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This paper uses a transactions economics theory of financial governance to reconcile and integrate the evidence on inter‐ and intra‐country differences in corporate finance and corporate governance. We argue that one reason for the competitive advantage demonstrated by Japan in recent years is Japan's greater use of high capability financial governance and its consequent reduction of risks that would otherwise be borne.

The purpose of this paper is to develop new tools to interpret changes in risk neutral probability distributions (RNPDs). It distinguishes between changes attributable to upside potential and those attributable to downside risk, and shows that the distinction is supported empirically.

This paper estimates pricing kernels and RNPDs from option price data, then studies the expected excess returns on a fixed‐strategy reference portfolio composed of the claims defined by the RNPDs. The portfolio is disaggregated so that realized returns can be expressed as a value‐weighted average of returns to upside (investment) and downside (insurance) sub‐portfolios, respectively. An upside sub‐portfolio can be interpreted as defining payoffs to a call option, a downside sub‐portfolio as payoffs to a short put position.

Empirical results indicate that the realized excess returns on the reference portfolios are significantly and negatively related to both S&P index growth and volatility (measured by the Chicago Board Options Exchanges (CBOEs) volatility index (VIX)) in the original data, but neither variable is significant in regressions on data first differences. However, in regressions on both the original data and first differences, realized excess returns on the investment sub‐portfolios are significantly and negatively related to both S&P index growth and volatility, whereas the realized excess returns to insurance sub‐portfolios are significantly and positively related only to the VIX. In regressions on both original data and its first differences the ratio of realized insurance excess return to total return is positively and significantly related only to the VIX. Constant terms are significant in about half of all the regressions, suggesting the presence of additional explanatory factors not captured in currently available data.

The paper shows that upside and downside sub‐portfolios have different return distributions in different market regimes, and that while returns to upside claims depend significantly on both S&P index growth and volatility, returns to downside claims depend significantly on just S&P index volatility. Thus realized excess returns to sub‐portfolios convey more nearly precise information about changes in market attitudes than do realized excess returns to entire portfolios. Although concepts of aggregating and disaggregating information have been investigated in the context of annual earnings announcements in other research, they have not previously been applied to realized portfolio returns in the manner used here. If the paper's findings are sustained in further empirical analyses, they can potentially provide information regarding both the Grossman‐Zhou and Holmstrom‐Tirole theories of claim pricing. Overall, because they distinguish between upside potential and downside risk, these methods contribute to more discriminating ways of understanding reference portfolio returns. In contrast, the CAPM measures of return variance do not distinguish between the risks of returns fluctuating on the upside from the risk of returns fluctuating on the downside.

The purpose of this paper is to examine the recent subprime mortgage market meltdown from a theoretical and practical perspective.

The authors apply the principles of transaction costs economics to critically evaluate the roles of lenders, borrowers, institutions, and investors.

It is found that a combination of need, greed, perverse incentives, inadequate risk controls, lax regulation, and lax oversight caused a bubble in the subprime mortgage market which has inevitably burst. The principles of transaction cost economics provide a template for analysis and corrective action.

The subprime mortgage market provides a useful example of where theory can provide helpful insights. The example has implications for future research in other financial market settings.

The results provide insight and guidance to lenders, borrowers, institutions, investors, regulators, and central bankers in how to identify and handle potentially toxic financial scenarios.

The theoretical perspective has not been applied to the subprime market or other similar financial settings. It offers both academic and practical contributions.

The purpose of this paper is to use an equilibrium model to identify the public and private informational requirements for equilibrium pricing and shows that unless these informational requirements are met, skin-in-the-game policies will not be fully effective against moral hazard for banks with relatively large market share. Selling securitizations with recourse can be.

The single-period model shows equilibrium prices depend on both public and private information, the latter produced as banks screen loans. If bank has a sufficiently large market share, it can profit by omitting the screening unless investors can detect the change. The author derives the profit function for not screening, shows that a skin-in-the-game policy cannot fully offset its incentives, and proposes a sale with recourse policy that can.

To value securitizations correctly, investors require both publicly and privately available information. If investors cannot monitor banks closely, correct pricing can be frustrated by profit maximization incentives, since banks with large market shares can profit from not screening. Skin-in-the-game policies cannot fully offset these incentives.

The equilibrium model identifies the public and private informational requirements for equilibrium pricing and shows that unless these informational requirements are met, skin-in-the-game policies will not be fully effective for banks with relatively large market share. Selling securitizations with recourse can be more fully effective.

