A remedy for all sins? Introducing a special issue on social enterprises and welfare regimes in Europe

The paper serves as an introduction to a special issue discussing social enterprises historical development and functions against welfare regimes across six European countries (France, Germany, Italy, Poland, Scotland, Serbia). While discussing convergences and diversities among them, the introduction proposes a comparative analytical framework for understanding social enterprises and welfare state as contingent phenomena developed at different point in time, within a broader political-institutional framework regulating states-peoples’ relationships

Entry into a network industry: consumers’ expectations and firms’ pricing policies

This paper presents a model of entry into a network industry. The entrant tries to attract the customer base of the incumbent service provider. While the entrant is more efficient, the incumbent enjoys an advantage thanks to a bias in consumers’ expectations. Buyers enter the game with heterogenous beliefs as to which of the two firms is going to win competition. Then expectations converge - through higher order beliefs - and select one winner, who ends up being the single supplier. The path of expectations convergence crucially depends on the pricing policy followed by firms: so equilibrium beliefs are endogenous. Depending on parameter values, one of two outcomes obtains: (i) the incumbent is able to exclude the entrant, by lowering his price below the monopoly level; (ii) the entrant is successful, by undercutting the incumbent price. Productive efficiency and consumers’ welfare are hurt by exclusion; the entry threat is beneficial to consumers anyway. Imposing compatibility among networks is welfare improving, as it removes the exclusionary potential enjoyed by the incumbent.network industries, critical mass, entry, exclusion, higher order beliefs

Shareholders' agreements and voting power. Evidence from Italian listed firms

This work provides an empirical investigation of shareholders’ agreements signed in Italy over the last decade. The focus is on the impact of agreements on the voting power (Shapley value) of participants. The evidence shows that agreements produce a remarkable reshuffling of voting power. Two views are confronted. First: agreements allow the largest shareholder to increase his power beyond his own voting rights, exploiting a leverage effect. Second: agreements are a way to share control among a coalition of large shareholders, thus limiting the ability of the first one to extract private benefits of control. The leverage effect seems to prevail at lower levels of ownership concentration, while the shared control view works better at higher levels of ownership concentration. Supermajority rules – a tool to reach a more balanced distribution of power – are more likely to be adopted when the first owner has a larger equity stake.Corporate governance; shareholders’ agreements; large shareholder; voting power; one-share-one-vote.

Corporate Governance as a Commitmente and Signalling Device

A model is presented, where firms issuing equity differ in the ability of their controlling shareholders to extract private benefits: this creates a lemon problem, leading to cross-subsidization across issuers. A governance institution is introduced, enabling large shareholders to (imperfectly) commit to the general interest of shareholders. The following main results are obtained. I) Controlling shareholders willing to apply such an institution are those with a level of private benefits either very low or very high: the former employ the institutional constraint as a signalling device, the latter as a commitment device. Those with an intermediate level of private benefits are not interested. II) A higher ownership concentration reduces the large shareholder’s incentive to commit. III) Self-regulation dominates regulation.large shareholders, private benefits, (self-)regulation

Liquidity crunch in the interbank market: is it credit or liquidity risk, or both?

The interplay between liquidity and credit risks in the interbank market is analyzed. Banks are hit by idiosyncratic random liquidity shocks. The market may also be hit by a bad news at a future date, implying the insolvency of some participants and creating a lemon problem; this may end up with a gridlock of the interbank market at that date. Anticipating such possible contingency, banks currently long of liquidity ask a liquidity premium for lending beyond a short maturity, as a compensation for the risk of being short of liquidity later and being forced to liquidate some illiquid assets. Then banks currently short of liquidity may prefer to borrow short term. The model is able to explain some stylized facts of the 2007- 2009 liquidity crunch affecting the money market at the international level: (i) high spreads between interest rates at different maturities; (ii) "flight to overnight" in traded volumes; (iii) ineffectiveness of open market operations, leading the central banks to introduce some relevant innovations into their operational framework.Global financial crisis, Money market, Liquidity, Central banking.

Aspiring workers or striving consumers? Rethinking social exclusion in the era of consumer capitalism

https://doi.org/10.1080/21582041.2017.138583

Between tradition and change: the Scottish social economy sector at a crossroad

This paper discusses the origins and motives behind the rich institutional and policy infrastructure that Scotland has developed in previous decades to support the social economy sector. Drawing on a large body of primary data collected through an EU funded project this paper reflects upon the effects of the economic and financial crisis, and how such changes may shed light on the future of the social economy in Scotland

The efficiency view of corporate boards: theory and evidence

We build a simple model in which corporate governance may allow for institutions acting as commitment devices (e.g., the introduction of independent and minority members in the board). The model predicts that the incentive to adopt an institution — letting the general interest of shareholders prevail over private benefits of control by dominant shareholders — is decreasing in ownership concentration and increasing in free cash flow. We take the predictions of our theoretical model to the data, by providing empirical evidence on the board structure of Italian listed companies over the period 2004-2007. We find that board composition favors independent members in firms where the free cash flow is large, and executive members in firms with high ownership concentration and in family firms, supporting the view of corporate governance as a mechanism to control agency costs. More ambiguous conclusions are reached as for the link between governance and firm value, as the presence of minority lists in the board appears to improve value while that of independent members reduces performance.corporate boards, agency problems, private benefits, firms’ performance.

The intraday interest rate under a liquidity crisis: the case of August 2007

By analyzing high frequency data for the European interbank market, we show that the intraday interest rate (implicitly defined by the term structure of the ON rate) jumped by more than ten times at the outset of the financial turmoil in August 2007, resulting in an inefficiency of the money market. This took place despite the provision of unlimited free daylight overdrafts by the ECB, on a collateralized basis. We suggest that such result may be attributed to an increase of the liquidity premium and of the cost of collateral.intraday interest rate, liquidity crisis, money market, central banking

The intraday price of money: evidence from the e-MID market

We present a simple model, where intraday and overnight interest rates are linked by a no-arbitrage argument. The hourly interest rate is shown to be a function of the intraday term structure of the overnight rate. This property holds under both assumptions, where an explicit intraday market for interbank loans exists and when it does not. In the first case, such a property is an equilibrium condition; in the second one it holds by definition, as a synthetic hourly loan is a portfolio of overnight contracts. We then provide empirical evidence, based on tick- by-tick data for the e-MID money market (covering the whole 2003). The overnight rate shows a clear downward pattern throughout the operating day. A positive hourly interest rate emerges from the intraday term structure of the overnight rate: we estimate the market price of a one hour interbank loan to be slightly above a half basis point.intraday interest rate, overnight interbank loans, money market.