Francisco J. Callado-Muñoz

Does It Pay to Be Socially Responsible? Evidence from Spain's Retail Banking Sector

This paper extends the research on the relation between financial performance and corporate social responsibility in two respects. First, it develops a model of strategic competition that includes consumer perceptions with respect to firm social performance. It is shown that in the presence of a positive valuation of social responsibility practices by consumers, a firm that endorses this responsible behaviour may obtain a better strategic position in the market, along with higher margin, demand, and profit. Second, the models predictions are tested with a sample of Spanish banking firms. The empirical analysis confirms that consumers significantly value other features apart from price in making deposit and mortgage decisions, particularly a financial institutions social responsibility. A more disaggregated analysis shows first, that not every CSR dimension has relevance for consumers and second, that customers equally value activities that can have a direct impact on their well�?being (e.g., culture and leisure), as well as other activities that can be viewed more generally as public goods (e.g., heritage and the environment). These conclusions are of interest in the debate about a firms social or ethical activities. It is shown that, provided that consumers value corporate social responsibility activities, firms can improve both their competitive position in the market and their profits by behaving in a socially responsible manner. Therefore, the design and implementation of corporate social responsibility practices could confer upon firms an initial competitive advantage over their competitors.

Do investors react to corporate governance news? An empirical analysis for the Spanish market

This work adds to the debate on corporate governance regulations and its effects on performance and firm value. The paper empirically tests whether there is a significant price reaction to corporate governance announcements following the publication of the Aldama Code of Best practice (2003) in Spain. In particular, news announcements are classified according to the code principles to distinguish among different dimensions of corporate governance and have a better understanding of investors’ reaction. Results show first, that investors react to this kind of practices, second, that the sign of their reaction depends crucially on the nature and extension of the recommendation and finally that firms that disclose more do not enjoy higher market prices or return on the medium-long term.

Effects of institutional environment and technology development on payment choice

The purpose of this paper is to analyze the combination of institutional factors and technology advances as determinants of payment systems choice. The theoretical set up suggests that countries entering into a new institutional environment approach accepting group attitudes towards payment choices as a consequence of institutional pressure and technology development. We apply the results of the model to 2004 European Union enlargement process. Results confirm the relevance of both institutional environment and technology development in retail payment system decisions of newly acceded countries.

Defence Spending, Institutional Environment and Economic Growth: Case of NATO

This paper analyses the impact of participating in a military alliance on the nexus between defence spending and economic growth. In particular, we study how the process of gradual association to a military organization influences the defence spending of newcomers, and consequently their economic growth. Conclusions from the theoretical model are tested empirically for countries in the North Atlantic Treaty Organization. Results show that the prospect of intensified military alliance partnership and membership has a positive effect on economic growth. In addition, increased security and stability gained by closer military cooperation reinforces the positive link with economic growth. Empirical evidence supports theoretical priors.

Collateral in Monetary Policy Operations

We present a portfolio decision model for banks that permits us to estimate the costs associated with the need to collateralise loans from the central bank. This allows us to calibrate the difference between a restrictive collateral eligibility framework for open market operations, such as that applied by the FED, with a more flexible approach such as that of Eurosystem. We also document that there could potentially appear relevant cost differences between the various collateral mobilisation procedures (pooling and earmarking) that currently coexist in the eurozone.