If it is difficult for investors to obtain private information, skin-in-the-game policies are not provide fully effective remedies against moral hazard. Sales with recourse policies offer promise because they are easy for investors to understand and difficult to evade.

Trading on the basis of private information can create perverse incentives, and appropriate corrective policies can help offset them.

The general equilibrium methodology, the findings of incentives to avoid screening, the flaws with skin-in-the-game policies, and the proposal for sale with recourse are all new.

At the recent conference of the British Medical Association, Dr. Langdon‐Down, of South Middlesex, submitted the report of the Ethical Committee on behalf of the Council, upon the ethics of indirect advertising by the medical profession. The report mentioned a number of restrictions which it was thought advisable to impose as regards advertising by members of the profession. It was stated that in discussions in the Press on matters of public importance relating to the medical questions it was not necessary that the names of the medical writers or informants should be given. The newspapers, it was contended, could give the necessary assurance to their readers as to the professional standing of the authority quoted without mentioning names.—Dr. Fothergill moved that certain recommendations in the report be referred back for reconsideration, including that which related to medical men not attaching their signatures to letters and communications they sent to the Press on medical subjects. On that latter point he suggested that before the report was issued the council should approach the Press Association to get their views on the question. What the Press required was not the advertising of an inferior practitioner. What they desired was to get an adequate medical opinion. The Press said: “If you allow a doctor to go to the Church Congress and talk openly there of birth control, should you not allow that same doctor to put into the public Press a letter over his signature?”—Dr. Lyndon hoped the representative body would not be led away by Dr. Fothergill. The question of having a conference with the Press was brought before the council, who were all against it.—Sir Jenner Verrall said he did not think what was suggested would be a substitute for the indirect advertising complained of.—Dr. Bishop Harman expressed agreement with the contention that it was the name that really mattered in these contributions to the Press. An eminent medical man wrote to The Times a brilliant letter on an important medical subject, and signed himself “Veritas.” It never caused a ripple on the water. They thought it was a gas mantle or something, and there was no punch behind it. Three things mattered—what you say, how it is said, and who says it, and the last is the only thing that really matters.—The report was adopted with the exception of that part relating to medical men's names being attached to letters and communications sent to the Press. That section of the report was referred back for consideration, with the object of seeing how far it was possible to depart from anonymity.

The March issue of the Journal of Chemical Technology contains the following article, with every word of which we cordially agree. It is gratifying to find that there is one—if only one—of our scientific Journals which has the courage and the patriotism to speak out and to do so in vigorous terms. The indictment of the flabby persons belonging to the Chemical Profession who by their ineptitude and inertia are condoning the bestial crimes of the modern Huns is well‐timed and thoroughly deserved.

OWING to the comparatively early date in the year of the Library Association Conference, this number of THE LIBRARY WORLD is published so that it may be in the hands of our readers before it begins. The official programme is not in the hands of members at the time we write, but the circumstances are such this year that delay has been inevitable. We have dwelt already on the good fortune we enjoy in going to the beautiful West‐Country Spa. At this time of year it is at its best, and, if the weather is more genial than this weather‐chequered year gives us reason to expect, the Conference should be memorable on that account alone. The Conference has always been the focus of library friendships, and this idea, now that the Association is so large, should be developed. To be a member is to be one of a freemasonry of librarians, pledged to help and forward the work of one another. It is not in the conference rooms alone, where we listen, not always completely awake, to papers not always eloquent or cleverly read, that we gain most, although no one would discount these; it is in the hotels and boarding houses and restaurants, over dinner tables and in the easy chairs of the lounges, that we draw out really useful business information. In short, shop is the subject‐matter of conference conversation, and only misanthropic curmudgeons think otherwise.

THE blueprint, vital communication link between designer, engineer and manufacturer, is currently undergoing a radical change in its traditional format at the Boeing Airplane Company in the United States.

TO some, Annual Estimates this year may have a nightmarish quality. Not perhaps so much in the safe areas to which many who had the means to do so have gone with those means and no doubt are contributing part of them to the local exchequers; but in the so‐called “dangerous” areas which have lost them and their means and have, because of their liability to air raids, huge expenditure on A.R.P., the librarian may have a severe battle to get what he needs to maintain his work. Our own policy would be to concentrate, so far as is possible, upon the book fund and on salaries. If these can be retained at a fair amount much good will ensue.

Index by subjects, compiled by K.G.B. Bakewell covering the following journals: Facilities Volumes 8‐17; Journal of Property Investment & Finance Volumes 8‐17; Property Management Volumes 8‐17; Structural Survey Volumes 8‐17.