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on Regulation |
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Issue of 2005‒03‒13
twelve papers chosen by Christian Calmes Université du Québec en Outaouais, Canada |
| By: | Vladimir Atanasov; Conrad S. Ciccotello; Stanley B. Gyoshev |
| Abstract: | This paper documents that law affects finance in emerging markets through the methods used by controlling shareholders to “tunnel” wealth out of the firm. We find that Bulgarian securities law enabled financial tunneling via dilution and freeze-out tender offers. During the period 1999- 2001, about two-thirds of the 1,040 firms on the Bulgarian Stock Exchange were delisted. Freeze-out tender offers for minority shares averaged about 25% of the shares’ intrinsic value. Bulgarian securities law changes in 2002 made financial tunneling more costly for controlling shareholders. Subsequent increases in stock market valuations and liquidity suggest that controlling shareholders have shifted from financial tunneling to less value-destroying methods, such as transfer pricing, to extract wealth from firms. |
| Keywords: | Tunneling, freeze-out, controlling shareholders, appraisal rights, preemptive rights |
| JEL: | G34 K22 |
| Date: | 2005–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2005-742&r=reg |
| By: | Bernard Gauthier (IEA, HEC Montréal); Jean-Paul Azam; ; Jonathan Goyette (IEA, HEC Montréal); |
| Abstract: | The paper investigates the conflict that arises between the government, its bureaucrats and businesses in the tax collection process. We examine the effect of fiscal policy and corruption control mechanisms on the prevalence of tax evasion and corruption behaviour, and their impact on firm growth and social welfare. We first model a situation where bureaucrats are homogeneous and have complete negotiating power over the firms with which they interact. We show that in such a situation the government can set an optimal tax rate and put in place a corruption control mechanism involving detection of corrupt bureaucrats within the framework of a no-corruption equilibrium. However, when the public administration is composed of heterogeneous types of bureaucrats with the specific ability to impose red tape costs on firms, we show, like Acemoglu and Verdier (2000), that it might be best for the government to allow a certain level of corruption, given the cost of monitoring activities. We also show that the government could face lose-lose as well as win-win situations in the conduct of its fiscal policies. We then verify the predictions of the model using firm-level data collected from 243 businesses in Uganda. We test the effect of monitoring on bribe and tax payments. We also test the effect of tax rates and corruption control mechanisms on firm growth. We compare the effect of actual corruption (as measured by bribe payments) with the effect of government corruption expectations on firms’ growth. |
| Keywords: | Corruption, Tax evasion, Tax administration, Firm growth |
| Date: | 2004–11 |
| URL: | http://d.repec.org/n?u=RePEc:iea:carech:0410&r=reg |
| By: | Laura Bottazzi; Marco Da Rin; Thomas Hellmann |
| Abstract: | How does the relationship between an investor and entrepreneur depend on the legal system? In a double moral hazard framework, we show how optimal contracts, corporate governance, and investor actions depend on the legal system. With better legal protection, investors give more non-contractible support, demand more downside protection, and exercise more governance. Investors in better legal systems develop stronger governance and support competencies. Therefore, when investing in a different legal systems they behave differently than local investors. We test these predictions using a hand-collected dataset of European venture capital deals. The empirical results confirm the predictions of the model. |
| URL: | http://d.repec.org/n?u=RePEc:igi:igierp:283&r=reg |
| By: | Pascale Petit (EUREQua) |
| Abstract: | Using correspondence testing, we investigate whether gender access gap in job interviews is due to different effects of present or future family responsibilities on expected productivity of male and female job applicants or if it is due to a taste for discrimination. We have sent job applications of three pairs of candidates to the same job advertisements in the French financial sector. Using three pairs of applicants, we compare the effect on the gender access gap to job interviews of a high probability of maternity/paternity (1) ; high family responsibilities (2) ; neither risk of maternity or family responsibility (3). Within each pair, the applicants' characteristics are similar except for their gender. We find significant discrimination against women with a high probability of maternity for highly qualified administrative jobs. In the other cases, unequal treatment between genders is not significant. So, controling for female probability of maternity, we find no significant unequal treatment between genders. We conclude that female employment suffers more from their probability of maternity (and their anticipated career interruptions) than family responsibilities alone. So, statistical discrimination due to female probability of maternity exists on the French labor market. An appropriate economic policy may correct it by reducing firms' cost due to maternity leave. |
