New Economics Papers
on Financial Markets
Issue of 2006‒01‒29
33 papers chosen by
Carolina Valiente

  1. Extracting Leading Indicators of Bank Fragility from Market Prices – Estonia Focus By Yu-Fu Chen; Michael Funke; Kadri Männasoo
  2. A Market Microstructure Analysis of Foreign Exchange Intervention By Vitale, Paolo
  3. Technological Revolutions and Stock Prices By Pástor, Lubos; Veronesi, Pietro
  4. The transmission of US shocks to Latin America By Fabio Canova
  5. The Role of Advertising in Commercial Banking By Örs, Evren
  6. Monetary Policy in the Euro area: Lessons from 5 years of ECB and implications for Turkey By Fabio Canova; Carlo Favero
  7. Market Structure and Competitive Conditions in the Arab GCC Banking System By Al-Muharrami, Saeed; Matthews, Kent; Khabari, Yusuf
  8. Impact of Public R&D Financing on Private R&D - Does Financial Constraint Matter? By Jyrki Ali-Yrkkö
  9. Are Foreign Investments Replacing Domestic Investments? - Evidence from Finnish Manufacturing By Olli-Pekka Oksanen
  10. Macroeconomic Derivatives: An Initial Analysis of Market-Based Macro Forecasts, Uncertainty and Risk By Gürkaynak, Refet.S.; Wolfers, Justin
  11. Hot and Cold Housing Markets: International Evidence By Ceron, Jose A.; Suarez, Javier
  12. Mandatory Auditor Choice and Small Finance: Evidence from Finland By Ari Hyytinen; Lotta Väänänen
  13. Distribution Risk and Equity Returns By Danthine, Jean-Pierre; Donaldson, John B; Siconolfi, Paolo
  14. Stuck on Gold: Real Exchange Rate Volatility and the Rise and Fall of the Gold Standard, 1870-1939 By Chernyshoff, Natasha; Jacks, David S.; Taylor, Alan M
  15. The Determinants of Stock Option Compensation: Evidence from Finland By Derek C. Jones; Panu Kalmi; Mikko Mäkinen
  16. Financial performance and outreach : a global analysis of leading microbanks By Morduch, Jonathan; Demirguc-Kunt, Asli; Cull, Robert
  17. What Makes Performance-related Pay Schemes Work? Finnish Evidence By Antti Kauhanen; Hannu Piekkola
  18. The Asymmetric Effect of the Business Cycle on the Realtion between Stock Market Returns and their Volatility By P N Smith; S Sorensen; M R Wickens
  19. The Unsustainable US Current Account Position Revisited By Obstfeld, Maurice; Rogoff, Kenneth
  20. Does it pay to be socially responsible? Evidence from Spanish retail banking sector By Callado-Muñoz, Francisco J; Utrero-González, Natalia
  21. A Reappraisal of the Border Effect on Relative Price Volatility By Yin-Wong Cheung; Kon S. Lai
  22. Parametric Properties of Semi-Nonparametric Distributions, With Applications to Option Valuation By León, Ángel; Mencía, Javier; Sentana, Enrique
  23. Is the Cost of Debt Capital Higher for Younger Firms? By Ari Hyytinen; Mika Pajarinen
  24. Following the yellow brick road? The Euro, the Czech Republic, Hungary and Poland By Jesús Rodríguez López; José Luis Torres Chacón
  25. Credible Ratings By Damiano, Ettore; Li, Hao; Suen, Wing
  26. Credit Cards and Monetary Policy: Are Households still Liquidity-Constrained? By Ryan R. Brady
  27. Central Bank Independence, Accountability and Transparency: Complements or Strategic Substitutes? By Hughes Hallett, Andrew; Libich, Jan
  28. Il finanziamento dello sviluppo: Teorie ed evidenza empirica By Rosa Capolupo; Giuseppe Celi
  29. ¿Son adecuados los depósitos de garantía exigidos por MEFF? By Ángel Pardo; José María Calderón Pardo
