Issue 5 (September 2024)

Finace Theory Insights

Issue 5 (September 2024)

Social dimensions of finance

Logo Finance Theory Group

Share:

icon share X icon share facebook icon share linkedin
This issue of FTG Insights covers research on the broader social consequences of financial arrangements. “A Theory of Socially Responsible Investment” argues that environmentally-minded investors do the most good by funding green projects that aren’t profitable enough to appeal to traditional investors---as opposed to simply boycotting polluting-projects. “On the Magnification of Small Biases in Hiring” considers firms’ hiring of senior executives, and shows that even infinitesimally small biases in hiring committees in favor of some demographic group can lead to large advantages for that demographic group. “Worker Runs” develops insights from existing research on bank runs to understand a related phenomenon in which workers’ decisions to quit a firm are contagious; the article characterizes what types of firms are most exposed, and how they can structure employee compensation, including stock options, to mitigate the threat. “Intervention with Screening in Panic-Based Runs” considers the more traditional topic of the prevention of bank runs, and argues that governments could both reduce the cost of deposit insurance schemes, and reduce associated moral hazard, by shifting to opt-in schemes that are designed to be attractive specifically to depositors who are most likely to be pivotal in bank runs.

Shaun W. Davies, Edward D. Van Wesep, Brian Waters

On the Magnification of Small Biases in Hiring

In many hiring scenarios, a single candidate must be selected from a pool of...
Read More

Lin Shen, Junyuan Zou

Should deposit insurance be mandatory for depositors?

Bank runs have long posed a significant threat to the stability of the modern...
Read More

Vladimir Vladimirov, Florian Hoffmann

Worker Runs

In June 2021, the financial press reported extensively on Credit Suisse’s fight to stem...
Read More

Martin Oehmke, Marcus Opp

A Theory of Socially Responsible Investment

The rapid rise of socially responsible investing has been one of the most significant...
Read More