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4. Realigning Finance to Its Original Purpose

verfasst von : Jan Emblemsvåg

Erschienen in: Reengineering Capitalism

Verlag: Springer International Publishing

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Abstract

Financial considerations always win in society—almost. Yet, finance does at its core only two simple things:(1) It can act as an economic time machine, helping savers transport today’s surplus income into the future, or giving borrowers access to future earnings now, and (2) it can act as a safety net, insuring against floods, fires, or illness. Depending on how these transactions play out, finance determines loss and gain, what is economically viable or not and they serve as basis for management of all economic resources. Ultimately, they determine winners and losers, and because of this, finance has a huge impact on the behavior of people.

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Vorheriges Kapitel Risk and Uncertainty—Crucial Issues in Finance and Innovation

Nächstes Kapitel Reengineering some Capitalist Cornerstones

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100

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101

According to Hagstrom, R. G. (2005). The Warren Buffett Way. Hoboken, NJ, John Wiley & Sons. p. 245.

102

See Graham, B. (2005). The Intelligent Investor. New York, HarperCollins Publishers. p. 269.

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Quoted by Hagstrom, R. G. (2005). The Warren Buffett Way. Hoboken, NJ, John Wiley & Sons. p. 245.

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In Graham, B. (2005). The Intelligent Investor. New York, HarperCollins Publishers. p. 269.

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Offered by several academics including:

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109

This argument is most forcefully argued by Fama, E. F. and K. R. French (1992). “The cross-section of expected stock returns.” Journal of Finance 47(2): pp. 427–466.

110

See Lakonishok, J., A. Shleifer and R. W. Vishny (1994). “Contrarian Investment, Extrapolation, and Risk.” Journal of Finance 49(5): pp. 1541–1578.

111

See for example Fama, E. F. and K. R. French (1992). “The cross-section of expected stock returns.” Journal of Finance 47(2): pp. 427–466.

112

According to Mizrahi, C. S. (2008). Getting Started in Value Investing. Hoboken, NJ, John Wiley & Sons. p. 190.

113

See for example Lakonishok, J., A. Shleifer and R. W. Vishny (1994). “Contrarian Investment, Extrapolation, and Risk.” Journal of Finance 49(5): pp. 1541–1578.

114

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115

See for example Lakonishok, J., A. Shleifer and R. W. Vishny (1994). “Contrarian Investment, Extrapolation, and Risk.” Journal of Finance 49(5): pp. 1541–1578.

116

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117

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118

See Greenwald, B. C. N., J. Kahn, P. D. Sonkin and M. van Biema (2001). Value Investing: From Graham to Buffet and Beyond. Hoboken, NJ, John Wiley & Sons. p. 300.

119

See Graham, B. and D. L. Dodd (1951). Security Analysis: Principles and Technique. London, McGraw-Hill Book Company. p. 770.

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131

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132

According to Schleifer, A. and R. W. Vishny (1990). “The New Theory of the Firm: Equilibrium Short Horizons of Investors and Firms.” The American Economic Review: Second Annual Meeting of the American Economic Association 80(2): pp. 148–153.

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134

135

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According to Northbridge Environmental Management Consultants (2003). Analyzing the Cost of Obtaining LEED Certification. Arlington, VA, The American Chemistry Council. p. 13.

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An approach for how this can be achieved is presented in Emblemsvåg, J. (2003). Life-Cycle Costing: Using Activity-Based Costing and Monte Carlo Methods to Manage Future Costs and Risks. Hoboken, NJ, John Wiley & Sons. p. 320.

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See Duhigg, C. (2009). Stock Traders Find Speed Pays, in Milliseconds. The New York Times. New York: p. 24 July.

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See Stewart, J. B. (2009). Barclays Suit Sheds Light on Trading in Shadows. The New York Times. New York: p. B1, 24 July.

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See Cartea, A. and J. Penalva (2012). “Where is the Value in High Frequency Trading?” Quarterly Journal of Finance 2(3): pp. doi:10.1142/S2010139212500140.