  30. Bubbles, Collateral and Monetary Equilibrium By Aloisio Araujo; Mário R. Páscoa; Juan Pablo Torres-Martínez
  31. Nothing like the Enron affair could happen in France (!) By Stolowy, Hervé
  32. Information Gathering, Transaction Costs and the Property Rights Approach By Schmitz, Patrick W.
  33. The Ownership of Ratings By Faure-Grimaud, Antoine; Peyrache, Eloïc; Quesada, Lucía

  1. By: Yu-Fu Chen; Michael Funke; Kadri Männasoo
    Abstract: Banking reform has proved to be one of the most problematic elements of economic transition in central and Eastern Europe. Therefore the paper considers the development of the Estonian banking sector and derives individual banks´ fragility scores during transition. To this end we use option-based tools and equity prices to estimate distance-to-default measures of banks´ distress probabilities. Overall, the results suggest that market indicators are moderately useful for anticipating future financial distress and rating changes in transition economies. The implication for an effective supervisory framework is to use a plurality of risk scores when assessing bank vulnerability.
    Keywords: banking, financial stability, bank fragility, options, Estonia
    JEL: E44 E58 G21
    Date: 2006
  2. By: Vitale, Paolo
    Abstract: We formulate a market microstructure model of exchange determination we employ to investigate the impact of foreign exchange intervention on exchange rates and on foreign exchange (FX) market conditions. With our formulation we show i) how foreign exchange intervention in°uences exchange rates via both a portfolio-balance and a signalling channel and ii) derive a series of testable implications which are coherent with a large body of empirical research. Our investigation also proposes some normative recommendations, as we show that central bank intervention can be destabilizing for the functioning of FX markets and that the route chosen for the implementation of o±cial intervention has important implications for its impact on exchange rates and on market conditions.
    Keywords: exchange rate dynamics; foreign exchange microstructure; official intervention; order flow
    JEL: D82 G14 G15
    Date: 2006–01
  3. By: Pástor, Lubos; Veronesi, Pietro
    Abstract: During technological revolutions, stock prices of innovative firms tend to exhibit high volatility and bubble-like patterns, which are often attributed to investor irrationality. We develop a general equilibrium model that rationalizes the observed price patterns. The high volatility results from high uncertainty about the average productivity of a new technology. Investors learn about this productivity before deciding whether to adopt the technology on a large scale. For technologies that are ultimately adopted, the nature of uncertainty changes from idiosyncratic to systematic as the adoption becomes more likely; as a result, stock prices fall after an initial run-up. This 'bubble' in stock prices is observable ex post but unpredictable ex ante, and it is most pronounced for technologies characterized by high uncertainty and fast adoption. We examine stock prices in the early days of American railroads, and find evidence consistent with a large-scale adoption of the railroad technology by the late 1850s.
    Keywords: bubble; innovation; railroads; technology
    JEL: G1
    Date: 2006–01
  4. By: Fabio Canova
    Abstract: I study whether and how US shocks are transmitted to eight Latin American countries. US shocks are identified using sign restrictions and treated as exogenous with respect to Latin American economies. Posterior estimates for individual and average effects are constructed. US monetary shocks produce significant fluctuations in Latin America, but real demand and supply shocks do not. Floaters and currency boarders display similar output but different inflation and interest rate responses. The financial channel plays a crucial role in the transmission. US disturbances explain important portions of the variability of Latin American macrovariables, producing continental cyclical fluctuations and, in two episodes, destabilizing nominal exchange rate effects. Policy implications are discussed.
    Keywords: Shocks, inflation
    Date: 2003–05
  5. By: Örs, Evren
    Abstract: I use a new Call Reports data item to revisit the role of advertising in US commercial banking. I examine how banks' advertising varies with the deposit market structure and whether bank profitability is influenced by advertising. My analysis addresses the endogeneity of market structure and advertising variables using instrumental variables. I find that banks advertise more with increasing market concentration, whereas banks with larger market shares and size advertise less. I also find that advertising has a positive and economically significant impact on bank profitability. These results suggest that advertising is an important aspect of bank competition.
