Neues Aufsichtsrecht für Aufsichtsr?te durch den Regierungsentwurf zum 10. VAG-?nderungsgesetz

The Transformation of the Solvency II Directive into the German insurance supervisory law will lead to more exacting tasks for the members of supervisory boards, which will have a significant impact on their qualifications. The directive, however, doesn??t stipulate fit an proper reqirements for the members of supervisory boards, so that German corporate law provides the relevant standards. The German governement??s draft of the transformation act, which still requires ??Sachkunde??, conflicts with German constitunional law and European supervisory law.     

The Effects of Purchases of Mortgages and Securitization by Government Sponsored Enterprises on Mortgage Yield Spreads and Volatility

In this paper, we investigate the effects of GSE (government sponsored enterprise) activities on mortgage yield spreads and volatility. Using various regression procedures (i.e., vector error correction (VEC) and GARCH models) and controlling for default and prepayment risk, we find that securitizations and purchases of mortgages by GSEs reduce mortgage yield spreads and volatility. In particular, we find that the yield spread between conforming and 10-year constant maturity treasury (CMT) rates decreases by 8.0 bp per $1billion increase in the level of GSE securitizations. Similarly, if GSEs increase mortgage purchases, the yield spread decreases 10.5 bp per $1billion increase of purchases. In addition, we hypothesize and find that GSE activities have a spillover effect to the non-conforming mortgage market; via investor substitutions, GSE purchases and securitizations of conforming loans reduce non-conforming loan rates. Thus, the measured influence of GSE activities is biased downward when measured using the spread of non-conforming loans over conforming loan rates. We also find that purchases of mortgages by GSEs significantly reduce mortgage yield volatility. In sum, our findings show that GSE activities reduce and stabilize mortgage market rates.     

The causes and consequences of a poor-performing emerging stock market in sub-Saharan Africa: The case of the Ghana Stock Exchange

The Ghana Stock Exchange (GSE) is one of the premier stock exchanges in Africa and has demonstrated sound performance since trading commenced in 1990. This study shows, however, that many Ghanaians are ignorant about the location and functions of the GSE. Several firms are discouraged from operating on the GSE due to the high rate of inflation, slow services and perceived high risk. Respondents agree that GSE provides adequate information on stock indexes and the price of foreign stocks but inadequate information on new securities issues and the number of rises and falls. TV, radio and newspapers are the most effective media that inform Ghanaians about the activities of the GSE but there is no structured method of disseminating information about GSE activities.     

Taxpayer resistance,guarantee uncertainty,and housing finance subsidies

In the absence of external guarantees, a private firm's debt trades in the market at rates reflective of its private default risk. Not all firms go it alone, however. There are entities, government-sponsored enterprises (GSEs), whose debt obligations enjoy federal guarantees. Federal guarantees affect housing finance indirectly in that they tend to enhance the creditworthiness of the debt obligations of the housing intermediary which lessens the debtholder's exposure to default. The market investor then becomes a willing buyer of GSE debt at a lower (subsidized) rate as a result of the government guarantee.Due to the fact that the subsidy rests on the presumption that the GSE debt will be bailed out by the government it can be seen that the subsidy in turn rests upon the presumption by the GSE debtholder that the taxpayers will honor the guarantee in the event of a GSE default. Hence, government subsidies to the housing intermediaries rest not on ongoing government outlays but rather on the confidence that the taxpayers will be willing, if called upon, to cover GSE losses, i.e., the confidence of a bailout.This article analyzes the effects on the GSE subsidy and on the taxpayer, if the debt markets charge for bailout risk. Bailout risk pricing is an economic event. When debtholders seek to protect themselves by pricing for bailout risk, this increases GSE borrowing costs and cuts into both GSE borrowers' subsidies and stockholder earnings. Higher borrowing costs leave the GSE in a weakened condition and increase the ex ante bailout cost to the taxpayer. When bailout risk premiums become priced by the market, it substantially lessens the government's ability to subsidize housing finance or other GSE activities.     

Bubbles and crashes in a Black�CScholes model with delay

This paper studies the asymptotic behaviour of an affine stochastic functional differential equation modelling the evolution of the cumulative return of a risky security. In the model, the traders of the security determine their investment strategy by comparing short- and long-run moving averages of the security??s returns. We show that the cumulative returns either obey the law of the iterated logarithm, but have dependent increments, or exhibit asymptotic behaviour that can be interpreted as a runaway bubble or crash.     

Institutional Investors and Firm Efficiency of Real Estate Investment Trusts

This study investigates the effect of institutional ownership on improving firm efficiency of equity Real Estate Investment Trusts (REITs), using a stochastic frontier approach. Firm inefficiency is estimated by comparing a benchmark Tobin??s Q of a hypothetical value-maximizing firm to the firm??s actual Q. We find that the average inefficiency of equity REITs is around 45.5%, and that institutional ownership can improve the firm??s corporate governance, and hence reduce firm inefficiency. Moreover, we highlight the importance of heterogeneity in institutional investors??certain types of institutional investors such as long-term, active, and top-five institutional investors, and investment advisors are more effective institutional investors in reducing firm inefficiency; whereas hedge funds and pension funds seem to aggravate the problem. In sub-sample analysis, we find that these effective institutional investors can reduce inefficiency more effectively for distressed REITs, and for REITs with high information asymmetry, and with longer term lease contracts. Lastly, we find that the negative impact of institutional ownership (except for long-term institutional investors) on firm inefficiency reduces over time, possibly due to strengthened corporate governance and regulatory environment in the REIT industry.     