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See Aldridge, I. (2010). How Profitable Are High Frequency Strategies? The Huffington Post, www.huffingtonpost.com: pp. July 26.

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According to The Economist (2014c). Free exchange: Frequent but inefficient. The Economist. 413: p. 66.

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See Cartea, A. and J. Penalva (2012). “Where is the Value in High Frequency Trading?” Quarterly Journal of Finance 2(3): pp. doi:10.1142/S2010139212500140.

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See Cartea, A. and J. Penalva (2012). “Where is the Value in High Frequency Trading?” Quarterly Journal of Finance 2(3): pp. doi:10.1142/S2010139212500140.

151

See Stewart, J. B. (2009). Barclays Suit Sheds Light on Trading in Shadows. The New York Times. New York: p. B1, 24 July.

152

See The Economist (2014b). A bigger bang. The Economist. 411: pp. 63–65.

153

Published in The Independent on Tuesday 20 May 2014.

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According to Devenow, A. and I. Welch (1996). “Rational herding in financial economics.” European Economic Review 40(3): pp. 603–615.

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According to Devenow, A. and I. Welch (1996). “Rational herding in financial economics.” European Economic Review 40(3): pp. 603–615.

157

See for example Hwang, S. and M. Salmon (2004). “Market stress and herding.” Journal of Empirical Finance 11(4): pp. 585–616.

158

According to De Bondt, W. F. M. and R. H. Thaler (1985b). “Does the Stock Market Overreact?” Journal of Finance 40(3): pp. 793–805.

159

See The Economist (2009). Greed—and fear: A special report on the future of finance. London, The Economist. p. 24.

160

See Podolny, J. M. (2009). “The Buck Stops (and Starts) as Business School.” Harvard Business Review 87(6): pp. 62–67.

161

See Greenspan, A. (2013). “Never Saw It Coming: Why the Financial Crisis Took Economists by Surprise.” Foreign Affairs 92(6): pp. 88–96.

162

According to Greenspan, A. (2013). “Never Saw It Coming: Why the Financial Crisis Took Economists by Surprise.” Foreign Affairs 92(6): pp. 88–96.

163

See The Economist (2004). Signifying nothing? The Economist. 370: pp. 63.

164

According to Greenspan, A. (2013). “Never Saw It Coming: Why the Financial Crisis Took Economists by Surprise.” Foreign Affairs 92(6): pp. 88–96.

165

According to Mizrahi, C. S. (2008). Getting Started in Value Investing. Hoboken, NJ, John Wiley & Sons. p. 190.

166

According to Graham, B. (2005). The Intelligent Investor. New York, HarperCollins Publishers. p. 269.

167

See Calomiris, C. W. and S. H. Haber (2013). “Why Banking Systems Succeed—and Fail; The Politics Behind Financial Institutions.” Foreign Affairs 92(6): pp. 97–110.

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See The Economist (2014f). The slumps that shaped modern finance. The Economist. 411: pp. 47–52.

169

See Gates, J. R. (1998). The Ownership Solution: Toward A Shared Capitalism For The 21st Century. Reading, MA, Addison-Wesley. p. 388.

170

See Taylor, F. (2010). Mastering Derivatives Markets: A Step-by-Step Guide to the Products, Applications and Risks. London, Financial Times/Prentice Hall. p. 432.

171

Gates provide a thorough discussion on this to which people are referred to for more information, see Gates, J. R. (1998). The Ownership Solution: Toward A Shared Capitalism For The 21st Century. Reading, MA, Addison-Wesley. p. 388.

172

Quoted by Cassidy, J. (1995). Who Killed the Middle Class. The New Yorker. New York: p. 113.

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See UNDP (1996). Human Development Report 1996. New York, United Nations Development Programme (UNDP). p. 229.

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See Stretcher, R., S. Henry and J. K. Kavanaugh (2006). “The ESOP Performance Puzzle in Public Companies.” The Journal of Employee Ownership Law and Finance 18(4).

