... the international diversity of TMTs, we separate between cognitive and experiential team diversity. The upper echelon literature ... implications for theory and practice. Download PDF Ebook Transcending Borders With International Top Management Teams: A ...
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The over-the-counter (OTC) derivatives market has grown sizably in the past two years. Notional amounts of all categories of the OTC contracts reached almost $600 trillion at the end of December 2007. These include foreign exchange contracts, interest rate contracts, equity linked contracts, commodity contracts, and credit default swaps (CDS) contracts. Interest rate contracts continue to be the largest segment of this market comprising 66 percent of all OTC derivative market or about $400 trillion. Growth in the credit derivatives segment has been the fastest and the volume has more than doubled in the last year to about $60 trillion.
In this paper we are interested in counterparty risk that may stem from the OTC derivatives markets. The financial market turmoil of recent months has highlighted the importance of such risk. The risk is measured by losses that may result via the OTC derivative contracts to the financial system from the default (or fail) of one or more banks or broker dealers. Thus, in order to quantify counterparty risk, we calculate (expected) losses absorbed by the system under two different scenarios (described in Section II.D). For the estimation of (expected) losses, we define (i) the exposure of the financial system to specific financial institutions (FIs); and (ii) propose a novel methodology to estimate the probability that given that a particular institution (counterparty) fails to deliver, other institutions in the system would also fail to deliver.
The Global Conference on Profiting from Small Business Lending has reaffirmed a concept of enormous economic potential: that expanding credit to underserved communities and businesses around the world can not only promote development but also provide profitable business opportunities for financial institutions. This concept is not in the least far-fetched thanks to modern technology, the growth of credit bureaus, and the advent of credit scoring, all of which help lenders better evaluate risk. With these tools at their disposal, financial institutions need not regard credit for small business with alarm. As one conference participant put it, “If you can measure the risk, you have the opportunity to manage it.”
Despite its demonstrated impact on economic growth in places such as the United States, however, in most countries credit to small businesses and to entrepreneurs remains very limited. Financial institutions continue to be uneasy about the risks in offering credit to small businesses. They also fail to see the quality in small portfolios and worry about the transaction costs, two very important drivers for lenders. Another concern is that small businesses, like consumer finance, entails high volumes. Thus the fundamental question for financial institutions today is whether these and other obstacles to small business lending can indeed be surmounted, to the benefit of all concerned. The key to managing risk, conference participants agreed, is better information. But arriving at better information is a complex process. It requires an entire infrastructure—actually two infrastructures, one specifically for the individual financial institution and the other for the entire financial market—to produce the right kind of information and to ensure that it is useful. That is to say, credit information has to be consistent, good, and timely.
In the early 2000s, a highly selective university introduced a —no-loans“ policy under which the loan component of financial aid awards was replaced with grants. We use this natural experiment to identify the causal effect of student debt on employment outcomes. In the standard life-cycle model, young people make optimal educational investment decisions if they are able to finance these investments by borrowing against future earnings; the presence of debt has only income effects on future decisions. We find that debt causes graduates to choose substantially higher-salary jobs and reduces the probability that students choose low-paid —public interest“ jobs. We also find some evidence that debt affects students‘ academic decisions during college. Our estimates suggest that recent college graduates are not life-cycle agents. Two potential explanations are that young workers are credit constrained or that they are averse to holding debt. We find suggestive evidence that debt reduces students‘ donations to the institution in the years after they graduate and increases the likelihood that a graduate will default on a pledge made during her senior year; we argue this result is more likely consistent with credit constraints than with debt aversion.
The returns to a college degree have risen substantially in recent years, but the cost of higher education has risen even more quickly. Between 1993 and 2005, the college wage premium rose by 27 percent (Mishel, Bernstein, and Allegretto 2007)1, while real tuition and fees at public and private four-year colleges rose by 63 percent and 43 percent, respectively (Trends in College Pricing 2005, Table A1).2 These rising costs have made financial aid more important. The proportion of full-time, full-year undergraduates receiving financial aid rose from 58.7 percent in 1993 to 76.1 percent in 2004 (Snyder, Tan, and Hoffman 2006, Table 320).