| Keywords: | Field experiment; hiring discrimination |
| JEL: | J16 J71 J82 |
| Date: | 2004–07 |
| URL: | http://d.repec.org/n?u=RePEc:mse:wpsorb:v04086&r=reg |
| By: | Jeffrey Carpenter; Peter Hans Matthews |
| Abstract: | The enforcement of social norms often requires that unaffected third parties sanction offenders. Given the renewed interest of economists in norms, the literature on third party punishment is surprisingly thin, however. In this paper, we report on the results of an experiment designed to evaluate two distinct explanations for this phenomenon, indignation and group reciprocity. We find evidence in favor of both, with the caveat that the incidence of indignation-driven sanctions is perhaps smaller than earlier studies have hinted. Furthermore, our results suggest that second parties use sanctions to promote conformism while third parties intervene primarily to promote efficiency. |
| Keywords: | experiment, voluntary contribution mechanism, norm, third party punishment, reciprocity, indignation |
| JEL: | C79 C91 C92 D64 H41 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:mdl:mdlpap:0503&r=reg |
| By: | Bernard Enjolras (Institute for social research et MATISSE) |
| Abstract: | This anthology consists of a collection of articles that address two common questions : how institutions emerge from individual actions and how individual actions are shaped by institutions ? What unifies these contributions is the search of a theoretical explanation that overcomes the shortcomings of the rational choice explanations of social institutions. The approach developed here deals with two methodological problems that are pervasive in social sciences : that of the relationship between agency and structures and that of role of rationality and norms in explaining individual social behavior. Individuals are seen to be acting according to "conventions" that structure their interaction and that are cognitive and interpretative schemes that allow them to understand social reality and to give meaning to their actions. In addition individuals do not act either rationally or normatively but are conceived as acting within a "conventional" context that gives meaning to their action but also constrains them. They are supposed to be moved both by normative considerations and by self-interest that can conflict. |
| Keywords: | Convention, norm; rationality; collective action; agency; structure; social action; institution; governance; social change; community; nonprofit organizations; institutions |
| JEL: | C72 D70 H42 L3 L31 L32 L50 |
| Date: | 2004–06 |
| URL: | http://d.repec.org/n?u=RePEc:mse:wpsorb:r04052&r=reg |
| By: | Phyllis Dininio; Robert W. Orttung |
| Abstract: | Corruption is one of the key problems facing the Russian state as it seeks to evolve out of its socialist past. Naturally, regional patterns of corruption exist across a country as large and diverse as the Russian Federation. To explain these variations, we analyze 2002 data from Transparency International and the Information for Democracy Foundation that provides the first effort to measure differences in incidence of corruption across 40 Russian regions. We find that corruption in Russia primarily is a structural problem, and not one related to its institutions. Within each region, the amount of corruption increases as the size of the regional economy grows, the per capita income decreases, and the population decreases. Russian policymakers can therefore work to reduce corruption by encouraging economic development outside of the key centers of Moscow and St. Petersburg. Because the data show that voter turnout also lowers corruption, policymakers can also fight corruption by fostering more political accountability in elections. |
| Keywords: | Corruption, Russia |
| JEL: | D73 |
| Date: | 2004–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2004-727&r=reg |
| By: | Ruth Dupré (IEA, HEC Montréal) |
| Abstract: | The 13-year American episode of the prohibition of alcohol (1919-1933) is so notorious and has been so extensively studied that there would not seem to be much to add. However, very little of this work has been done in a comparative and international perspective. Yet, the prohibition movement was international and quite a few countries, particularly the ones with a significant Anglo-Saxon Protestant majority, went through a long lasting and vigorous struggle over the issue. While some of them came quite close to a total ban, they finally adopted different regimes and none went as far as the U.S. Why was it? This is the question addressed in this paper. Using a political economy approach, we try to compare the strength and stakes of the supporters and opponents of prohibition in the U.S., Canada, Australia and New Zealand. As these countries shared many socio-cultural features with the US, this international exploration should shed new light on the American experiment with prohibition, an episode which has always been somehow a paradox in the land of individual freedom and minimalist government.. |