Creditor Learning and Discrimination in Lending

I study the implications of creditor learning for the estimated racial disparity in access to credit. Utilizing a dataset of mortgage lending, I find that the estimated racial disparity in loan approval rates declines with the length of the borrower??s credit history. In addition, minority borrowers improve significantly their chances of obtaining a loan by accumulating longer credit histories, with the improvements being the largest for those with no credit history. Importantly, I find no significant racial disparity among borrowers with long credit histories, suggesting that one cannot reject the null hypothesis of no taste-based discrimination taking place. I also conduct a number of tests to detect statistical discrimination, which yield inconclusive results.     

Concentrated Ownership, No Dividend Payout Requirement and Capital Structure of REITs: Evidence from Turkey

This paper studies empirically the capital structure of Turkish REITs as they offer unique and so far untested angles. They do not have to pay out dividends, yet enjoy the exemption from paying corporate taxes since their legal foundation in 1998. Several financial meltdowns occurred in the last three decades, keeping investors with a doubt about Turkey??s financial and political stability. The last meltdown in 2001 is part of the sample period. Findings show that Turkish REITs employ little long-term debt in their capital structure. The legal requirement that a leader entrepreneur be present with a minimum equity position of 25% introduces the agency problem between the majority and minority owners. The leader entrepreneurs, as non-taxable institutional investors, appear to dictate Turkish REITs?? dividend and debt policies and deplete REITs?? dividends, causing them to go to the long-term debt market. The financial meltdown of 2001 exerts negative short-term and positive long-term influence on the debt ratios while inflation??s effect is negative. Firm size, REITs?? engagement in development and stock market development influence debt ratios positively; tangibility and a few firm, ownership, and country-specific determinants appear to have either mixed or no influence on Turkish REITs?? debt policies.     

Alternative statistical distributions for estimating value-at-risk: theory and evidence

A number of applications presume that asset returns are normally distributed, even though they are widely known to be skewed leptokurtic and fat-tailed and excess kurtosis. This leads to the underestimation or overestimation of the true value-at-risk (VaR). This study utilizes a composite trapezoid rule, a numerical integral method, for estimating quantiles on the skewed generalized t distribution (SGT) which permits returns innovation to flexibly treat skewness, leptokurtosis and fat tails. Daily spot prices of the thirteen stock indices in North America, Europe and Asia provide data for examining the one-day-ahead VaR forecasting performance of the GARCH model with normal, student??s t and SGT distributions. Empirical results indicate that the SGT provides a good fit to the empirical distribution of the log-returns followed by student??s t and normal distributions. Moreover, for all confidence levels, all models tend to underestimate real market risk. Furthermore, the GARCH-based model, with SGT distributional setting, generates the most conservative VaR forecasts followed by student??s t and normal distributions for a long position. Consequently, it appears reasonable to conclude that, from the viewpoint of accuracy, the influence of both skewness and fat-tails effects (SGT) is more important than only the effect of fat-tails (student??s t) on VaR estimates in stock markets for a long position.     

GSE Activity,FHA Feedback,and Implications for the Efficacy of the Affordable Housing Goals

There is a seeming paradox regarding the “affordable housing goals”: GSE activities in targeted communities have increased under the goals but there has been little measurable improvement in housing market conditions in these communities. This paper seeks to reconcile this paradox by focusing on linkage between GSE purchases and FHA activities. We present a simple theoretical framework suggesting that GSE activities can have a feedback effect on FHA. More aggressive GSE pursuit of targeted borrowers under the affordable housing goals induces potential FHA borrowers with best credit quality to use the conventional market. Changes to the housing market will depend on the FHA response to the loss of its best credits, with many different possible outcomes for credit supply and homeownership, including scenarios in which they remain effectively unchanged. While market-level benefits might not be forthcoming, the shift from FHA to less costly conventional loans is clearly beneficial for affected borrowers. Two-stage least squares estimates of the relationship between GSE and FHA lending after the affordable housing goals were made more binding are found to be consistent with the theoretical predictions.

GSEs,Mortgage Rates,and Secondary Market Activities

Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) that securitize mortgages and issue mortgage-backed securities (MBS). In addition, the GSEs are active participants in the secondary mortgage market on behalf of their own investment portfolios. Because these portfolios have grown quite large, portfolio purchases (in addition to MBS issuance) are often thought to be an important force in the mortgage market. Using monthly data from 1993 to 2005 we estimate a VAR model of the relationship between GSE secondary market activities and mortgage interest rate spreads. We find that GSE portfolio purchases have no significant effects on either primary or secondary mortgage rate spreads. Further, we examine GSE activities and mortgage rate spreads in the wake of the 1998 debt crisis, and find that GSE portfolio purchases did little to affect mortgage rates. This empirical finding is robust to alternative identification assumptions and to alternative model and variable specifications.      