    Keywords: depository institutions; market structure; non-price competition
    JEL: D40 G21 M37
    Date: 2006–01
  6. By: Fabio Canova; Carlo Favero
    Abstract: We examine monetary policy in the Euro area from both theoretical and empirical perspectives. We discuss what theory tells us the strategy of Central banks should be and contrasts it with the one employed by the ECB. We review accomplishments (and failures) of monetary policy in the Euro area and suggest changes that would increase the correlation between words and actions; streamline the understanding that markets have of the policy process; and anchor expectation formation more strongly. We examine the transmission of monetary policy shocks in the Euro area and in some potential member countries and try to infer the likely effects occurring when Turkey joins the EU first and the Euro area later. Much of the analysis here warns against having too high expectations of the economic gains that membership to the EU and Euro club will produce.
    Keywords: Pillars, Communication, Transmission, EU newcomers
    JEL: C11 E12 E32 E62
    Date: 2005–03
  7. By: Al-Muharrami, Saeed; Matthews, Kent (Cardiff Business School); Khabari, Yusuf
    Abstract: This paper investigates the market structure of Arab GCC banking industry during the years of 1993 to 2002 using the most frequently applied measures of concentration k-bank concentration ratio (CRk) and Herfindahl-Hirschman Index (HHI) and evaluates the monopoly power of banks over the ten years period using the "H statistic" by Panzar and Rosse. The results show that Kuwait, Saudi Arabia and UAE have moderately concentrated markets and are moving to less concentrated positions. The measures of concentration also show that Qatar, Bahrain and Oman are highly concentrated markets. The Panzar-Rosse H-statistics suggest that banks in Kuwait, Saudi Arabia and the UAE operate under perfect competition; banks in Bahrain and Qatar operate under conditions of monopolistic competition; and we are unable to reject monopolistic competition for the banking market in Oman.
    Keywords: GCC countries; Concentration; Market structure; Competition; Panzar-Rosse model; k-bank concentration ratio (CR<i>k</i>) and Herfindahl-Hirschman Index (HHI)
    JEL: G21 L1 D40
    Date: 2006–01
  8. By: Jyrki Ali-Yrkkö
    Keywords: public finance, R&D, research and development, substitute, financial constraint
    Date: 2004–11–03
  9. By: Olli-Pekka Oksanen
    Abstract: This study analyses the relationship between firms’ foreign and domestic investments using a panel dataset containing 218 Finnish manufacturing firms during the years 1998-2002. The study examines whether foreign investments increase or decrease domestic investments and whether the effect varies between investments directed to developed markets or emerging markets. Financial constraints’ effect on the relationship is also investigated. The empirical part estimates an empirical investment equation following Bond and Meghir (1994). The estimations are carried out using the GMM (Generalised Method of Moments) instrumental variables method, which allows for endogenoity in the explanatory variables. The main result of the study is that foreign investments’ effect on domestic investments varies depending on the direction of the investments and the firm’s financial position. Foreign investments conducted by financially unconstrained firms increase domestic investments substantially where as emerging market investments of financially constrained firms decrease domestic investments moderately.
    Keywords: foreign direct investment, domestic investment, multinational enterprises, financial constraint
    Date: 2006–01–19
  10. By: Gürkaynak, Refet.S.; Wolfers, Justin
    Abstract: September 2002, a new market in 'Economic Derivatives' was launched allowing traders to take positions on future values of several macroeconomic data releases. We provide an initial analysis of the prices of these options. We find that market-based measures of expectations are similar to survey-based forecasts although the market-based measures somewhat more accurately predict financial market responses to surprises in data. These markets also provide implied probabilities of the full range of specific outcomes, allowing us to measure uncertainty, assess its driving forces, and compare this measure of uncertainty with the dispersion of point-estimates among individual forecasters (a measure of disagreement). We also assess the accuracy of market-generated probability density forecasts. A consistent theme is that few of the behavioural anomalies present in surveys of professional forecasts survive in equilibrium, and that these markets are remarkably well calibrated. Finally we assess the role of risk, finding little evidence that risk-aversion drives a wedge between market prices and probabilities in this market.
