Credit Ratings as Coordination Mechanisms

In this paper, we provide a novel rationale for credit ratings. The rationale that we propose is that credit ratings can serve as a coordinating mechanism in situations where multiple equilibria can obtain. We show that credit ratings provide a "focal point" for firms and their investors. We explore the vital, but previously overlooked implicit contractual relationship between a credit rating agency and a firm. Credit ratings can help fix the desired equilibrium and as such play an economically meaningful role. Our model provides several empirical predictions and insights regarding the expected price impact of ratings changes, the discreteness in funding cost changes, and the effect of the focus of organizations on the efficacy of credit ratings.http://deepblue.lib.umich.edu/bitstream/2027.42/39841/3/wp457.pd

Objectivity, Proximity and Adaptability in Corporate Governance

Countries appear to differ considerably in the basic orientations of their corporate governance structures. We postulate the trade-off between objectivity and proximity as fundamental to the corporate governance debate. We stress the value of objectivity that comes with distance (e.g. the market oriented U.S. system), and the value of better information that comes with proximity (e.g. the more intrusive Continental European model). Our key result is that the optimal distance between management and monitor (board or shareholders) has a bang-bang solution: either one should capitalize on the better information that comes with proximity or one should seek to benefit optimally from the objectivity that comes with distance. We argue that this result points at an important link between the optimal corporate governance arrangement and industry structure. In this context, we also discuss the ways in which investors have "contracted around" the flaws in their own corporate governance systems, pointing at the adaptability of different arrangements.http://deepblue.lib.umich.edu/bitstream/2027.42/39651/3/wp266.pd

Effect of compaction pressure on consolidation behaviour of unsaturated silty soil

The effect of compaction pressure on subsequent soil behaviour during isotropic consolidation has been investigated by conducting controlled-suction triaxial tests on samples of an unsaturated compacted silty soil. A comprehensive set of laboratory experiments was carried out in a double-walled triaxial apparatus on samples of unsaturated soil that were prepared using two different compaction pressures. The axis translation technique was used for creating the desired suctions in the samples. In the experiments, the soil samples were subjected to isotropic consolidation under constant suctions. The results show that different compaction pressures produce different fabrics in a soil and therefore affect the behaviour of the soil. The results also show that the value of yield stress and the location of the loading¿collapse (LC) yield curve are functions of soil fabric. Furthermore, it is shown that the slopes of normal consolidation lines for densely and loosely compacted samples differ in unsaturated conditions but are the same in saturated soils. A comparison is made between the behaviour of the dense and loose samples, and the difference in the behaviour is explained

Credit Ratings as Coordination Mechanisms

In this paper, we provide a novel rationale for credit ratings. The rationale that we propose is that credit ratings can serve as a coordinating mechanism in situations where multiple equilibria can obtain. We show that credit ratings provide a "focal point" for firms and their investors. We explore the vital, but previously overlooked implicit contractual relationship between a credit rating agency and a firm. Credit ratings can help fix the desired equilibrium and as such play an economically meaningful role. Our model provides several empirical predictions and insights regarding the expected price impact of ratings changes, the discreteness in funding cost changes, and the effect of the focus of organizations on the efficacy of credit ratings.coordination, credit ratings, multiple equilibria

PCR (Polymerase Chain Reaction) is Superior to Culture and Serology in Detecting Haemophilus Infection in Rats and Guinea Pigs

Based on partial sequencing of the 16S rRNA gene V-factor dependent Pasteurellaceae (Haemophilus),  strains from rat and guinea pig were assigned to the Rodent cluster or the Haemophilus parainfluenzae  complex. PCRs for the detection of biotype Heyl or Jawetz [P.] pneumotropica detected none of the strains and only  two Haemophilus strains assigned to the Rodent cluster respectively. All Haemophilus strains were positive  by a PCR developed for detection of all Pasteurellaceae taxa. The Pasteurellaceae PCR detected infection in all 76 rats and 40 guinea pigs from 3 and 6 colonies respectively  reported to be free from Pasteurellaceae infection.  ELISAs, using two Haemophilus antigens and culture, detected infection with similar frequency but both  methods were inferior to PCR. The Pasteurellaceae PCR should be the new ‘gold standard’ for comparison of the sensitivity of other test  methods for Pasteurellaceae infection in rodents.

'Trust is good, control is better': the 1974 Herstatt-Bank crisis and its implications for international regulatory reform

With its international supervisory and regulatory implications, the failure of Bankhaus Herstatt is one of the landmarks of post-war financial history. This article offers the first comprehensive historical account of the Herstatt crisis, and contributes to the wider discussions on international supervisory and regulatory reform since the mid-1970s, including regulatory capture, markets' self-regulation and resolution of failed banks. In doing so, it first argues that contrary to a widely held view, the German authorities received early and repeated warnings about Herstatt's dealings but this involved only limited and ineffective regulatory/supervisory responses, then it turns to the actual collapse of the bank in June 1974, and finally explores the wider regulatory issues raised by the Herstatt case

Monitoring Corporate Performance: The Role of Objectivity, Proximity, and Adaptability in Corporate Governance

This Article identifies the fundamental tradeoff faced by individuals, firms and institutions that monitor corporate management\u27s performance. This tradeoff, between objectivity in monitoring and proximity in monitoring, is central to the corporate governance debate. Proximity exists when monitors maintain close contact with management and participate in important decisions on a real-time basis. Objectivity exists when monitors, such as hostile acquirers, analysts, credit rating agencies, accounting firms, and outside lenders, remain distant from management and evaluate management\u27s performance without influence by management