The inefficiency of refinancing: Why prepayment penalties are good for risky borrowers

This paper provides a theoretical analysis of the efficiency of prepayment penalties in a dynamic competitive lending model with risky borrowers and costly default. When considering improvements in the borrower's creditworthiness as one of the reasons for refinancing mortgages, we show that refinancing penalties can be welfare improving and that they can be particularly beneficial to riskier borrowers in the form of lower mortgage rates, reduced defaults, and increased availability of credit. Thus, a high concentration of prepayment penalties among the riskiest borrowers can be an outcome of efficient equilibrium in a mortgage market. We also provide empirical evidence that is consistent with the key predictions of our model.     

Why good projects fail anyway

Big projects fail at an astonishing rate--more than half the time, by some estimates. It's not hard to understand why. Complicated long-term projects are customarily developed by a series of teams working along parallel tracks. If managers fail to anticipate everything that might fall through the cracks, those tracks will not converge successfully at the end to reach the goal. Take a companywide CRM project. Traditionally, one team might analyze customers, another select the software, a third develop training programs, and so forth. When the project's finally complete, though, it may turn out that the salespeople won't enter in the requisite data because they don't understand why they need to. This very problem has, in fact, derailed many CRM programs at major organizations. There is a way to uncover unanticipated problems while the project is still in development. The key is to inject into the overall plan a series of miniprojects, or "rapid-results initiatives," which each have as their goal a miniature version of the overall goal. In the CRM project, a single team might be charged with increasing the revenues of one sales group in one region by 25% within four months. To reach that goal, team members would have to draw on the work of all the parallel teams. But in just four months, they would discover the salespeople's resistance and probably other unforeseen issues, such as, perhaps, the need to divvy up commissions for joint-selling efforts. The World Bank has used rapid-results initiatives to great effect to keep a sweeping 16-year project on track and deliver visible results years ahead of schedule. In taking an in-depth look at this project, and others, the authors show why this approach is so effective and how the initiatives are managed in conjunction with more traditional project activities.     

Why good accountants do bad audits

On July 30, President Bush signed into law the Sarbanes-Oxley Act addressing corporate accountability. A response to recent financial scandals, the law tightened federal controls over the accounting industry and imposed tough new criminal penalties for fraud. The president proclaimed, "The era of low standards and false profits is over." If only it were that easy. The authors don't think corruption is the main cause of bad audits. Rather, they claim, the problem is unconscious bias. Without knowing it, we all tend to discount facts that contradict the conclusions we want to reach, and we uncritically embrace evidence that supports our positions. Accountants might seem immune to such distortions because they work with seemingly hard numbers and clear-cut standards. But the corporate-auditing arena is particularly fertile ground for self-serving biases. Because of the often subjective nature of accounting and the close relationships between accounting firms and their corporate clients, even the most honest and meticulous of auditors can unintentionally massage the numbers in ways that mask a company's true financial status, thereby misleading investors, regulators, and even management. Solving this problem will require far more aggressive action than the U.S. government has taken thus far. What's needed are practices and regulations that recognize the existence of bias and moderate its effects. True auditor independence will entail fundamental changes to the way the accounting industry operates, including full divestiture of consulting and tax services, rotation of auditing firms, and fixed-term contracts that prohibit client companies from firing their auditors. Less tangibly, auditors must come to appreciate the profound impact of self-serving biases on their judgment.     

Anomalies in finance: What are they and what are they good for?

In the natural sciences, anomalies contribute significantly to the development of new and ultimately more successful theories. The role of anomalies in financial economics, however, has been quite different. Although at the beginning, the word was used to show deviations from the Efficient Markets Hypothesis (EMH)/Capital Asset Pricing Model (CAPM) paradigm, lately, it has been applied to a new literature that is also more accurately called Behavioral Finance (BF). This paper argues that this misuse and misapplication of the word anomaly is not a simple coincidence. It is rather a sophisticated and accordant effort to imply that although there are some unresolved deviations from the norm, the reigning paradigm is irreplaceable, and its validity needs no empirical proof. In fact, an alternative paradigm such as BF is not only insignificant but also unnecessary and even impossible.     

走进李镇西"1、3、5"构想

近两年,包头市商业银行这样一家位处祖国西北边陲小城——包头的城商行,在我国银行圈内可谓名声鹊起。"国际化"、"微小贷款"、"风险管理一类行"、"七家二类城商行(一类行空缺)之一"……这些国内稀缺的概念资源无不与包商行有着密切关系,而所有这些又无不深深烙着这家银行的挂帅人——李镇西的印记。最近,这位西北硬汉型行长又提出了一个颇有意思的所谓"1、3、5"构想。带着兴趣和疑惑,本刊记者于日前对其进行了采访。     

Strategic delegation when public inputs for a global good are imperfect substitutes

This paper explores the outcome of non-cooperative decision making by elected politicians under transnational externalities. In each country, the delegate (the government) is elected by means of majority voting. Thereafter, delegates of each country choose their environmental policy, which becomes a public input to the global common good. In equilibrium, the median voter deliberately elects a delegate whose preferences differ from his/her own, to pursue advantages in international decision making. In this paper we use the social composition function to capture various cases of environmental problems with complementarity (imperfect substitutability). Our analysis shows the following results: with sufficient complementarity of the public inputs, strategic delegation can lead to the delegation of decisions to a “greener” politician. However, with almost perfect substitutability of public inputs, the only equilibria may involve asymmetric provision of public inputs to the global common good, even if the countries are identical.     