175

There are scores of books on Toyota, but perhaps the most important is the first major book; Womack, J. P., D. T. Jones and D. Roos (1990). The machine that changed the world. New York, Rawson Associates. p. 323.

176

See Woodin, T., D. Crook and V. Carpentier (2010). Community and mutual ownership: A historical review. York, Joseph Rowntree Foundation. p. 58.

177

According to Woodin, T., D. Crook and V. Carpentier (2010). Community and mutual ownership: A historical review. York, Joseph Rowntree Foundation. p. 58.

178

See Maslakovic, M. (2012). TheCityUK Fund Management 2012. Financial Markets Series. London, TheCityUK Research Centre. p. 14.

179

See Logue, J. and J. S. Yates (1999). “Worker Ownership American Style: Pluralism, Participation and Performance.” Economic and Industrial Democracy 20(2): pp. 225–252.

180

See Lazonick, W. (2014). “Profits without prosperity.” Harvard Business Review 92(9): pp. 46–55.

181

See Bothamley, J., Ed. (1993). Dictionary of Theories. London, Gale Research International, Inc. p. 637.

182

One study shows that a doubling in stock repurchases leads to an 8 percent fall in R&D spending, see The Economist (2014e). Schumpeter: The tyranny of the long term. The Economist. 413: p. 65.

183

See Martin, R. L. (2014). “The Rise (and Likely Fall) of the Talent Economy.” Harvard Business Review 92(10): pp. 41–47.

184

See for example Pisano, G. P. and W. C. Shih (2012). Producing Prosperity: Why America Needs a Manufacturing Renaissance. Boston, MA, Harvard Business Review Press. p. 256.

185

See Tammen, H. (1978). Die I. G. Farbenindustrie Aktiengesellschaft (1925–1933): Ein Chemiekonzern in der Weimarer Republik (in German). Berlin. p. 468.

186

See Freeman, C. and L. Soete (1997). The Economics of Industrial Innovation. Oxford, Routledge. p. 256.

187

According to Delorme, J. (1962). Anthologie des brevets sur les matières plastiques: Fabrication et transformation, Vols 1–3. Paris, Amphora.p.

188

According to Office of Technology Assessment (1995). Innovation and Commercialization of Emerging Technology, OTA-BP-ITC-165. Washington, DC, U.S. Congress, Office of Technology Assessment, U.S. Government Printing Office. p. 96.

189

According to Goodhart, C. A. E. (2008). “The regulatory response to the financial crisis.” Journal of Financial Stability 4(4): pp. 351–358.

190

According to Greenwald, B. C. N., J. Kahn, P. D. Sonkin and M. van Biema (2001). Value Investing: From Graham to Buffet and Beyond. Hoboken, NJ, John Wiley & Sons. p. 300.

191

See Johnson, S. and J. Kwak (2010). 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. New York, Pantheon E-books.p.

192

According to The Economist (2014d). It’s complicated. The Economist. 413: p. 72.

193

According to Admati, A. and M. Hellwig (2013). The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It. Princeton, NJ, Princeton University Press. p. 416.

194

See The Economist (2014g). Special report on International Banking: Shadow and substance. London, The Economist. p. 16.

195

Quoted in The Economist (2014g). Special report on International Banking: Shadow and substance. London, The Economist. p. 16.

196

See Calomiris, C. W. and S. H. Haber (2013). “Why Banking Systems Succeed—and Fail; The Politics Behind Financial Institutions.” Foreign Affairs 92(6): pp. 97–110.

197

See Fukuyama, F. (2014). “America in Decay: The Sources of Political Dysfunction.” Foreign Affairs 93(5): pp. 5–26.

198

According to Fukuyama, F. (2014). “America in Decay: The Sources of Political Dysfunction.” Foreign Affairs 93(5): pp. 5–26.

199

Offered by Friedman, M. (2002). Capitalism and Freedom. Chicago, IL, University of Chicago Press. p. 210.

200

See Jay, D. (2004). “Devil in lack of planning detail.” The Australian(24 June): p. 48.

