This article analyzes the optimal allocation of losses via a Central Clearing Counterparty (CCP) in the presence of counterparty risk. A CCP can hedge this risk by mutualizing losses among its members. This protection, however, weakens members’ incentives to manage counterparty risk. Delegating members’ risk monitoring to the CCP alleviates this tension in large markets. To discipline the CCP at minimum cost, members offer the CCP a junior tranche and demand capital contribution. Our results endogenize key layers of the default waterfall and deliver novel predictions on its composition, collateral requirements, and CCP ownership structure.

We identify Industry-Neutral Self-Financed Informed Trading (INSFIT) as stock trades financed by offsetting, equivalent dollar-denominated stock trades in the same industry. Approximately 37% of short-term mutual fund trading profits can be attributed to these trade pairs. Consistent with informed trading, INSFIT precedes unusually high media coverage for the underlying stocks. The trades underlying INSFIT are also larger as the release of stock-level news becomes more imminent. Both relative valuation and the hedging of industry exposure motivate INSFIT’s industry neutrality. While INSFIT positively impacts fund performance, active fund managers who execute INSFIT more aggressively obtain smaller trading profits per execution.

Announcements of mergers very often discuss the immediate impact of the deal on the acquirer’s earnings per share (EPS). We argue that the focus on EPS reflects the difficulty of evaluating and communicating deal synergy in mergers and acquisitions (M&A) practice and provide supporting evidence. We show that the acquirer’s EPS focus affects how deals are structured, the premium that is paid, and the types of deals that are done. EPS-driven M&A decisions are also associated with costly distortions in the acquirer’s financial and investment policies.

Credit default swaps (CDSs) are a major financial innovation related to debt contracting. Because CDS markets facilitate bad news being incorporated into equity prices via cross-market information spillover, CDS availability may curb firms’ information hoarding. We find that CDS trading on a firm’s debt reduces the future stock price crash risk. This effect is stronger in active CDS markets, when the main lenders are CDS market dealers with securities trading subsidiaries, or when managers have more motivation to hoard information. Our findings suggest that debt market financial innovations curtail the negative equity market effects of firms withholding bad news.

This study examines how maximum emotional intelligence (EI) members can contribute to the emergence of team-level organizational citizenship behaviors (OCB). Based on integrating a strategic core role and multilevel theory, we developed and tested a model in which the maximum EI score in teams results in intrateam trust and consequently impacts team OCB and examined whether the indirect effect of maximum EI on team OCB through intrateam trust would be moderated by EI diversity and trust divergence in teams. The results from 129 project teams showed that the relationship of maximum EI with team OCB is mediated by intrateam trust and this relationship is stronger for lower levels of EI diversity and trust divergence than for higher levels of diversity and divergence. The findings advance our understanding of the role of EI in team settings. Our research has important implications for organizations attempting to develop the applied value of EI.

This article analyzes the accounting treatment of sales and purchasing at the Fengshengtai Company (丰盛泰号), a salt trader from Shanxi Province. We find evidence of “dualled entry” bookkeeping in that all transactions were recorded twice. Crucially, each set of dualled entries was recorded in two distinct accounts. For example, cash transactions were recorded in a “cash flowing account” as well as a specialized flowing account. We thus argue that, in light of clues from other records, a system of indigenous Chinese double-entry bookkeeping may well have been developed at Fengshengtai and other Shanxi merchants. Our study is based on Fengshengtai's surviving account books, a collection of primary sources spanning 1854 to 1881, that have recently become available to scholars.

The concept of a ‘safe harbour’ has been mentioned in several contexts during ongoing discussions around regulatory developments towards mandatory human rights and environmental due diligence (mHREDD) which continue at international, European and national levels. This article analyses the concept of a ‘safe harbour’ and how it relates to human rights due diligence (HRDD) as described in the UN Guiding Principles on Business and Human Rights (UNGPs). It discusses examples of other types of safe harbours which were recognized in legislation and case law; considers that a safe harbour could result in a ‘tick-box’ approach; highlights the implications for access to remedy; and distinguishes a safe harbour exemption from a defence of having undertaken HRDD in accordance with an expected standard of conduct.