    Keywords: density forecasts; disagreement; economic derivatives; expectations; forecasting; macroeconomic surveys; prediction markets; surveys; uncertainty
    JEL: C5 C82 D8 E3 G14
    Date: 2006–01
  11. By: Ceron, Jose A.; Suarez, Javier
    Abstract: This paper examines the experience of 14 developed countries for which there are about 30 years of quarterly inflation-adjusted housing price data. Price dynamics is modelled as a combination of a country-specific component and a cyclical component. The cyclical component is a two-state Markov switching process with parameters common to all countries. We find that the latent cyclical variable captures previously undocumented changes in the volatility of real housing price increases. These volatility phases are quite persistent (about six years, on average) and occur with about the same unconditional frequency over time. In line with previous studies, the mean of real housing price increases can be predicted to be larger when lagged values of those increases are large, real GDP growth is high, unemployment falls, and interest rates are low or have declined. Our findings have important implications for risk management in regard to residential property markets.
    Keywords: cycles; housing prices; Markov switching; volatility
    JEL: E32 G15 R31
    Date: 2006–01
  12. By: Ari Hyytinen; Lotta Väänänen
    Keywords: auditing, small business finance, cost of debt capital, regression discontinuity
    JEL: G14 G31 G32
    Date: 2004–11–23
  13. By: Danthine, Jean-Pierre; Donaldson, John B; Siconolfi, Paolo
    Abstract: In this paper we entertain the hypothesis that observed variations in income shares are the result of changes in the balance of power between workers and capital owners in labour relations. We show that this view implies that income share variations represent a risk factor of first-order importance for the owners of capital and, consequently, are a crucial determinant of the return to equity. When both risks are calibrated to observations, this distribution risk dominates in importance the usual systematic risk for the pricing of assets. We also show that distribution risks may originate in non-traded idiosyncratic income shocks.
    Keywords: distribution risk; equity premium; income shares; limited market participation
    JEL: E3 G1
    Date: 2006–01
  14. By: Chernyshoff, Natasha; Jacks, David S.; Taylor, Alan M
    Abstract: Did adoption of the gold standard exacerbate or diminish macroeconomic volatility? Supporters thought so, critics thought not, and theory offers ambiguous messages. A hard exchange-rate regime such as the gold standard might limit monetary shocks if it ties the hands of policy-makers. But any decision to forsake exchange-rate flexibility might compromise shock absorption in a world of real shocks and nominal stickiness. A simple model shows how a lack of flexibility can be discerned in the transmission of terms of trade shocks. Evidence on the relationship between real exchange rate volatility and terms of trade volatility from the late nineteenth and early twentieth century exposes a dramatic change. The classical gold standard did absorb shocks, but the interwar gold standard did not, and this historical pattern suggests that the interwar gold standard was a poor regime choice.
    Keywords: gold standard
    JEL: F33 F41 N10
    Date: 2006–01
  15. By: Derek C. Jones; Panu Kalmi; Mikko Mäkinen
    Keywords: stock options, compensation, corporate governance
    JEL: J33 M52
    Date: 2004–12–02
  16. By: Morduch, Jonathan; Demirguc-Kunt, Asli; Cull, Robert
    Abstract: Microfinance contracts have proven able to secure high rates of loan repayment in the face of limited liability and information asymmetries, but high repayment rates have not translated easily into profits for most microbanks. Profitability, though, is at the heart of the promise that microfinance can deliver poverty reduction while not relying on ongoing subsidy. The authors examine why this promise remains unmet for most institutions. Using a data set with unusually high quality financial information on 124 institutions in 49 countries, they explore the patterns of profitability, loan repayment, and cost reduction. The authors find that institutional design and orientation matter substantially. Lenders that do not use group-based methods to overcome incentive problems experience weaker portfolio quality and lower profit rates when interest rates are raised substantially. For these individual-based lenders, one key to achieving profitability is investing more heavily in staff costs-a finding consistent with the economics of information but contrary to the conventional wisdom that profitability is largely a function of minimizing cost.
