Essays in banking and corporate finance

Abstract This paper presents a model of executive compensation in which the executive is risk-averse and has specific knowledge -knowledge about the optimal actions to take that is costly to transfer to the principal. The model generates predictions that are consistent with the available evidence and provides a rationale for a number of unresolved puzzles in executive compensation. Notably, we find that relative performance evaluation is optimal only if the quality of specific knowledge is low. We also show (1) why some common risk components are not filtered out of executives' pay, (2) why performance is more likely to be evaluated relative to aggregate market movements than relative to industry movements, and (3) why executives with higher perceived abilities are given stronger incentives. Finally, we demonstrate that the relation between risk and incentives may be positive or negative, depending on the quality of the executive's specific knowledge.

In-vitro cell exposure studies for the assessment of nanoparticle toxicity in the lung: a dialog between aerosol science and biology

The introduction of engineered nanostructured materials into a rapidly increasing number of industrial and consumer products will result in enhanced exposure to engineered nanoparticles. Workplace exposure has been identified as the most likely source of uncontrolled inhalation of engineered aerosolized nanoparticles, but release of engineered nanoparticles may occur at any stage of the lifecycle of (consumer) products. The dynamic development of nanomaterials with possibly unknown toxicological effects poses a challenge for the assessment of nanoparticle induced toxicity and safety.In this consensus document from a workshop on in-vitro cell systems for nanoparticle toxicity testing11Workshop on 'In-Vitro Exposure Studies for Toxicity Testing of Engineered Nanoparticles' sponsored by the Association for Aerosol Research (GAeF), 5-6 September 2009, Karlsruhe, Germany. an overview is given of the main issues concerning exposure to airborne nanoparticles, lung physiology, biological mechanisms of (adverse) action, in-vitro cell exposure systems, realistic tissue doses, risk assessment and social aspects of nanotechnology. The workshop participants recognized the large potential of in-vitro cell exposure systems for reliable, high-throughput screening of nanoparticle toxicity. For the investigation of lung toxicity, a strong preference was expressed for air-liquid interface (ALI) cell exposure systems (rather than submerged cell exposure systems) as they more closely resemble in-vivo conditions in the lungs and they allow for unaltered and dosimetrically accurate delivery of aerosolized nanoparticles to the cells. An important aspect, which is frequently overlooked, is the comparison of typically used in-vitro dose levels with realistic in-vivo nanoparticle doses in the lung. If we consider average ambient urban exposure and occupational exposure at 5mg/m3 (maximum level allowed by Occupational Safety and Health Administration (OSHA)) as the boundaries of human exposure, the corresponding upper-limit range of nanoparticle flux delivered to the lung tissue is 3×10-5-5×10-3μg/h/cm2 of lung tissue and 2-300particles/h/(epithelial) cell. This range can be easily matched and even exceeded by almost all currently available cell exposure systems.The consensus statement includes a set of recommendations for conducting in-vitro cell exposure studies with pulmonary cell systems and identifies urgent needs for future development. As these issues are crucial for the introduction of safe nanomaterials into the marketplace and the living environment, they deserve more attention and more interaction between biologists and aerosol scientists. The members of the workshop believe that further advances in in-vitro cell exposure studies would be greatly facilitated by a more active role of the aerosol scientists. The technical know-how for developing and running ALI in-vitro exposure systems is available in the aerosol community and at the same time biologists/toxicologists are required for proper assessment of the biological impact of nanoparticles.

Progressive Taxes and Firm Births

Tax reform proposals in the spirit of the "flat tax" model typically aim to reduce three parameters: the average tax burden, the progressivity of the tax schedule, and the complexity of the tax code. We explore the implications of changes in these three parameters for entrepreneurial activity, measured by counts of firm births. The Swiss fiscal system offers sufficient intra-national variation in tax codes to allow us to estimate such effects with considerable precision. We find that high average taxes and complicated tax codes depress firm birth rates, while tax progressivity per se promotes firm births. The latter result supports the existence of an insurance effect from progressive corporate income taxes for risk averse entrepreneurs. However, implied elasticities with respect to the level and complexity of corporate taxes are an order of magnitude larger than elasticities with respect to the progressivity of tax schedules.

Limitations and information needs for engineered nanomaterial-specific exposure estimation and scenarios: recommendations for improved reporting practices

The aim of this paper is to describe the process and challenges in building exposure scenarios for engineered nanomaterials (ENM), using an exposure scenario format similar to that used for the European Chemicals regulation (REACH). Over 60 exposure scenarios were developed based on information from publicly available sources (literature, books, and reports), publicly available exposure estimation models, occupational sampling campaign data from partnering institutions, and industrial partners regarding their own facilities. The primary focus was on carbon-based nanomaterials, nano-silver (nano-Ag) and nano-titanium dioxide (nano-TiO2), and included occupational and consumer uses of these materials with consideration of the associated environmental release. The process of building exposure scenarios illustrated the availability and limitations of existing information and exposure assessment tools for characterizing exposure to ENM, particularly as it relates to risk assessment. This article describes the gaps in the information reviewed, recommends future areas of ENM exposure research, and proposes types of information that should, at a minimum, be included when reporting the results of such research, so that the information is useful in a wider context.

Capital Controls with International Reserve Accumulation: Can this Be Optimal ?

Motivated by the Chinese experience, we analyze a semi-open economy where the central bank has access to international capital markets, but the private sector has not. This enables the central bank to choose an interest rate different from the international rate. We examine the optimal policy of the central bank by modelling it as a Ramsey planner who can choose the level of domestic public debt and of international reserves. The central bank can improve savings opportunities of credit-constrained consumers modelled as in Woodford (1990). We find that in a steady state it is optimal for the central bank to replicate the open economy, i.e., to issue debt financed by the accumulation of reserves so that the domestic interest rate equals the foreign rate. When the economy is in transition, however, a rapidly growing economy has a higher welfare without capital mobility and the optimal interest rate differs from the international rate. We argue that the domestic interest rate should be temporarily above the international rate. We also find that capital controls can still help reach the first best when the planner has more fiscal instruments.