Self-licensing and financial rewards: is morality for sale?

This paper studies the impact of financially rewarding good deeds on self-licensing. We run a between-subjects experiment comprised of an adapted dictator game preceded by paid and unpaid pro-environmental tasks. We find that prefacing the dictator game with an unpaid good deed seems to establish a 'moral rectitude' which licenses subsequent selfish behaviour, whereas a paid good deed dampens this effect. Interestingly, the nature of the initial task has more of an effect on the binary option (give vs. not give) than on the amount donated.

Entrepreneurial failure and economic crisis: an historical perspective

This chapter analyses the major UK economic crises that have occurred since the speculative bubbles of the seventeenth century. It integrates insights from economic history and business history to analyse both the general economic conditions and the specific business and financial practices that led to these crises. The analysis suggests a significant reinterpretation of the evidence – one that questions economists’ conventional views.

What controls the vertical distribution of aerosol? Relationships between process sensitivity in HadGEM3–UKCA and inter-model variation from AeroCom Phase II

The vertical profile of aerosol is important for its radiative effects, but weakly constrained by observations on the global scale, and highly variable among different models. To investigate the controlling factors in one particular model, we investigate the effects of individual processes in HadGEM3–UKCA and compare the resulting diversity of aerosol vertical profiles with the inter-model diversity from the AeroCom Phase II control experiment. In this way we show that (in this model at least) the vertical profile is controlled by a relatively small number of processes, although these vary among aerosol components and particle sizes. We also show that sufficiently coarse variations in these processes can produce a similar diversity to that among different models in terms of the global-mean profile and, to a lesser extent, the zonal-mean vertical position. However, there are features of certain models' profiles that cannot be reproduced, suggesting the influence of further structural differences between models. In HadGEM3–UKCA, convective transport is found to be very important in controlling the vertical profile of all aerosol components by mass. In-cloud scavenging is very important for all except mineral dust. Growth by condensation is important for sulfate and carbonaceous aerosol (along with aqueous oxidation for the former and ageing by soluble material for the latter). The vertical extent of biomass-burning emissions into the free troposphere is also important for the profile of carbonaceous aerosol. Boundary-layer mixing plays a dominant role for sea salt and mineral dust, which are emitted only from the surface. Dry deposition and below-cloud scavenging are important for the profile of mineral dust only. In this model, the microphysical processes of nucleation, condensation and coagulation dominate the vertical profile of the smallest particles by number (e.g. total CN  >  3 nm), while the profiles of larger particles (e.g. CN  >  100 nm) are controlled by the same processes as the component mass profiles, plus the size distribution of primary emissions. We also show that the processes that affect the AOD-normalised radiative forcing in the model are predominantly those that affect the vertical mass distribution, in particular convective transport, in-cloud scavenging, aqueous oxidation, ageing and the vertical extent of biomass-burning emissions.

The financial and environmental performance of firms exposed to the EU Emissions Trading Scheme

This thesis is an empirical-based study of the European Union’s Emissions Trading Scheme (EU ETS) and its implications in terms of corporate environmental and financial performance. The novelty of this study includes the extended scope of the data coverage, as most previous studies have examined only the power sector. The use of verified emissions data of ETS-regulated firms as the environmental compliance measure and as the potential differentiating criteria that concern the valuation of EU ETS-exposed firms in the stock market is also an original aspect of this study. The study begins in Chapter 2 by introducing the background information on the emission trading system (ETS), which focuses on (i) the adoption of ETS as an environmental management instrument and (ii) the adoption of ETS by the European Union as one of its central climate policies. Chapter 3 surveys four databases that provide carbon emissions data in order to determine the most suitable source of the data to be used in the later empirical chapters. The first empirical chapter, which is also Chapter 4 of this thesis, investigates the determinants of the emissions compliance performance of the EU ETS-exposed firms through constructing the best possible performance ratio from verified emissions data and self-configuring models for a panel regression analysis. Chapter 5 examines the impacts on the EU ETS-exposed firms in terms of their equity valuation with customised portfolios and multi-factor market models. The research design takes into account the emissions allowance (EUA) price as an additional factor, as it has the most direct association with the EU ETS to control for the exposure. The final empirical Chapter 6 takes the investigation one step further, by specifically testing the degree of ETS exposure facing different sectors with sector-based portfolios and an extended multi-factor market model. The findings from the emissions performance ratio analysis show that the business model of firms significantly influences emissions compliance, as the capital intensity has a positive association with the increasing emissions-to-emissions cap ratio. Furthermore, different sectors show different degrees of sensitivity towards the determining factors. The production factor influences the performance ratio of the Utilities sector, but not the Energy or Materials sectors. The results show that the capital intensity has a more profound influence on the utilities sector than on the materials sector. With regard to the financial performance impact, ETS-exposed firms as aggregate portfolios experienced a substantial underperformance during the 2001–2004 period, but not in the operating period of 2005–2011. The results of the sector-based portfolios show again the differentiating effect of the EU ETS on sectors, as one sector is priced indifferently against its benchmark, three sectors see a constant underperformance, and three sectors have altered outcomes.

