Nonlinear effects of monetary policy on stock returns in a smooth transition autoregressive model

This paper employs smooth transition autoregressive (STAR) models to investigate the nonlinear effect of monetary policy on stock returns. The change in the Federal funds rate is used as an endogenous measure of monetary policy, and the growth rate of industrial production is also considered in the model. Our results show that the relationship between the monetary policy and excess returns on stock prices is positive and nonlinear. A decrease in the Federal funds rate causes a larger increase in excess returns if excess stock returns are located in the extreme low excess returns regime.     

The role of spatial scale in the timing of uncertain environmental policy

The spatial scale of an environmental problem is dictated by boundaries. Physical boundaries limit the extent of impacts while the scale of decision making creates perceived boundaries beyond which impacts are ignored by decision makers. While it is well understood that uncertainty and irreversibility will alter policy decisions aimed at alleviating environmental impacts, the effect of spatial scales, both physical and perceived, is less understood. When spatial scale is included in a real options model of environmental policy adoption results indicate that the importance and influence of spatial considerations depends on the level of uncertainty, stringency of the proposed policy and flexibility of the policy decision. Recognizing spatial scale may force policy adoption to take place within a window of current damage. When spatial scale is small or uncertainty high, this window for policy adoption can close precluding policy adoption entirely. This undermines well-known results demonstrating that changes in uncertainty will only alter the timing of policy adoption. In other instances, the policy adoption window remains open but the option value increases faster than the benefits of the policy creating a scenario where it is always preferable to delay. Here the inclusion of an option value can prevent adoption of policies that would be adopted according to traditional cost-benefit analysis. In general policy decisions will be most affected by spatial considerations when the spatial scale is small, damage is spreading fast, and the uncertainty in damage spread is high.     

Global indeterminacy and equilibrium selection in a model with depletion of non-renewable resources

We use the principles of global bifurcation analysis to explore the role of fiscal policy in a model where non-renewable depletion presents stock effects. Initially, we show that fiscal policy may induce the onset of two coexisting steady states, one of which is characterized by a lower depletion rate and higher income (virtuous steady state) than the other (bad steady state). Then, we shed light on the ability of an endogenous fiscal policy to act as an equilibrium selection device. We find that when the economy is sufficiently patient and exhibits low capital returns and environmental parameters, fiscal policy can create a continuum of equilibria that leads to the virtuous steady state. In the opposite situation of an impatient economy, which has high capital returns and environmental parameters, fiscal policy can only create one perfect-foresight path (a heteroclinic trajectory) through which the economy can approach the virtuous steady state.     

Some empirical evidence on the effects of U.S. monetary policy shocks on cross exchange rates

This paper examines the impact of U.S. monetary policy shocks on the cross exchange rates of sterling, yen and mark. The main finding of the paper is a ‘delayed overshooting’ pattern for all currency cross rates examined (sterling/yen, yen/mark and mark/sterling) following an unexpected U.S. monetary policy change, which in turn generates excess returns. We also provide evidence that the ‘delayed overshooting’ pattern in cross exchange rates is accompanied by asymmetric interventions by central banks in the foreign exchange markets under consideration triggered by a U.S. monetary policy shock.     

Measuring digitization: A growth and welfare multiplier

Digitization encapsulates the social transformation triggered by the mass adoption of digital technologies that generate, process and transfer information. The digitization index introduces a global measure of national performance reflecting ubiquity, affordability, reliability, speed, usability and skills. Output and welfare rise with the index while manifesting increasing returns to scale some implications for ICT public policy are drawn from these findings.     

Explaining the impact of ISO 14001 on emission performance: a dynamic capabilities perspective on process and learning

I draw upon the dynamic capability model to explore how new process standards influence the ability of manufacturing facilities to improve environmental performance by reducing toxic emissions. The process standards studied are the ISO 14001 environmental management standards, in use since 1996. Hypotheses are developed to account for how early adoption of ISO 14001 and experience with the standards influence emission levels. These hypotheses are tested using a large sample of electronics manufacturing facilities and data from 1996 through 2001. Consistent with theoretical expectations, analyses show that being one of the first facilities to adopt ISO 14001 was associated with lower emissions. Further, a separate effect is due to experience: the longer a facility operated under ISO 14001, the lower its emissions. The paper discusses the implications of these results for theory and policy development. Copyright © 2007 John Wiley & Sons, Ltd and ERP Environment.     