| Date: | 2004–11 |
| URL: | http://d.repec.org/n?u=RePEc:iea:carech:0411&r=reg |
| By: | Hultkrantz, Lars (Department of Business, Economics, Statistics and Informatics); Lindberg, Gunnar (VTI); Andersson, Camilla (Umeå University) |
| Abstract: | We report the results of a contingent valuation study of the value of a serious statistical accident (VSSA) in an urban road safety context in Sweden. To account for scale bias of responses (i.e., the insensitivity of the willingness-to-pay value to the size of the risk reduction being valued) we derive a lower-bound estimate. This is computed from the willingness to pay for a private-good device or a public safety program that completely eliminates the risk of fatal and serious injury road accidents. <p> We search for values from respondents with self- reported high confidence in their answers. Our conservative estimates result in average benefits of public road-safety measures targeting serious accidents that are greater than previous studies have indicated. |
| Keywords: | Value of statistical life; vision zero; contingent valuation; scale bias; scope bias |
| JEL: | H43 I18 Q51 |
| Date: | 2005–03–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:oruesi:2005_004&r=reg |
| By: | Aghassi Mkrtchyan |
| Abstract: | The impact of macroeconomic management (monetary policy) and administrative price adjustments on price variability in a low inflation economy characterized by relatively frequent administrative price adjustments is examined. Fluctuations of market determined prices, prices of agricultural goods in particular, are linked to the lack of synchronization between administrative price changes and monetary policy. If monetary policy does not account for expected changes in administrative prices, demand in “free” goods markets will shift causing fluctuation of prices for agricultural goods, because the supply of these goods is highly inelastic in Armenia. The findings contribute to a better understanding of agricultural price variability during 1998-2002. The impact of macroeconomic policy and structural adjustments on income distribution and rural poverty incidence are also examined. This research has immediate policy implications since Armenia will undergo major upward price adjustments for goods and services with regulated prices, which may have a negative impact on income distribution if aggregate demand management is unchanged. |
| Keywords: | Inflation, price variability, regulated prices |
| JEL: | E31 E61 |
| Date: | 2004–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2004-731&r=reg |
| By: | Laura Nyantung Beny |
| Abstract: | Despite the longstanding insider trading debate, there is little empirical research on insider trading laws, especially in a comparative context. The article attempts to fill that gap. I find that countries with more prohibitive insider trading laws have more diffuse equity ownership, more accurate stock prices, and more liquid stock markets. These findings are generally robust to controlling for measures of disclosure and enforceability and suggest that formal insider trading laws (especially their deterrent components) matter to stock market development. The article suggests further avenues of empirical research on the specific mechanisms through which insider trading laws might matter and the political economy of their adoption. |
| Keywords: | Insider trading law, Market efficiency, Ownership structure, Law and finance, Comparative capital markets |
| JEL: | K22 G14 G15 G18 G32 |
| Date: | 2005–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2005-741&r=reg |
| By: | Stef Proost (K.U.Leuven-Center for Economic Studies; UCL - CORE); Akshaya Sen |
| Abstract: | This paper analyses two challenges in the reform of urban transport pricing. The first challenge is the construction of an optimal package of urban transport pricing instruments assuming one benevolent government level that maximizes overall welfare. We examine the welfare gains from implementing in succession better parking prices, improved public transport prices and time varying tolling. It is found that parking and tolling are the most important elements of the optimal package and that the alternative policy instruments are sub-additive in their benefits. The second problem studied is the use of these pricing instruments by different government levels. We examine a case where an urban government controls parking fees and the regional government controls the tolling. Although both government levels have different objective functions, we find that the overall efficiency losses in the Nash and Stackelberg equilibria are limited. |
| JEL: | R48 H71 H21 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:etewps:ete0503&r=reg |