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Research meeting in the middle. While this approach might not be perfect, it offers a best estimate until markets stabilize, says O'Hara. Ironically, the two researchers were working on this approach long before the banking collapse of Sep- tember 2008. They point out that their new model recognizes that firms still need a way to calculate value logically, even when economic forces stop making sense. Their study recently received the Western Finance Association's award for best paper in asset pricing. It is available as abstract No. 1282106 on www.ssrn.com. White-Collar Crime: A Slippery Slope Valuing Assets When the Bottom Drops Out In their paper "Liquidity and Valuation in an Uncertain World," Maureen O'Hara and David Easley look close- ly at the financial crisis—and more specifically, at how to value assets accurately when a market essentially stops in its tracks. O'Hara, professor of manage- ment at Cornell University's Johnson Graduate School of Management in Ithaca, New York, worked with Easley, professor of economics in Cornell's department of economics, to develop a model that tracks and explains the behaviors and decision making of individuals during a finan- cial meltdown. When market turmoil goes beyond the norm, rules of prob- 52 BizEd JANUARY/FEBRUARY 2010 ability no longer apply. And when market participants can no longer predict likely scenarios or calculate risk, they stop buying and selling assets regardless of bid or ask prices. But even in such an economic environment, regulatory bodies still require firms to price their assets. So, the question remains: How is asset value calculated in a market where no one's buying? The typical approach of using ask or bid prices to set values is faulty, say O'Hara and Easley. In uncertain markets, these prices are often in freefall because markets are frozen, not because the actual value of the company has changed. Instead, the researchers recom- mend averaging the bid and ask prices—essentially looking at the best- and worst-case scenarios and White-collar crime might begin with a single malefactor, but it is enabled by many otherwise good individu- als, say three Canadian researchers. These people are simply caught up in a corporate culture governed by power plays and bad behavior. For example, the collapse of 233-year-old Barings Bank in the United Kingdom might have seemed to be caused by a single person. After all, the bad trades of chief trader Nick Leeson cost the bank $1.4 billion— and its very existence. But for years, Barings Bank executives allowed Leeson to both trade and settle deals, actions usually completed by two people to avoid conflicts of interest and corruption. Likewise, three executives might share the brunt of the blame for Enron's collapse, but their actions were enabled by a pervasive culture of misrepresentation and secrecy. Ruth McKay, an associate profes- sor at Carleton University's Sprott School of Business in Ontario, Cana-