The impact of ISO 14001 on firm environmental and economic performance: The moderating role of size and environmental awareness

This paper analyzes the impact of adopting the ISO 14001 standard on firm environmental and economic performance. In particular, it is argued that the degree of environmental awareness of the society (EAS) and firm size are two factors moderating the effect of ISO 14001 on firm performance. A number of hypotheses are formulated and empirically tested on an international sample of 583 listed companies in 46 countries over the period of 2009–2018. The findings show that (i) ISO 14001 adoption contributes to reducing firm carbon emission intensity and increasing firm profitability; (ii) the impact of ISO14001 on profitability is greater for companies from countries with high EAS and for larger firms; and (iii) the impact of ISO 14001 on carbon intensity is greater for headquartered in countries with low EAS. Managerial and policy implications resulting from the widespread adoption of certifiable environmental standards are also discussed.     

CONTROLLING BANKERS' BONUSES: EFFICIENT REGULATION OR POLITICS OF ENVY?

The positive relationship between bank CEO compensation and risk-taking is a well-established empirical fact. The global banking crisis has resulted in a chorus of demands to control bankers' bonuses and thereby curtail their risk-taking activities in the hope that the world can avoid a repeat in the future. However, the positive relationship is not a causative one. In this paper we argue that an implicit too-big-to-fail policy provides the incentive for banks to take excessive risks and design compensation packages to deliver high returns. A credible no-bailout policy will have a better chance of curbing excess risk-taking than controlling bankers' compensation.     

Court Intervention as a Governance Mechanism over CEO Pay: Evidence from the Citigroup Derivative Lawsuit

Abstract

We use an unanticipated court ruling in a lawsuit against Citigroup claiming corporate waste related to CEO pay to analyse court intervention as an alternative governance mechanism in cases of excess pay. We find a negative relation between announcement returns and excess pay, consistent with shareholders of these firms perceiving court intervention as net costly. However, we find a positive relation between announcement returns and excess pay accompanied by poor performance, suggesting that intervention is welcome when pay is more egregious. Finally, we find that firms with excess pay and whose shareholders welcome intervention reduce future pay relative to other firms, suggesting that the threat of court intervention is a potential mechanism to control excess pay.     

Influences on Sustainable Innovation Adoption: Evidence from Leadership in Energy and Environmental Design

The adoption of innovations associated with environmental sustainability has been a topic of growing interest among scholars. The research presented in this paper draws on Abrahamson's theoretical framework of fads and fashions to argue that dimensions of uncertainty and degree of external versus internal influence provide significant insights into firms' decisions to adopt sustainable building innovations. We develop three hypotheses, reflecting three views of adoption influence: fad, fashion, and efficient‐choice. We find that adoption of Leadership in Energy and Environmental Design (LEED) green building certification in the United States was more likely among firms similarly oriented toward end‐consumers and among firms strategically positioned as environmental leaders. These results provide support for the fad and efficient‐choice views of adoption, respectively. Contrary to expectations suggested by the fashion perspective, adoption was not more likely among firms located in states whose political leaders are more committed to environmental protection. Our findings offer important implications for practitioners and policy makers seeking to encourage sustainable building design. Copyright © 2011 John Wiley & Sons, Ltd and ERP Environment.     

Consumer eco‐innovation adoption: assessing attitudinal factors and perceived product characteristics

For business and environmental reasons, increased understanding of green consumer behavior is essential. This paper addresses consumer adoption and non‐adoption of a high involvement eco‐innovation (the alternative fuel vehicle, AFV). The purpose is to integrate two research streams to explore factors driving and hindering adoption. The factors are rooted in environmental psychology research and the diffusion of innovation literature. Survey results on Swedish car owners are reported. The results indicate that adopters and non‐adopters differ on norms, attitudes, novelty seeking and on how innovation attributes are perceived. Furthermore, the results show that the groups rank car attributes such as fuel consumption and carbon dioxide emissions differently. The main contribution of the paper is the integration of norms and attitudes together with consumer adoption factors in analyzing green consumer behavior in relation to a high involvement product. The implications for business and marketing strategy and for environmental policy are discussed. Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment.     

Environmental business strategy: the Portuguese case

This study focuses on the adoption of environmental management systems and corporate social responsibility reporting as mechanisms for creating a differential advantage, looking at how different stakeholders in an organization perceive the importance of instituting these mechanisms as determinants of market success. The paper then aims to focus on environmental business strategy and corporate social responsibility reporting in companies, rather than prescribing policy for the entire sector. In so doing it postulates that compliance with market requirements on environmentally related issues, by instituting proper environmental management mechanisms and corporate social responsibility reporting, is a pre‐requisite for acceptance of the firm and its products in the market. The paper is methodologically based on a set of 60 interviews conducted with various agents in the Portuguese textile industry, ranging from policy‐makers to industrialists and NGOs, with a view to determining differences in perception between the various stakeholders. Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment.     