    Keywords: Banks & Banking Reform,Economic Theory & Research,Economic Adjustment and Lending,Investment and Investment Climate,Rural Finance
    Date: 2006–02–01
  17. By: Antti Kauhanen; Hannu Piekkola
    Date: 2004–09–14
  18. By: P N Smith; S Sorensen; M R Wickens
    Abstract: We examine the relation between US stock market returns and the US business cycle for the period 1960 - 2003 using a new methodology that allows us to estimate a time-varying equity premium. We identify two channels in the transmission mechanism. One is through the mean of stock returns via the equity risk premium, and the other is through the volatility of returns. We provide support for previous findings based on simple correlation analysis that the relation is asymmetric with downturns in the business cycle having a greater negative impact on stock returns than the positive effect of upturns. We also obtain a new result, that demand and supply shocks affect stock returns differently. Our model of the relation between returns and their volatility encompasses CAPM, consumption CAPM and Merton's (1973) inter-temporal CAPM. It is implemented using a multi-variate GARCH-in-mean model with an asymmetric time-varying conditional heteroskedasticity and correlation structure.
    Keywords: Equity returns, risk premium, asymmetry
    JEL: G12 C32 C51
    Date: 2006–01
  19. By: Obstfeld, Maurice; Rogoff, Kenneth
    Abstract: We show that the when one takes into account the global equilibrium ramifications of an unwinding of the US current account deficit, currently running at more than 6% of GDP, the potential collapse of the dollar becomes considerably larger than our previous estimates (Obstfeld and Rogoff 2000a) - as much as 30% or even higher. It is true that global capital market deepening appears to have accelerated over the past decade (a fact documented by Lane and Milesi-Ferreti (2003, 2004) and recently emphasized by outgoing US Federal Reserve Chairman Alan Greenspan), and that this deepening may have helped allowed the United States to a record-breaking string of deficits. Unfortunately, however, global capital market deepening turns out to be of only modest help in mitigating the dollar decline that will almost inevitably occur in the wake of global current account adjustment. As the analysis of our earlier papers (2000a,b) showed, and the model of this paper reinforces, adjustments to large current account shifts depend mainly on the flexibility and global integration of goods and factor markets. Whereas the dollar’s decline may be benign as in the 1980s, we argue that the current conjuncture more closely parallels the early 1970s, when the Bretton Woods system collapsed. Finally, we use our model to dispel some common misconceptions about what kinds of shifts are needed to help close the US current account imbalance. For example, faster growth abroad helps only if it is relatively concentrated in nontradable goods; faster productivity growth in foreign tradable goods will actually exacerbate the US adjustment problem.
    Keywords: external imbalance; net foreign assets; real exchange rate; sustainability; US current account deficit
    JEL: F21 F32 F36 F41
    Date: 2006–01
  20. By: Callado-Muñoz, Francisco J; Utrero-González, Natalia
    Abstract: This paper presents a theoretical and empirical analysis of strategic competition in retail banking when some of the financial firms are non-profit organisations that invest in social activities. Banking literature about competition is fairly large, but the strategic interaction between profit maximizing and non profit maximizers has not been extensively analysed except for Purroy and Salas (1999). In this paper, a completely different approach is taken. An adaptation of Hotelling’s two stage model of spatial competition is developed to take into account consumer perceptions respect to the two different types of financial institutions. The empirical analysis confirms that consumers take into account other features different from the price, such as social contribution or closer service to make a deposit or mortgage decision. These conclusions are of interest in the debate about a firm’s social or ethical activities. It is shown that if consumers value social activities, firms can improve their results by behaving socially responsible.
    Keywords: Strategic competition; Hotelling´s model; Spanish banking; Corporate social responsibility
    JEL: D83 G21 D21
    Date: 2006–01
  21. By: Yin-Wong Cheung; Kon S. Lai
    Abstract: Engel and Rogers (1996) find that crossing the US-Canada border can considerably raise relative price volatility and that exchange rate fluctuations explain about one-third of the volatility increase. In re-evaluating the border effect, this study shows that cross-country heterogeneity in price volatility can lead to significant bias in measuring the border effect unless proper adjustment is made to correct it. The analysis explores the implication of symmetric sampling for border effect estimation. Moreover, using a direct decomposition method, two conditions governing the strength of the border effect are identified. In particular, the more dissimilar the price shocks are across countries, the greater the border effect will be. Decomposition estimates also suggest that exchange rate fluctuations actually account for a large majority of the border effect.
