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on Business Economics |
| By: | Allen, Franklin; Babus, Ana; Carletti, Elena |
| Abstract: | We develop a model in which asset commonality and short-term debt of banks interact to generate excessive systemic risk. Banks swap assets to diversify their individual risk. Two asset structures arise. In a clustered structure, groups of banks hold common asset portfolios and default together. In an unclustered structure, defaults are more dispersed. Portfolio quality of individual banks is opaque but can be inferred by creditors from aggregate signals about bank solvency. When bank debt is short-term, creditors do not roll over in response to adverse signals and all banks are inefficiently liquidated. This information contagion is more likely under clustered asset structures. In contrast, when bank debt is long-term, welfare is the same under both asset structures. |
| Keywords: | interim information; rollover risk.; Short-term debt |
| JEL: | D85 G21 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8476&r=bec |
| By: | Richard Blundell (Institute for Fiscal Studies and University College London); Joel Horowitz (Institute for Fiscal Studies and Northwestern University); Matthias Parey (Institute for Fiscal Studies) |
| Abstract: | <p><p><p>This paper develops a new method for estimating a demand function and the welfare consequences of price changes. The method is applied to gasoline demand in the U.S. and is applicable to other goods. The method uses shape restrictions derived from economic theory to improve the precision of a nonparametric estimate of the demand function. Using data from the U.S. National Household Travel Survey, we show that the restrictions are consistent with the data on gasoline demand and remove the anomalous behavior of a standard nonparametric estimator. Our approach provides new insights about the price responsiveness of gasoline demand and the way responses vary across the income distribution. We find that price responses vary nonmonotonically with income. In particular, we find that low- and high-income consumers are less responsive to changes in gasoline prices than are middle-income consumers. We find similar results using comparable data from Canada.</p></p></p> |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:cemmap:24/11&r=bec |
| By: | Vives, Xavier (IESE Business School) |
| Abstract: | This paper performs a welfare analysis of economies with private information when public information is endogenously generated and agents can condition on noisy public statistics in the rational expectations tradition. We find that equilibrium is not (restricted) efficient even when feasible allocations share similar properties to the market context (e.g., linear in information). The reason is that the market in general does not internalize the informational externality when public statistics (e.g., prices) convey information. Under strategic substitutability, equilibrium prices will tend to convey too little information when the "informational" role of prices prevails over its index of scarcity" role and too much information in the opposite case. Under strategic complementarity, prices always convey too little information. These results extend to the internal efficiency benchmark (accounting only for the collective welfare of the active players). However, received results-on the relative weights placed by agents on private and public information, when the latter is exogenous-may be overturned. |
| Keywords: | information externality; strategic complementarity and substitutability; asymmetric information; team solution; rational expectations; schedule competition; behavioral traders; |
| Date: | 2011–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0925&r=bec |
| By: | Patton, Andrew J; Ramadorai, Tarun |
| Abstract: | We propose a new method to model hedge fund risk exposures using relatively high frequency conditioning variables. In a large sample of funds, we find substantial evidence that hedge fund risk exposures vary across and within months, and that capturing within-month variation is more important for hedge funds than for mutual funds. We consider different within-month functional forms, and uncover patterns such as day-of-the-month variation in risk exposures. We also find that changes in portfolio allocations, rather than changes in the risk exposures of the underlying assets, are the main drivers of hedge funds' risk exposure variation. |
| Keywords: | beta; hedge funds; mutual funds; performance evaluation; time-varying risk; window-dressing |
| JEL: | C22 G11 G23 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8479&r=bec |
| By: | Francois-Éric Racicot (Département des sciences administratives, Université du Québec (Outaouais), LRSP et Chaire d'information financière et organisationnelle); Raymond Théoret (Département de finance, Université du Québec (Montréal), Université du Québec (Outaouais), et Chaire d'information financière et organisationnelle) |
| Abstract: | It is well-known that traditional financial institutions like banks follow procyclical risk strategies (Rajan 2005, 2009, Shin 2009, Jacques 2010) in the sense that they increase their leverage in economic expansions and reduce it in recessions, which leads to a procyclical behaviour for their betas and other risk and financial performance measures. But it is less known that the spectrum of the returns of many hedge fund strategies displays a high volatility at business cycle frequencies. In this paper, we study this unknown stylized fact resorting to two procedures: conditional modelling and Kalman filtering of Funds alphas and betas. We find that hedge fund betas are usually procyclical. Regarding the alpha, it is often high at the beginning of a market upside cycle but as the demand pressure stems from investors, it eventually fades away, which suggests that the alpha puzzle documented in the financial literature is questionable when cast in a dynamic setting. |
