New Financial Tools for Small Businesses: A Commitment Mechanism to Secure Funding

We suggest new tools for financing small business newcomers that struggle to overcome bank's unwillingness to finance their operations and clients fear that suppliers may choose willful litigation by breaching the contract. We suggest a commitment mechanism based on a commitment to a bank that makes the newcomer supplier’s obligations reliable. We show how the purchase contracts and obligations to banks can be priced, and how the commitment mechanism may provide the banks new tools to spread the risk of newcomers' bankruptcy by selling the obligations as binary options in an options market or by securitization of the purchase contracts

The Impact of Independent Directors on the Cash Conversion Cycle of American Manufacturing Firms

This study examined the impact of independent directors on the cash conversion cycle of American manufacturing firms. A sample of 189 American manufacturing firms listed on the New York Stock Exchange (NYSE) for a period of five years (from 2009–2013) was used. The findings indicate that the presence of independent directors on the board of directors shortens the inventory period and cash conversion cycle of manufacturing firms. The study contributes to the literature on the factors that shorten the cash conversion cycle of the firm. The results may be used by financial managers and operations managers

Financial Institutions and the Taxi-Cab Industry: An Exploratory Study in Canada

A current challenge taxicab owner/operators face in Canada is the lack of financing for taxicabs. This article examines business opportunities and lending risk; it also provides risk management strategies for financial institutions to manage the risk of lending to the taxi-cab industry. Members of the boards of directors and shareholders from the Canadian taxicab industry, and lenders from financial institutions that do not provide financing to taxicab owner/operators, were interviewed. Board members and shareholders were asked about their perceptions regarding business opportunity, risk, and their willingness to provide collateral for taxicab loans. Lenders of financial institutions were asked about their reasons for not providing taxicab loans. The findings of this study show that there is a reasonably attractive opportunity for financial institutions to offer financing for taxicab owner/operators. However, the findings also show that there are both systematic and unsystematic risks in lending to the taxicab industry. This offers recommendations on risk management strategies for Canadian lenders to mitigate the risk in lending to the Canadian taxicab industry. Our findings may be useful for new and existing financial/lending institutions, lenders, investors, and taxicab owner/operators

Exchange Risk Implications of International Portfolio Diversification

This paper evaluates the systematic risk of foreign exchange by deriving efficient sets of international portfolios from six national viewpoints. The composition of these portfolios is examined and the effect of different exchange rate risks is discussed theoretically and tested empirically. The paper shows that in the context of international portfolios, exchange risk matters much less than would be expected.© 1979 JIBS. Journal of International Business Studies (1979) 10, 63–74