Sensitivity of US equity returns to economic policy uncertainty and investor sentiments

This paper examines the sensitivity of major US sectoral returns to economic policy uncertainty and investor sentiments. Our analysis is based on weekly frequency and ranges from January 1995 to December 2015 covering a span of 20 years. Considering existing, however limited evidence of non-linear structure exhibited by investor sentiments and economic policy uncertainty and on the basis of our non-linear diagnostics, we use novel technique of non-parametric causality in quantiles approach proposed by Balcilar, Gupta, and Pierdzioch (2016). Our results highlight that economic policy uncertainty and investor sentiments act as driving factors for US sectoral returns. The nature of relationship is reported as asymmetrical for stock returns and symmetrical for variance of returns with an exception of Healthcare sector for economic policy uncertainty and bullish market sentiments. Our study carries implications for portfolio diversification and policy makers for forecasting market efficiency and economic trends.     

Assessing the productivity consequences of agri-environmental practices when adoption is endogenous

Journal of Productivity Analysis - We address the general problem of selection bias, an issue endemic to policy analysis when adoption is voluntary, with an empirical application to environmental...     

Improving footprint calculations of small open economies: combining local with multi-regional input–output tables

In a small, open and resource-poor economy, import and export dependency have an ever-growing impact on local policy decisions, which makes local (environmental) policy-makers increasingly depend on global data. This increases the interest in models that link local production and consumption data to global production, trade and environmental data. The recent increase in availability of global environmentally extended multi-regional input-output tables (EE-MRIO tables) provides an opportunity to link them with existing local environmentally extended input-output tables (EE-RIO tables). These combined tables make it possible (1) to analyse the links between local and global production and consumption and (2) to study global value chains, material use and environmental impacts simultaneously. However, estimations using input-output (I–O) analyses contain errors due to imperfect databases. In this article the magnitude of specification, aggregation and time errors are estimated and compared. The results show the need to combine local datasets with multi-regional ones and show that highest detailed (country and sector levels) as well as time series of I–O tables are the way forward for using I–O analyses in local policy-making. The paper provides guidance on trading off investments in model adoption and/or extension and the reliability of estimation results.     

Monetary policy and real estate returns

Previous research established that Federal Reserve monetary policy influences stock, bond, and other financial asset returns. This research extends past research and shows that similar patterns exist for real estate returns. We also provide evidence consistent with the contention that returns to underlying real estate are less sensitive than stock returns or securitized real estate returns to changes in monetary policy conditions. Investing in real estate may provide a hedge against changes in the monetary environment; however, investing in REITs represents an ineffective method to capture this benefit.     

Analysing the factors influencing clean technology adoption: a study of the Spanish pulp and paper industry

Technological change has a relevant role to play in the transition towards a sustainable industry. However, slow diffusion of clean technologies can be observed in OECD countries. The analysis of the determinants and barriers to clean technology adoption should be a main goal of economists and social scientists. This paper shows that three sets of interrelated factors prevent but also stimulate the widespread adoption and diffusion of clean technology: these are factors external and internal to the firm, conditions of the potential adopters and characteristics of the environmental technology. These factors are included in the so‐called ‘triangular model’, which is further applied to the analysis of clean technology adoption in the pulp and paper industry in Spain. The empirical study shows that clean technology adoption decisions are the result of an interaction between these factors, often involving contradictory signals for the potential adopter. The paper closes with some public policy recommendations for the effective and efficient promotion of clean technology diffusion. Copyright © 2005 John Wiley & Sons, Ltd and ERP Environment.     

The foreclosure discount: Myth or reality?

Foreclosed properties sell at lower prices than do nearby non-distressed properties. Of particular concern, is whether there is a “stigma” foreclosure discount whereby REO properties sell at lower prices simply because they have been involved in foreclosure proceedings. To the extent that such a discount exists, arbitrage opportunities exist and the associated market failure has significant policy implications. We examine the foreclosure discount from a different perspective than prior researchers by comparing holding period returns earned by purchasers of REOs with those earned by purchasers of similar non-distressed properties. Our results show that the majority of REO purchasers do not earn economically significant excess returns. On average, the implied market discount is less than typical transaction costs. We also find evidence that REO properties and buyers vary systematically from their counterparts in the non-distressed market segment and that REO attribute prices differ from those of non-distressed properties. Overall, our evidence suggests that the market for REOs operates efficiently: lenders are not irrationally dumping REO properties and REO investors are not reaping extraordinary profits.     

Economic policy and the presidential election cycle in stock returns

Many papers in the academic literature have documented a “Presidential Election” cycle in stock returns. Prior literature also documents that stock returns appear to be influenced by economic policy. The goal of this study is to examine the tools of fiscal and monetary policy to test for the presence of a presidential election cycle. The findings strongly suggest that the presidential election cycle in stock returns and the government’s economic policy influence on stock returns are two separate phenomena. Moreover, it is much more likely that stock returns are influencing economic policy rather than the other way around. However, the findings also suggest that tax legislation may drive the Presidential Election Cycle.