Why bad projects are so hard to kill

Even at the prototype stage, experts were saying the technology was obsolete. Yet, in the face of tepid consumer response, the company stubbornly kept increasing production capacity and developing new models. By the time it was finally killed, the initiative had cost the company an astounding $580 million and had tied up resources for 14 years. The product was RCA's SelectaVision videodisc recorder, and its story is hardly unique. Companies make similar mistakes--if on a somewhat smaller scale--all the time. But why? No one comes to work saying, "I'm going to pursue a project that will waste my company millions of dollars." Quite the opposite. They come to work full of excitement about a project they believe in. And that, surprisingly, can be the root of all the trouble--a fervent belief in the inevitability of a project's ultimate success. Starting, naturally enough, with a project's champion, this faith can spread throughout the organization, leading everyone to believe collectively in the product's viability and to view any signs of impending doom merely as temporary setbacks. This phenomenon is documented here in two chillingly detailed case studied, one involving Essilor, the world's largest maker of corrective lenses for eyeglasses, and the other involving Lafarge, the largest producer of building materials. By counterexample, they point the way toward avoiding such morasses: assembling project teams not entirely composed of like-minded people and putting in place--and sticking to--well-defined review processes. Both cases also show that if it takes a project champion to get a project up and running, it may take a new kind of organizational player--an "exit champion"--to push an irrationally exuberant organization to admit when enough is enough.     

联迪商用“见费出单”解决方案结硕果

不久前,保监会出台新规定,要求各保险公司在处理交强险和商业车险时实施“见费出单”制度,即保险公司收到保费后,及时确认并出具有效保单,实现“一手交钱,一手交单”。POS刷卡以其便捷性成为最佳缴纳保费方式。针对这种情况,福建联迪商用设备有限公司（以下简称“联迪商用”）凭借十多年的银行、保险行业系统开发经验,结合保险业“见费出单”的具体需求,推出了“见费出单”电子化解决方案。目前,该方案已成功应用于中银保险、中国人保、中国人寿、太平洋保险、平安保险、人保财险等多家保险公司,获得用户一致好评。     

国外交易所为什么追捧中国企业

就在国内投资者对上市公司圈钱、欺诈等恶行的声讨不绝于耳之时,国外交易所却纷纷远渡重洋,争抢中国企业,原因何在自从2002年以来,就在国内投资者对上市公司圈钱、欺诈等恶行的声讨不绝于耳之时,海外交易所却一而再、再而三地远渡重洋,争抢中国企业。2002至2004年的第四、五、六届高交会连续出现海外交易所云集深圳的盛况--纽约证券交易所、纳斯达克、美国证券交易所、多伦多证券交易所、伦敦证券交易所、韩国证券交易所、新加坡证券交易所、东京证券交易所、俄罗斯证券交     

Why are stock returns and volatility negatively correlated?

The literature documents that low stock returns are associated with increased volatility, but two competing explanations have proved difficult to disentangle. A negative return increases leverage, making equity value more volatile. However, an increase in volatility that persists causes stock prices to drop. We follow Bekaert and Wu [Bekaert, G., Wu, G., 2000. Asymmetric volatility and risk in equity markets. Review of Financial Studies 13, 1–42.] in controlling for leverage, but distinguish between volatility regimes that persist from less persistent changes using GARCH. For post-World War II returns on the value-weighted portfolio of all NYSE stocks, we find that changes in the volatility regime are reflected in stock returns but not in GARCH.     

Why electric utility stocks are sensitive to interest rates

The determinants of electric utility stock interest rate sensitivity are examined. The bond rating of a utility's debt has a strong influence on its equity sensitivity to interest rates. The common stock of highly rated utilities is more interest rate sensitive than that of lower rated utilities. This finding is consistent with investors valuing utility stocks as predominantly income-oriented securities. Once the rating of the debt is controlled for, the debt-level of the utility is positively correlated with interest rate sensitivity. Additionally, larger utilities are found to be more interest rate sensitive than smaller utilities. Evidence is also presented that a utility's proportion of maturing long-term debt influences interest rate sensitivity. A measure for regulatory lag is developed but appears to have no effect on interest rate sensitivity.     