| Keywords: | risk measures; Aggregate risk; Financial stability; Conditional models; Kalman Filter; Spectral analysis. |
| JEL: | C13 C19 C49 G12 G23 |
| Date: | 2011–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:pqs:wpaper:062011&r=bec |
| By: | Macdonald, Ryan |
| Abstract: | Dans la présente étude, des statistiques sur la production et le revenu provenant du Système de comptabilité nationale sont utilisées pour examiner la performance dans les trois pays de l'Amérique du Nord. Ce faisant, l'étude s'appuie sur des recommandations formulées dans le Système de comptabilité nationale de 1993 (SCN de 1993) pour calculer des statistiques sur le revenu réel agrégé telles que le revenu national brut (RNB) et le revenu national disponible brut (RNDB) plutôt que des statistiques sur le produit intérieur brut (PIB) réel agrégé en vue de démontrer l'utilité d'autres mesures pour analyser la performance économique agrégée et le niveau de vie. Pour passer des estimations du PIB à celles du RNB et du RNDB, des corrections sont apportées aux variations des prix relatifs appelées « gain d'échange » (c.-à-d. l'effet combiné des variations des termes de l'échange et des variations du ratio des prix des biens échangés à ceux des biens non échangés), ainsi qu'aux écritures du compte courant ne faisant pas partie de la balance commerciale. L'étude compare les mesures de production et de revenu réels utilisées pour le Mexique, les États Unis et le Canada. Les différences entre les estimations du PIB et celles du RNDB illustrent la mesure dans laquelle des facteurs n'entrant pas dans la production, tels que les variations des prix relatifs, peuvent avoir une incidence sur la performance économique d'un pays par comparaison à celle d'autres pays ou en ce qui a trait à sa capacité d'acheter les biens et services que consomment ses citoyens. Elles illustrent aussi le bienfait d'utiliser plus d'une mesure pour comparer la performance économique |
| Keywords: | Comptes économiques, |
| Date: | 2011–07–11 |
| URL: | http://d.repec.org/n?u=RePEc:stc:stcp5f:2011068f&r=bec |
| By: | Yoshiro Miwa (Faculty of Economics, University of Tokyo) |
| Abstract: | The Ministry of Finance's "Corporate Enterprise Quarterly Statistics" (Hojin kigyo tokei kiho) is the only statistical source of well-balanced information about the financing behavior of Japanese firms. Indeed, there are few comparable sources available anywhere in the world. Using this firm-level data set from 1994 to 2009, I investigate the financing behavior of Japanese firms with over \10 million in paid-in capital. The conclusions contrast sharply with the conventional wisdom. Much of the research and policy discussions about Japanese finance begin from the premise that banks play a decisive role in firm behavior. This paper shows that firms have maintained a dependence on financial institutions well below the level that the conventional wisdom has claimed. Under the recent gzero-interest-rate, quantity easingh monetary policy, this gindependence of the firms from the banksh has increased further. This tendency is clearest among the smaller firms. In turn, this first conclusion raises doubts about the plausibility of the basic premise of research and policy debate on financial issues, and leads us to question whether observers may not have confused a gcrisis of financial institutionsh with a gfinancial crisish. Investigation into firm financing behavior under the gfinancial crisish from the end of 1997 to the beginning of 1999 does indeed suggest that it was a fiasco caused by the confusion of a gcrisis of financial institutionsh with a gfinancial crisish. |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:cfi:fseres:cf251&r=bec |
| By: | Maitreesh Ghatak; Alexander Karaivanov |
| Abstract: | We analyze optimal contracts and optimal matching patterns in a simple model of partnership where there is a double-sided moral hazard problem and potential partners differ in their productivity in two tasks. It is possible for one individual to accomplish both tasks (sole production) and there are no agency costs associated with this option but partnerships are a better option if comparative advantages are significant. We show that the presence of moral hazard can reverse the optimal matching pattern relative to the first best, and that even if partnerships are optimal for an exogenously given pair of types, they may not be observed in equilibrium when matching is endogenous, suggesting that empirical studies on agency costs are likely to underestimate their extent by focusing on the intensive margin and ignoring the extensive margin. |
| Keywords: | Endogenous matching, partnerships, contractual structure |
| JEL: | D21 D23 D82 D12 Q15 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:cep:stieop:024&r=bec |
| By: | Kronenberg, Kristin |
| Abstract: | This study analyzes determinants of business relocation and identifies regional characteristics which attract relocating firms. Results indicate that the relocation decisions of firms are sector-dependent, and the migratory behavior of firms in knowledge-intensive sectors notably differs from that in less knowledge-intensive sectors. Generally, its age and size keep a firm from relocating, whereas firms paying high average salaries have a higher probability to move out of their present location. Relocating firms are generally attracted by densely populated municipalities with high wage levels, and predominantly service firms are drawn to municipalities which are specialized in the firm’s own sector and appeal to individuals, while they avoid moving to municipalities in which only few sectors are present. Sector-specific wages may either attract, or deter firms, suggesting that this variable may capture both the cost and the quality of the locally available workforce. |
