Risk Taking, Principal Agent Problems and Breakdown of Corporate Social Responsibility (CSR): How to Reestablish Safe-Assets and Capital Funding for Social Security?
DOI:
https://doi.org/10.12775/EQUIL.2013.011Keywords:
capital funding, corporate social responsibility, financial markets, principal agent problems, risk managementAbstract
The breakdown of the financial markets in fall 2007 and the following debt crisis in the EU has produced an enormous mistrust in financial products and the monetary system. The paper describes the background of the crisis induced by functional failures in risk management and the multifold principal agent problems existing in the financial market structures. The innovated nontransparent financial products have mixed up different risk weights and puzzled, or even fooled formerly loyal customers. Contemporaneously abundant liquidity on the international financial market accompanied by easy money policies of the Fed in the US and the ECB in the euro zone have depressed the real interest rate to zero or even negative values. Desperate investors are seeking for safe-assets, but their demand remains unsatisfied. Low real interest rates and the consequently lacking compound interest effect in the same time jeopardize private as well as public insurance schemes being dependent on capital funding: the demographic crisis becomes gloomy. Therefore, the managers of the financial markets have to reestablish CSR and to divide the markets into safe-asset areas for the usual clients and ?casino? areas for those who like to play with high risks. Only with transparency and risk adequate financial products can the lost commitment be regained.
Downloads
References
Khoperia L., Narmania D., Goderdzishvili N. (2012), The Role of Government and Public Policies in Promoting Corporate Social Responsibility ? An Analytical Overview and Recommendations to the Georgian Government (Executive Summary), The Centre for Strategic Research and Development of Georgia and Friedrich Ebert Stiftung, Tblisi.
McKinsey Analytics (2010), McKinsey Global Economic Database; World Development Indicators of the World Bank, McKinsey Global Institute.
OECD (2011), Promoting Longer-Term Investment by Institutional Investors: Selected Issues and Policies, Discussion Note.
Petersen H.G. (1993), Ökonomik, Ethik und Demokratie. Zu einer Theorie der Effizienz und Gerechtigkeit offener Gesellschaften, Nomos Verlagsgesellschaft, Baden- Baden.
Petersen H.G. (2004), Redistribution and the Efficiency/Equity Trade-off. ?Studi economici?, No. 82, 1/2004. Petersen H.G. (2010), Steuern in fragilen Staaten ? Empfehlungen für die Entwicklungszusammenarbeit, Finanzwissenschaftliche Diskussionsbeiträge 61. University of Potsdam, Potsdam.
Petersen H.G. (2011), The Role of Credit and Banking and the Crisis of the Financial Markets ? Lessons for Financing the SME Sector [in:] A.V. Vakhabov et al. (eds.), The Role of Banking and Financial System in the Development of Small Business and Pivate Entrepreneuership, Central Bank of the Republic of Usbekistan, Banking Association of Usbekistan and the Banking and Finance Academy. Tashkent.
Petersen H.G. (2012a), Armut, Reichtum und Humankapital, ?Jahrbuch für Wirtschaftswissenschaften/ Review of Economics?, Vol. 63.
Petersen H.G. (2012b), Poverty, Human Capital and the Tax and Transfer Bases: The Role of Education fpr Development and International Competition [in:] B. Batavia, J. Wook Choi, R. Hema (eds.), Global Integration, National Strategies and Sectoral Impact. Studies in Economic Transformation and Public Policy. Indian Institute of management Lucknow, The Athenian Policy Forum Inc., Sidma Press, India.
Petersen H.G. (2012c), Principal-Agent-Problems, Risk Management and Social Responsibility: Moral Limitations for Efficient Governance. Paper presented at the Multi-Stakeholder Forum ?The Role of Government and Public Policies in Promoting Corporate Social Responsibility? organized by The Center for Strategic Research and Development of Georgia and Friedrich Ebert Stiftung, April 27, 2012, Tbilisi.
Petersen H.G., Mueller K. (1999), Volkswirtschaftspolitik, Vahlen, München.
Rawls J. (1999), A Theory of Justice, Haward University Press, Cambridge.
Wöhe G., Döring U. (2005), Einführung in die allgemeine Betriebswirtschaftslehre, Vahlen, München.
Sinn H.W. (2009), Kasino Kapitalismus ? Wie es zur Finanzkrise kam, und was jetzt zu tun ist, Econ, Berlin.
Sinn H.W. (2012), Die Target Falle. Gefahren für unser Geld und unsere Kinder, Hanser, München.
Wiegelmann A.M. (2013), Regulierung des Schattenfinanzsektors, Universitätsverlag Potsdam (forthcoming).