Asymmetric benchmarking in compensation: Executives are rewarded for good luck but not penalized for bad

Principal-agent theory suggests that a manager should be paid relative to a benchmark that removes the effect of market or sector performance on the firm's own performance. Recently, it has been argued that such indexation is not observed in the data because executives can set pay in their own interests; that is, they can enjoy “pay for luck” as well as “pay for performance.” We first show that this argument is incomplete. The positive expected return on stock markets reflects compensation for bearing systematic risk. If executives’ pay is tied to market movements, they can only expect to receive the market-determined return for risk-bearing. This argument, however, assumes that executive pay is tied to bad luck as well as to good luck. If executives can truly influence the setting of their pay, they will seek to have their performance benchmarked only when it is in their interest, namely, when the benchmark has fallen. Using industry benchmarks, we find significantly less pay for luck when luck is down (in which case, pay for luck would reduce compensation) than when it is up. These empirical results are robust to a variety of alternative hypotheses and robustness checks, and they suggest that the average executive loses 25–45% less pay from bad luck than is gained from good luck.     

“次级债风波”的影响为何是“重量级”的？

消费者信贷挑战金融行业的竞争并加快金融创新,次级债是金融机构在追逐利润前提下的资产证券化产物,然而资产证券化放大金融风险。有效性冲突是现代金融风险的一个新特征,它挑战现有金融监管方式,金融监管不能适应创新需要使得次级债风波重创美国金融市场。     

＂Differences＂are the Biggest Obstacle

China has the greatest numbers of both teachers and students worldwide ,who teach and learn English. Therefore ,to analyze the obstacles of learning English for Chinese is necessary. This article gives the idea of differences between Chinese and English mainly in languages and cultures fields. Through these we can see clearly that ＂differences＂ are the biggest obstacle in language learning.     

Why are IPOs underpriced? Evidence from Japan's hybrid auction-method offerings

We document discretionary underpricing and partial adjustment of IPO prices in the public offer tranche of Japan's hybrid auction regime, in which investor information differences are not important, there are no roadshows, preferential allocations are negligible, institutional investing is low, and the public offer tranche cannot fail. The magnitude and variation of underpricing in our sample, which spans relatively hot and cold markets, are similar to those reported for US IPOs. The evidence is most consistent with underpricing arising from an implicit contract to allocate risk related to initial mispricing where, in exchange for guaranteeing a minimum price, the underwriter participates indirectly in upside performance. The results raise important questions about interpretations of IPO underpricing in the US.     

小额农贷:为何离农户越来越远?

前不久,本文作者专程前往淄博市某偏远县A县B村,徒步行走40公里,深入农户调查,基本摸清了样本村农户生产面临的融资瓶颈问题     

Why Gaussian macro-finance term structure models are (nearly) unconstrained factor-VARs

This paper explores the implications of filtering and no-arbitrage for the maximum likelihood estimates of the entire conditional distribution of the risk factors and bond yields in Gaussian macro-finance term structure model (MTSM) when all yields are priced imperfectly. For typical yield curves and macro-variables studied in this literature, the estimated joint distribution within a canonical MTSM is nearly identical to the estimate from an economic-model-free factor vector-autoregression (factor-VAR), even when measurement errors are large. It follows that a canonical MTSM offers no new insights into economic questions regarding the historical distribution of the macro risk factors and yields, over and above what is learned from a factor-VAR. These results are rotation-invariant and, therefore, apply to many of the specifications in the literature.     

Inference on vertical contracts between manufacturers and retailers allowing for nonlinear pricing and resale price maintenance

We present a model of vertical contracts between manufacturers and retailers with nonlinear pricing strategies. Using home‐scan data on bottled water produced by manufacturers and sold by retail chains in France, we estimate a structural demand and supply model allowing for two‐part tariff contracts between manufacturers and retailers. Using price‐cost margins recovered from estimates of demand parameters, we select the best supply model by performing nonnested tests, and find that manufacturers use two‐part tariff contracts with resale price maintenance. We then perform counterfactual policy simulations that restrict the use of these vertical contracts and assess welfare effects under alternative scenarios.     

同是滞后做收入,税务处理为何不一致

基本案情 2004年9月份,安徽省庐江县国税局稽查局在对某企业的所得税纳税情况进行检查时,发现该企业有滞后做销售收入,调节年度利润的现象.经查,该企业存在以下两个违法事实:违法一,企业将2002年12月份已实现的销售收入30051450元挂"预收账款"科目贷方,于2003年元月份转作销售收入,当月成本收入比率为81.2%,该笔收入已纳入2003年度的年度申报,并办理了汇算清缴;违法二,将2003年12月份实现的收入19937110元以上述同样方式滞后2004年元月份转作销售收入,当月成本收入比率80.01%,该笔收入已于2004年一季度办理了季度所得税预缴(以下分别简称违法一、违法二).