    Keywords: price volatility, exchange rate volatility, national border, distance, dissimilar shocks
    JEL: F31 F41
    Date: 2006
  22. By: León, Ángel; Mencía, Javier; Sentana, Enrique
    Abstract: We derive the statistical properties of the SNP densities of Gallant and Nychka (1987). We show that these densities, which are always positive, are more general than the truncated Gram-Charlier expansions of Jondeau and Rockinger (2001), who impose parameter restrictions to ensure positivity. We also use the SNP densities for option valuation. We relate real and risk-neutral measures, obtain closed-form prices for European options, and study the 'Greeks'. We show that SNP densities generate wider option price ranges than the truncated expansions. In an empirical application to S&P 500 index options, we find that the SNP model beats the standard and Practitioner's Black-Scholes formulas, and the truncated expansions.
    Keywords: density expansions; Gram-Charlier; Kurtosis; S&P index options; skewness
    JEL: C16 G13
    Date: 2006–01
  23. By: Ari Hyytinen; Mika Pajarinen
    Keywords: small business finance, cost of debt capital, firm age
    JEL: G14 G31 G32
    Date: 2004–11–11
  24. By: Jesús Rodríguez López (Universidad Pablo de Olavide de Sevilla); José Luis Torres Chacón (Universidad de Málaga)
    Abstract: This paper uses a combination of VAR and bootstrapping techniques to analyze whether the exchange rates of some New Member States of the EU have been used as output stabilizers (those of the Czech Republic, Hungary and Poland), during 1993-2004. This question is important because it provides prior insights on the costs and benefits from entering the European Monetary Union (EMU). For these countries, joining the EMU is not optional but mandatory, although there is not a definite deadline. Thereby, if the exchange rate works as a shock absorber, monetary independence could be retained for a longer period. Our main finding is that the exchange rate could be a stabilizing tool in Poland and the Czech Republic, although in Hungary it appears as a propagator of shocks. Also, in these three countries, demand and monetary shocks account for most of the variability in both nominal and real exchange rates.
    Keywords: EMU, exchange rate, Structural VAR, stationary bootstraps
    JEL: C31 F31 F33
    Date: 2006
  25. By: Damiano, Ettore; Li, Hao; Suen, Wing
    Abstract: This paper considers a model of a rating agency with multiple clients. Each client has a separate market (end-user of the rating); the only connection among them is that the underlying qualities of the clients are correlated. In the benchmark case of individual rating, the market for each client does not know the ratings for other clients. In centralized rating, the agency rates all clients together and shares the rating information among all markets. In decentralized rating, the ratings are again shared among all markets, but each client is rated by a self-interested rater of the agency with no access to the quality information of other clients. Both centralized rating and decentralized rating weakly dominate individual rating for the agency. When the underlying qualities are weakly correlated, centralized rating can dominate decentralized rating, but the reverse holds when the qualities are strongly correlated.
    Date: 2006–01–17
  26. By: Ryan R. Brady (United States Naval Academy)
    Abstract: Liquidity-constrained households who borrow heavily on credit cards may be an important propagation source for the transmission of monetary policy, through rising interest rates or through credit channels. However, credit card use also suggests that households are more liquid, which may dampen the propagation of monetary policy. In this paper I estimate non-linear impulse response functions for credit card data from 1990 to 2003 to monetary policy shocks. The data suggests that, 1) households in the aggregate are not liquidity-constrained, and 2) credit cards slow the propagation of monetary policy.
    Date: 2006–01
  27. By: Hughes Hallett, Andrew; Libich, Jan
    Abstract: The paper incorporates three institutional design features into a Kydland-Prescott, Barro-Gordon monetary policy game. It shows that goal-independence and goal-transparency (an explicit inflation target) at the central bank are substitute ‘commitment technologies’ that reduce inflation and build credibility. In addition, goal-transparency is shown to be socially superior as it also lowers public’s monitoring cost. Nevertheless, independent central bankers are less likely to embrace it if they perceive public scrutiny (accountability) as intrusive. Combining these findings implies that both goal-transparency and accountability will be negatively related to goal-independence for which we present empirical support using established indices. Our analysis further suggests that, to avoid an inferior equilibrium with opaque objectives and a ‘democratic deficit’, institutional reforms should follow the Bank of England scenario, in which an explicit inflation target is first legislated and only then instrument (but not goal) independence granted.