| Keywords: | firm relocation; mobility; location choices; nested logit |
| JEL: | R30 R11 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32147&r=bec |
| By: | Lin Liu (School of Business Administration, China University of Petroleum, Beijing Campus); Yuanzhu Lu (China Economics and Management Academy, Central University of Finance and Economics) |
| Abstract: | We consider a game of endogenous timing with observable delay in a mixed duopoly with endogenous vertical differentiation in the context of sequential quality and price choice. We find that a simultaneous play in the first opportunity at each stage turns out to be the unique subgame perfect Nash equilibrium, which contrasts with the endogenous timing in a purely private duopoly. |
| Keywords: | Endogenous timing, public firm, private firm, vertical differentiation |
| JEL: | L13 D43 H42 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:cuf:wpaper:452&r=bec |
| By: | Yuanzhu Lu (China Economics and Management Academy, Central University of Finance and Economics); Kangsik Choi (Graduate School of International Studies, Pusan National University) |
| Abstract: | We investigated the endogenous choice of roles by managerial firms in the presence of unilateral externality. The choice over timing can be taken either by managers or by owners. It is shown that (i) the choice of the timing by managers entails the same profit that owners would have achieved by specifying the timing in the delegation contract; and (ii) firms move simultaneously if the degree of unilateral externality is small, while sequentially if the degree of unilateral externality is large, with the firm generating unilateral externality as a follower; the owner of the follower firm delegates to restrict output, while his/her counterpart does not delegate it. |
| Keywords: | Managerial Delegation, Externality, Stackelberg, Endogenous Timing |
| JEL: | D43 L13 M21 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:cuf:wpaper:390&r=bec |
| By: | Luciano Fanti (Department of Economics, University of Pisa, Italy); Nicola Meccheri (Department of Economics, University of Pisa, Italy) |
| Abstract: | This work aims to investigate if the conventional wisdom, that a decrease in the degree of product differentiation always reduces firms’ profits, remains true in a differentiated duopoly model with decentralized, or firm-specific, monopoly unions. It is shown that, provided that unions are sufficiently wage-oriented, that is, they sufficiently prefer wages to employment, the conventional result can actually be reversed under both Cournot and Bertrand competition, implying that incentives for firms towards less differentiation may arise. Moreover, the range of product differentiation values, for which the “reversal result” applies, is larger when firms compete in quantities than in prices. |
| Keywords: | unionized duopoly, product differentiation, profits |
| JEL: | J43 J50 L13 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:37_11&r=bec |
| By: | Sebastian Nielen; Alexander Schiersch |
| Abstract: | This paper addresses the relationship between the utilization of temporary agency workers by firms and their competitiveness measured by unit labor costs, using a rich, newly built, data set of German manufacturing enterprises. The analysis is conducted by applying different panel data models while taking the inherent selection problem into account. Making use of dynamic panel data models allows us to control for firm specific fixed effects as well as for potential endogeneity of explanatory variables. The results indicate a U-shaped relationship between the extent that temporary agency workers are used and the competitiveness of firms. |
| Keywords: | temporary agency work, competitiveness, firm performance, manufacturing |
| JEL: | D24 L23 L60 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1135&r=bec |
| By: | V. Eldon Ball; Carlos San Juan Mesonada; Camilo A. Ulloa |
| Abstract: | This paper examines the relation between the business cycle and convergence in levels of total factor productivity (TFP) across states. First, we find evidence of convergence in TFP levels across the different phases of the business cycle, but the speed of convergence was much greater during periods of contraction in economic activity than during periods of expansion. Second, we find that technology embodied in capital was an important source of productivity growth in agriculture. As with the rate of catch-up, the embodiment effect was much stronger during low economic activity phases of the business cycle. |
| Keywords: | Agriculture, Convergence, Total factor productivity |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:cte:werepe:we1116&r=bec |
| By: | Marcelo Cajias (IREBS, University of Regensburg); Franz Fuerst (School of Real Estate & Planning, Henley Business School, University of Reading); Pat McAllister (School of Real Estate & Planning, Henley Business School, University of Reading); Anupam Nanda (School of Real Estate & Planning, Henley Business School, University of Reading) |
