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on Regulation |
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Issue of 2005‒02‒06
three papers chosen by Christian Calmes Université du Québec en Outaouais, Canada |
| By: | Abel Elizalde; Rafael Repullo (CEMFI, Centro de Estudios Monetarios y Financieros) |
| Abstract: | This paper analyzes the determinants of regulatory capital (the minimum required by regulation) and economic capital (the capital that shareholders would choose in absence of regulation) in the context of the single risk factor model that underlies the New Basel Capital Accord (Basel II). The results show that economic and regulatory capital do not depend on the same set of variables and values, they are both increasing in the loans' probability of default and loss given default, but variables that affect economic but not regulatory capital, such as the intermediation margin and the cost of capital, can move them significantly apart. The results also show that market discipline, proxied by the coverage of deposit insurance, increases economic capital, although the effect is generally small. |
| Keywords: | Bank regulation, capital requirements, market discipline, credit risk, Basel II. |
| JEL: | G21 G28 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2004_0422&r=reg |
| By: | Judith M. Dean; Mary E. Lovely; Hua Wang (World Bank) |
| Abstract: | One of the most contentious debates today is whether pollution-intensive industries from rich countries relocate to poor countries with weaker environmental standards, turning them into “pollution havens.” Empirical studies to date show little evidence to support the pollution haven hypothesis, but suffer potentially from omitted variable bias, specification, and measurement errors. Dean, Lovely, and Wang estimate the strength of pollution-haven behavior by examining the location choices of equity joint venture (EJV) projects in China. They derive a location choice model from a theoretical framework that incorporates the firm’s production and abatement decision, agglomeration, and factor abundance. The authors estimate conditional logit and nested logit models using new data sets containing information on a sample of EJV projects, effective environmental levies on water pollution, and estimates of Chinese pollution-intensity for 3-digit ISIC (International Standard Industrial Classification) industries. Results from 2,886 manufacturing joint venture projects from 1993–96 show that EJVs from all source countries go into provinces with high concentrations of foreign investment, relatively abundant stocks of skilled workers, concentrations of potential local suppliers, special incentives, and less state ownership. Environmental stringency does affect location choice, but not as expected. Low environmental levies are a significant attraction only for joint ventures in highly-polluting industries with partners from Hong Kong, Macao, and Taiwan (China). In contrast, joint ventures with partners from OECD sources are not attracted by low environmental levies, regardless of the pollution intensity of the industry. The authors discuss the likely role of technological differences in explaining these results. This paper—a product of the Infrastructure and Environment Team, Development Research Group—is part of a larger effort in the group to understand the impact of environmental policies in developing countries. |
| Keywords: | Environment; Industry; International Economics; Private Sector Development; Globalization |
| Date: | 2005–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3505&r=reg |
| By: | Jong, A. de; DeJong, D.V.; Mertens, G.; Roosenboom, P. (Erasmus Research Institute of Management (ERIM), Erasmus University Rotterdam) |
| Abstract: | Royal Ahold (Koninklijke Ahold NV) was one of the major success stories in the 1990s and is one of the major failures in corporate governance, suffering a complete meltdown in 2003. This clinical study analyzes Ahold?s growth strategy through acquisitions and isolates the cause of the failed strategy, i.e. the absence of internal as well as external oversight of management?s strategy. This study details the consequences of the strategy: bad acquisitions, an accounting scandal and the loss of investor confidence. It illustrates how initially a family and later professional management exploited the intent of the law and existing regulatory structures to maintain absolute control of the company. It analyzes in detail the applicable governance mechanisms of Ahold that were designed to hold the self-interest of the parties in check. It asks the reader to consider whether these governance mechanisms, properly implemented, might have helped prevent Ahold or a situation similar to Ahold. |
| Keywords: | international economics;financial economics;law and economics;corporate governance;regulation; |
| Date: | 2005–01–25 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:eureri:30002016&r=reg |