    Keywords: accountability; central bank independence; inflation targeting; monitoring; transparency
    JEL: C72 E52 E61
    Date: 2006–01
  28. By: Rosa Capolupo (Dipartimento di Scienze economiche - Università degli Studi di Bari); Giuseppe Celi (Dipartimento di Scienze economiche - Università degli Studi di Bari)
    Abstract: The relationship between financial development and economic growth has received enormous attention in the economic literature of the last decade. The widely accepted consensus finding is that financial development has a positive effect on growth at either aggregate, or industry or firm levels. This paper aims at providing an overview of the theoretical and empirical findings. Specifically, we focus on the contribution of the Italian economists since the Seventies and point out how the finance-growth nexus was present in their research agenda. Their contributions are reviewed vis-à-vis the new researches trying eventually to elucidate what financial structure, banks or markets, is more conducive to the economic growth of Italian and European economies. We argue that the contribution of these Italian economists laid out already clear the main problems tackled by the recent mainstream literature.
    Keywords: financial development, economic growth
    JEL: G00 O4
  29. By: Ángel Pardo; José María Calderón Pardo
    Abstract: Las cámaras de compensación de los mercados de futuros, como garantes del buen fin de las operaciones, se encuentran expuestas al riesgo de contrapartida. Para cubrirse del posible incumplimiento del contrato por alguna de las partes, las cámaras exigen un depósito de garantía a todas las posiciones abiertas. Este depósito debe mantener un equilibrio entre unos costes de oportunidad bajos, para el usuario de los contratos de futuro, y una elevada protección de la cámara ante movimientos adversos de los precios. Este trabajo intenta dilucidar si los depósitos fijados por MEFF son adecuados en cuando a su magnitud y en cuanto a la no discriminación entre posiciones compradoras y vendedoras. Los diferentes análisis realizados no han podido rechazar la ausencia de asimetría en los depósitos de garantía. Además, el estudio de la magnitud de los casos extremos mediante el uso de la medida CVaR, bajo el supuesto de una distribución asintótica basada en la Teoría del Valor Extremo, muestra que los, a priori, elevados porcentajes exigidas por MEFF no se pueden considerar excesivos en ninguna de las series excepto en el caso de Endesa. Estos resultados no se ven modificados al tener en cuenta el riesgo overnight.
  30. By: Aloisio Araujo; Mário R. Páscoa; Juan Pablo Torres-Martínez
    Date: 2006–01–24
  31. By: Stolowy, Hervé
    Abstract: This article reviews the reactions of the French accounting profession and academia following the collapse of both Enron and Andersen. It considers the general impact on University accounting education programmes and the value of using corporate scandals in the teaching process.
    Keywords: Enron; accounting eductation; ethics; France
    JEL: K41 K42 M41
    Date: 2005–03–11
  32. By: Schmitz, Patrick W.
    Abstract: The property rights approach to the theory of the firm suggests that ownership structures are chosen in order to provide ex ante investment incentives, while bargaining is ex post efficient. In contrast, transaction cost economics emphasizes ex post inefficiencies. In the present paper, a party may invest and acquire private information about the default payoff that it can realize on its own. Inefficient rent-seeking can overturn prominent implications of the property rights theory. In particular, ownership by party B may be optimal, even though only the indispensable party A makes an investment decision.
    Keywords: incomplete contracts; ownership rights; theory of the firm
    JEL: D23 L14 L22
    Date: 2006–01
  33. By: Faure-Grimaud, Antoine; Peyrache, Eloïc; Quesada, Lucía
    Abstract: Standard & Poor's provides corporate governance ratings to firms who can, upon learning those, decide to reveal them or not to the market. This paper identifies the circumstances under which such a simple ownership contract over ratings can emerge as the optimal arrangement. Firms hiding their ratings can only be an equilibrium outcome if they are sufficiently uncertain of their quality at the time of hiring a certification intermediary and if the decision to get a rating is not observable. For some distribution functions of firms' qualities, a competitive market is a necessary condition for this result to obtain. Competition between rating intermediaries will unambiguously lead to less information being revealed in equilibrium.
    Keywords: certification; corporate governance
    JEL: D23 D82 G34 L15
    Date: 2006–01

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