201

See Australian Financial Review (2000). “Politics of myopia hurt us all in the long run.” (April 8): p. 20.

202

See Micklethwait, J. and A. Woolridge (2014). “The State of the State: The Global Contest for the Future of Government.” Foreign Affairs 93(4): pp. 118–132.

203

See Huntington, S. P. (2006). Political Order in Changing Societies. New Haven, CT, Yale University Press. p. 240.

204

The numbers are from Fukuyama, F. (2014). “America in Decay: The Sources of Political Dysfunction.” Foreign Affairs 93(5): pp. 5–26.

205

See Olson, M. (1984). The Rise and Decline of Nations: Economic Growth, Stagflation and Social Rigidities. New Haven, CT, Yale University Press. p. 288.

206

According to Lazonick, W. (2014). “Profits without prosperity.” Harvard Business Review 92(9): pp. 46–55.

207

According to Lazonick, W. (2014). “Profits without prosperity.” Harvard Business Review 92(9): pp. 46–55.

208

Definition is from Hawken, P., A. B. Lovins and L. H. Lovins (1999). Natural Capitalism—The Next Industrial Revoluion. London, Earthscan Publications, Ltd. p. 396.

209

Definition is based on Bannock, G., R. E. Baxter and E. Davis (1999). Dicitonary in Economics. London, Profile Books. p. 439.

210

Definition is based on Bannock, G., R. E. Baxter and E. Davis (1999). Dicitonary in Economics. London, Profile Books. p. 439.

211

See Crainer, S. and D. Dearlove, Eds. (2001). Financial Times Handbook of Management. London, Financial Times Prentice Hall. p. 784.

212

See Skandia (1994). Visualizing Intellectual Capital in Skandia, www.skandia.se: pp. Intellectual capital supplement.

213

See for example Roos, J., G. Roos, N. C. Dragonetti and L. Edvinsson (1998). Intellectual Capital: Navigating in the New Business Landscape, Macmillan Business. p. 208.

214

Definition is from Baker, W. E. (2000). Achieving Success Through Social Capital: Tapping the Hidden Resources in Your Personal and Business Networks. San Francisco, Jossey Bass Wiley. p. 256.

215

See for example West, J. (2013). Increasing Innovation Through Government Policy. Sydney, Australian Innovation Research Centre. p. 26.

216

217

This bold statement comes from Barton, D. and M. Wiseman (2015). “Where Boards Fall Short.” Harvard Business Review 93(1/2): pp. 98–104.

218

This bold statement comes from Barton, D. and M. Wiseman (2015). “Where Boards Fall Short.” Harvard Business Review 93(1/2): pp. 98–104.

219

According to Barton, D. and M. Wiseman (2015). “Where Boards Fall Short.” Harvard Business Review 93(1/2): pp. 98–104.

220

Quoted by The Economist (2014a). Activity funds; An investor calls. The Economist. 414: pp. 17–20.

221

See The Economist (2014a). Activity funds; An investor calls. The Economist. 414: pp. 17–20.

222

According to Barton, D. and M. Wiseman (2015). “Where Boards Fall Short.” Harvard Business Review 93(1/2): pp. 98–104.

223

224

According to Barton, D. and M. Wiseman (2015). “Where Boards Fall Short.” Harvard Business Review 93(1/2): pp. 98–104.

225

See Subramanian, G. (2015). “Corporate Governance 2.0.” Harvard Business Review 93(3): pp. 96–105.

226

See http://www.wsj.com/articles/michael-dell-going-private-is-paying-off-for-dell-1416872851.

227

See Subramanian, G. (2015). “Corporate Governance 2.0.” Harvard Business Review 93(3): pp. 96–105.

Titel: Realigning Finance to Its Original Purpose
verfasst von: Jan Emblemsvåg
Verlag: Springer International Publishing
Buch: Reengineering Capitalism
Print ISBN: 978-3-319-19688-6

Electronic ISBN: 978-3-319-19689-3

Copyright-Jahr: 2016
DOI: https://doi.org/10.1007/978-3-319-19689-3_4

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