Business cycle asymmetries: characterisation and testing based on Markov-switching autoregressions

Tests for business cycle asymmetries are developed for Markov-switching autoregressive models. The tests of deepness, steepness, and sharpness are Wald statistics, which have standard asymptotics. For the standard two-regime model of expansions and contractions, deepness is shown to imply sharpness (and vice versa), whereas the process is always nonsteep. Two and three-state models of U.S. GNP growth are used to illustrate the approach, along with models of U.S. investment and consumption growth. The robustness of the tests to model misspecification, and the effects of regime-dependent heteroscedasticity, are investigated.

Is there a gold social seal? The financial effects of additions to and deletions from social stock indices

This study investigates the financial effects of additions to and deletions from the most well-known social stock index: the MSCI KLD 400. Our study makes use of the unique setting that index reconstitution provides and allows us to bypass possible issues of endogeneity that commonly plague empirical studies of the link between corporate social and financial performance. By examining not only short-term returns but also trading activity, earnings per share, and long-term performance of stocks that are involved in these events, we bring forward evidence of a ‘social index effect’ where unethical transgressions are penalized more heavily than responsibility is rewarded. We find that the addition of a stock to the index does not lead to material changes in its market price, whereas deletions are accompanied by negative cumulative abnormal returns. Trading volumes for deleted stocks are significantly increased on the event date, while the operational performances of the respective firms deteriorate after their deletion from the social index.

Business life cycle and capital structure: evidence from Chinese manufacturing firms

This paper uses a panel data-fixed effect approach and data collected from Chinese public manufacturing firms between 1999 and 2011 to investigate the impacts of business life cycle stages on capital structure. We find that cash flow patterns capture more information on business life cycle stages than firm age and have a stronger impact on capital structure decision-making. We also find that the adjustment speed of capital structure varies significantly across life cycle stages and that non-sequential transitions over life cycle stages play an important role in the determination of capital structure. Our study indicates that it is important for policy-makers to ensure that products and financial markets are well-balanced.

The use and usefulness of financial assistance to UK SMEs

Existing literature has paid considerable attention to the effects of supporting programmes on the survival and performance of small and medium-sized enterprises (SMEs), but it lacks a deep understanding of the benefits of the use of such assistance and the factors influencing the evaluation of such services from the perspective of SMEs. We examine the factors affecting the propensity to use assistance when SMEs make financial decisions and the usefulness perceived by the users. We examine 2500 UK SMEs and find that the use of assistance and the usefulness of such services, as perceived by SMEs, are much related to: the characteristics of the entrepreneur, the nature of the business, and the financial products used by the business. These empirical results imply that support and advice on financial decision making, available for SMEs, are important for them to better manage and to access finance. Assistance and advice are also very valuable for SMEs and entrepreneurs to compensate for their lack of human capital and thus facilitate overcoming possible problems in managing their businesses.

Bricks vs clicks: entrepreneurial online banking behaviour and relationship banking

Purpose – Little research has been conducted on the effects of information technology on financing entrepreneurial businesses or small and medium sized enterprises (SMEs). The purpose of this paper is to examine the impacts of entrepreneurial online banking and relationship banking on the severity of financial problems perceived by entrepreneurs and their interactive effect. It also investigates how characteristics of individual businesses and entrepreneurial demographics influence SMEs’ financial situation. Design/methodology/approach – An ordered logistic model is used on a UK dataset to empirically test the hypotheses derived in this paper. The empirical evidence is drawn from the 2004 UK survey of SME finances, which contains a sample of 2,500 firms. Findings – This paper finds that both entrepreneurial online banking behaviour and relationship banking alleviates the severity of financial problems perceived by entrepreneurs. The relationship affect is less evident for entrepreneurs who most frequently use an online approach to communicate with their banks than for those using traditional methods. Business and entrepreneur characteristics also have a strong impact on the severity of the financial problems suffered by SMEs. Originality/value – This paper provides evidence supporting the favourable impacts of the application of information technology on entrepreneurial finance from the perspective of entrepreneur/business. It also identifies a substitute relationship between entrepreneurial online banking behaviour and relationship banking, a relationship which contradicts existing evidence.