| Abstract: | The linkage between corporate commitment to environmental, social and governance (ESG) issues and investment performance has generated a substantial body of research outside the real estate sector. Nevertheless, the relationship between the environmental performance and financial performance of companies is still not well understood as studies have found mixed and contradicting results. Drawing upon the KLD database which contains ratings on seven ESG dimensions from 2003-2009, this paper investigates the relationship between the ESG rating and the financial performance of a sample of US real estate firms. Since the primary transmission channel from ESG activities to financial performance may be better reflected by a firm's intangible assets, we model both Tobin's q and the total annual return in a panel framework with time and sector specific fixed effects. Our results are largely consistent with the existing literature finding a positive relationship between CFP and CSP. Further, the time scale of the lagged effects seems plausible. |
| Keywords: | Corporate Social Responsibility, Green Buildings, Financial Performance |
| JEL: | M14 D21 R33 C33 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:rdg:repxwp:rep-wp2011-03&r=bec |
| By: | Madhavan, Ravi (University of Pittsburgh); Mahoney, Joseph T. (University of IL) |
| Abstract: | Despite its intuitive appeal, evidence-based management (EBMgt) faces unique challenges in "macro" areas such as Organization Theory and Strategy Management, which emphasize actions by organizations, and business and corporate leaders. The inherent focus on complex, multi-level and unique problems present serious challenges. EBMgt will nurture the establishment of a new model of research that is not only cumulative in its knowledge-building but also promotes engaged scholarship. Further, the uncertainty and conflict that characterize "macro" decision contexts heighten the need for EBMgt. We put forward four recommendations to advance EBMgt: (1) using more sophisticated meta-analyses; (2) providing syntheses that go beyond quantitative summaries; (3) engaging in a disciplined conversation about our implicit "levels of evidence" frameworks; and (4) developing decision supports. |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:illbus:11-0105&r=bec |
| By: | Trueby, Johannes (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Paulus, Moritz (Energiewirtschaftliches Institut an der Universitaet zu Koeln) |
| Abstract: | The seaborne steam coal market changed in recent years. Trade volumes grew dynamically, important players emerged and since 2007 prices increased significantly and remained relatively high since then. <p>In this paper we analyse market equilibria in the years 2006 and 2008 by testing for two possible market structure scenarios in this market: perfect competition and an oligopoly setup with major exporters competing in quantities. <p>We conclude from our results that international steam coal trade is not perfectly competitive as there is a large spread between marginal costs and prices and a low capacity utilisation in 2008. Further, trade flows are generally more diversified in reality than in the competitive scenario.<p> However, also the Cournot scenarios fail to accurately explain real market outcomes. We conclude that only more sophisticated models of strategic behaviour can predict market equilibria in international steam coal trade. |
| Keywords: | Steam coal trade; Mining Costs; Market Structure |
| JEL: | C61 L11 L71 Q31 |
| Date: | 2011–04–12 |
| URL: | http://d.repec.org/n?u=RePEc:ris:ewikln:2011_002&r=bec |
| By: | Reinout De Bock; Jose G Gijon |
| Abstract: | We show that US natural gas prices have decoupled from oil prices following substantial institutional and technological changes. We then examine how this interrelationship has evolved in Europe using data for Algeria, one of Europe’s key gas suppliers. Taking into account total gas exports and cyclical conditions in partner countries, we find that gas prices remain linked to oil prices, though the nexus has loosened. Both high oil prices and a modest industrial recovery in partner countries have kept gas exports at low levels in recent years, suggesting changing market forces. The paper then shows how such shifts can have important macroeconomic implications for a big gas exporter such as Algeria. |
| Keywords: | Algeria , Commodity prices , Economic models , Europe , Exports , External shocks , Natural gas , Oil , Oil prices , Production , United States , |
| Date: | 2011–06–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/143&r=bec |
| By: | Parguel, Béatrice; Benoît-Moreau, Florence; Larceneux, Fabrice |
| Abstract: | Of the many ethical corporate marketing practices, many firms use corporate social responsibility (CSR) communication to enhance their corporate image. Yet consumers, overwhelmed by these more or less well-founded CSR claims, often have trouble identifying truly responsible firms. This confusion encourages “greenwashing” and may make CSR initiatives less effective. On the basis of attribution theory, this study investigates the role of independent sustainability ratings on consumers’ responses to companies’ CSR communication. Experimental results indicate the negative effect of a poor sustainability rating for corporate brand evaluations in the case of CSR communication, because consumers infer less intrinsic motives by the brand. Sustainability ratings thus could act to deter “greenwashing” and encourage virtuous firms to persevere in their CSR practices. |
| Keywords: | attribution theory; CSR communication; sustainability ratings; ethical corporate marketing; |
| JEL: | M31 Q56 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ner:dauphi:urn:hdl:123456789/4687&r=bec |