We examine how pension policy affects the value of corporate-level investment to the firm and its various claimants using Monte Carlo simulation. Shareholders lose the greatest amount of project value to the pension plan when it is undiversified across asset classes. Improved funding levels mandated by the provisions of the Pension Protection Act of 2006 generally reduce those wealth transfers. Thus, mitigation of the overhang effect joins the reduction of financial distress costs as a motivation for holding both stocks and bonds in the pension fund.Corporate pension policy describes decisions that determine the funded status of the pension plan (the ratio of plan assets to plan liabilities) and the allocation of the pension fund among different asset classes. When financing constraints exist, corporate pension policy will be relevant to shareholder wealth if it influences the amount of internal finance available for capital expenditures. Pension policy also has the potential to determine the extent to which gains from corporate-level investment are shared with the bondholders and the pension fund.This article employs Monte Carlo simulation to explore the extent to which the investment policy and funded status of a defined benefit pension plan affects the value of corporate-level investment to the firm, its senior claimants, and the shareholders. We also investigate whether changes in the speed of funding mandated by the Pension Protection Act of 2006 have an incremental effect on investment efficiency. To the best of our knowledge, the results presented here are new, and provide an additional motivation for balanced asset allocations in defined benefit plans. The insight they provide cannot be obtained from a large sample empirical study due to the endogenous relationship between pension policy and the financial strength of the plan sponsor.The simulation results indicate that shareholder project values are indeed sensitive to the selection of corporate pension policy. Shareholder gains from investing are influenced by the asset allocation of the pension assets, the funded status of the plan, and the degree of financial leverage employed by the plan sponsor. That happens because the pension fund is both a profit center (generating volatile investment earnings) and a senior claimant (requiring a fluctuating contribution stream that is senior to debt service).Our work is closely related in spirit to Parrino and Weisbach (1999), who employ simulation to study the impact of bondholder wealth transfers on the incremental shareholder wealth created by the acceptance of a project. The model here introduces the funding level and asset allocation of the pension fund as added influences on the shareholder value of corporate-level investment.

Purpose -While the "Information Age" has provided the technological tools to "democratize" data and make it widely available to a vast audience of knowledge consumers, ironically it has also provided the materials for a tapestry of rules, regulations and processes that make it more difficult for individuals to access information relevant to both their public and private lives. The purpose of this paper is to examine the role of the private sector in the control and policing of financial crime, and provide an empirical and theoretical framework for understanding the complex tensions created by the simultaneous expansion of both data sources and technologies to collect and format data to create marketable information "products." Design/methodology/approach -Three primary methods were used to gather the data for this research. Extensive literature reviews were conducted together with an analysis of existing data bases. Finally, a number of interviews were done with various corporate managers to ascertain their views of the existing climate of regulation and/or to determine their approach to monitoring financial crime. Findings -Regarding the private sector's role in the control of financial crime, this research found five distinct roles; each with its own dynamics and implications for successful suppression of unlawful conduct. The five roles are grudging informant, enthusiastic intelligence operative, agent provocateur, cop on the take, and officer friendly. A calculus of incentives and disincentives determines which role will be adopted by the private sector. Originality/value -Since this paper was exploratory in nature, resulting in a new taxonomy of compliance types, more in depth research ascertaining the empirical validity of each type would be in order. Such knowledge can help policy makers formulate rules and regulations that will enhance public/private partnerships in the control of financial crime.

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Purpose -The desirability of financial reform to avoid another financial melt-down is widely accepted, but the likelihood of reform is uncertain. The purpose of this paper is to present a case study of evolution and reform attempts at US mortgage giants Fannie Mae and Freddie Mac and provides an instructive model of the likely long-term success of attempts to reform the financial system. Design/methodology/approach -A model of the legislative and regulatory change process is first developed, considering the range of influences that arise. The history of reform attempts for US government sponsored mortgage giants Fannie Mae and Freddie Mac are examined in the context of this model. Findings -The model predicts that reform will often be thwarted. US government sponsored mortgage giants Fannie Mae and Freddie Mac helped fuel the housing bubble and required a government bail-out. Sentiment for reform was high, but what happened next was -nothing. Fannie Mae and Freddie Mac have a long history of successful lobbying, and they succeeded again. They did not need to stop legislation. They needed only to see it delayed long enough for attention to turn elsewhere. Five years after the bubble broke, their market dominance and the implied guarantees continue. Reform is not on the legislative agenda. This outcome does not bode well for financial market reform or stability. Originality/value -An understanding of the process, influences, and likelihood of reform is important for governments, businesses, and individuals. While the picture this paper paints is not optimistic, it is important.

In this study, announcements by U.S. firms of offshore joint venture manufacturing during the 1980s are used to provide more comprehensive evidence than past studies on the wealth effects of offshore joint ventures. Evidence shows that the target country's level of economic development and political stability, currency strength of the originating country (U.S. in this study) relative to that of the target country, U.S. firm's mode of entry, and the relative value of the US. firm's investment in the joint venture affect the wealth of US. firms which engage in offshore joint ventures. "he target country's level of economic development, its political stability, and the currency strength of the originating country relative to the target country are shown to be the dominant economic factors. Of particular importance, evidence indicates that the target country's level of economic development is a more important determinant of excess returns than is its political stability.

Purpose – The purpose of this paper is to understand the reasons why some financial crises do not result in extensive criminal prosecutions. Design/methodology/approach – The authors examine three major events: the crash of 1929 leading to the Great Depression, the collapse of the US Savings and Loan industry circa 1990 and the sub-prime mortgage meltdown. The authors explain how circumstances surrounding these financial collapses led to stark differences in criminal prosecutions. Findings – This review of prosecutions during three financial crises underscores the contingent nature of seeking criminal penalties for financial wrongdoing. The decision is influenced by a number of factors, including a prosecutor’s level of risk tolerance (probable win test); the potential economic impact of a successful conviction; the number of laws and regulations available in the prosecutorial tool kit; and the desired outcome which can range from new regulatory structures, to prosecutions that fix blame and satisfy the desire for scapegoats, to seeking financial penalties that shore up the government’s bottom line. Research limitations/implications – This study covers three crises and focuses on the US responses. A broader study could look across countries. Practical implications – Regulators and lawmakers are interested in avoiding future crises. Because crises are not anticipated, responses are determined by conditions of the moment. A frequent result is that laws and regulations are not in place. Decisions about likely preferred responses would allow anticipatory legislation and regulations. Social implications – Financial crises obviously have major implications for ordinary citizens far removed from the centers of finance. Improved responses to mitigate or avoid disasters would have profound impacts on people’s quality of life. Originality/value – The three crises have been studied individually. This work is different in that it examines the impact of a common set of factors over three crises covering a span of 80 years.

Purpose – This paper aims to address the question of who gained and who lost in the financial crisis of 2008. Design/methodology/approach – Gains and losses were identified by groups ranging from bankers to homeowners to taxpayers. Findings – Gains and losses are not neatly split by a main street/Wall street dichotomy. Major financial institutions and their chief executive officers made huge gains followed by bigger losses, a substantial portion of which were shared by taxpayers. Homeowners and taxpayers consistently lost. Workers and real estate developers experienced a mixture of gains and losses. Practical implications – Financial legislation is affected by questions of who won and who lost. The complex mixture of gains and losses must be fully grasped if winners and losers are an important consideration in the design of legislation. Originality/value – The detailed analysis and model of winners and losers provide important lessons for legislators and regulators in all countries.

Purpose -The purpose of this paper is to examine the legislative process, in order to determine the likely effectiveness of financial reform efforts in the USA. Design/methodology/approach -Case study of the legislative process, particularly the less visible parts such as rule making, that shaped the passage and implementation of the Dodd-Frank Act and the failed Financial Accounting Standards Board (FASB) reform. Findings -It is found that the process of financial reform legislation is structured in such a way as to thwart major reform, at least in the short run. Practical implications -The passage of a particular piece of legislation may be the least important element in the process of reform. Rule making and the decisions as to how a law will be implemented, can advance or significantly defeat the quest for change. Social implications -Much of what occurs in the legislative process is invisible, or appears arcane, to the ordinary citizen but can have major impact on their lives. Originality/value -The paper provides a road map to understanding the least visible parts of financial reform efforts and suggests ways of achieving reform outcomes.