Interdisciplinarity and tax law: The case of legal autopoiesis

This paper critically evaluates interdisciplinary research in tax law. The strategy I follow runs at two levels of abstraction.First, I examine a concrete example of interdisciplinary research in taxation. More precisely, I examine Hikaka and Prebble's (2010) recent paper where, applying Luhmannian autopoietic theory to tax law, they make a series of claims about the productivity of their research strategy as well as the consistency and coherence of Luhmann's interdisciplinary framework. Whereas my analytical and conceptual critique of Hikaka and Prebble's paper stands on its own, it should also be read as revealing the obstacles that lurk behind interdisciplinary research in using such a complex and idiosyncratic theory as Luhmann's autopoietic account of law and society. Accordingly, my analysis shows how autopoietic theory can indeed prove useful for tax and accounting reform as well as to connect tax theory and notions of public interest.Second, I extrapolate from the analysis of Hikaka and Prebble's paper some general problems that current interdisciplinary tax research needs to give further consideration: (i) how to identify productive research questions and uses of interdisciplinary resources; (ii) the dubious added value of interdisciplinary research, given its tendency to adopt complex theoretical apparatuses in a cursory way with little comparison being made to existing research achievements; and (iii) the risk of using interdisciplinary research as an exercise of confirmatory investigation and/or an exercise of mere translation of one discipline's problems into another discipline's language.     

Trader Leverage and Liquidity

Does trader leverage drive equity market liquidity? We use the unique features of the margin trading system in India to identify a causal relationship between traders’ ability to borrow and a stock's market liquidity. To quantify the impact of trader leverage, we employ a regression discontinuity design that exploits threshold rules that determine a stock's margin trading eligibility. We find that liquidity is higher when stocks become eligible for margin trading and that this liquidity enhancement is driven by margin traders’ contrarian strategies. Consistent with downward liquidity spirals due to deleveraging, we also find that this effect reverses during crises.     

Presale Contract and its Embedded Default and Abandonment Options

The presale contract is a popular property selling method that allows a buyer to default on the remaining payment and/or a developer to abandon a project. Using a simple two-period game theoretical model, we derive a closed-form pricing equation for a presale contract that explicitly accounts for a developer??s abandonment option and a buyer??s default option. Although a developer has an abandonment option under either a spot sale or a presale method, the option is more valuable under a presale contract because of an additional cash inflow from the presale downpayment. A presale also provides a buyer a default option, which is valuable in a real estate market with uncertain demand and price risk. We analyze the implications of the abandonment option on a developer??s construction decision and choice of selling method, as well as the implications of the default option on a buyer??s purchase decision. Furthermore, our model framework has implications to the pricing of futures contracts that involve both stochastic revenues and costs.     

Die Beurteilung von Musterversicherungsbedingungen nach Europ?ischem Kartellrecht

Standard policy conditions (??SPCs??) were exempted from the prohibition of restrictive practices until 31 March 2010 by the block exemption regulations for the insurance sector dated 1992 and 2003. The new block exemption regulation for the insurance sector that entered into force on 1 April 2010 did not renew the exemption of SPCs from the prohibition of restrictive practices. As a result, the admissibility of existing as well as of new established and distributed SPCs must be assessed under European Competition law (Art. 101(1), (3) TFEU). Of central importance are the Commission??s new Horizontal Guidelines which cover criteria for the assessment of standard terms, including SPCs. This paper analyzes the criteria under which SPCs are compatible with competition law according to the Horizontal Guidelines.     

Why do firms rarely adopt IFRS voluntarily? Academics find significant benefits and the costs appear to be low

Kim and Shi (Rev Account Stud, doi:10.1007/s11142-012-9190-y, this issue) document that voluntary IFRS adoption is associated with significant benefits and argue that the effect is causal??a conclusion that is similar to many published papers on IFRS adoption. Yet voluntary IFRS adopters constitute only a small percentage of the global population of firms, which implies that either practitioners behave irrationally or the benefits are incorrectly estimated by academics. In this discussion I argue that the error is on the part of academics, not practitioners, and that it is mainly due to the lack of exogenous variation in accounting standards. This conclusion is based on inconsistencies between the estimated benefits and costs of IFRS adoption, as well as the accounting standards choices of presumed rational managers. I also propose a contracting explanation for the capital market benefits around IFRS adoption in which managers behave rationally, but IFRS per se is not the cause.     

Housing Finance GSEs: Who Gets the Subsidy?

Taxpayer subsidies that flow toward housing-finance GSEs are implicit in nature. This makes the size and distribution of subsidy values hard to measure directly. An array of indirect analyses indicates that incentive-conflicted GSE managers can and do extract substantial annual subsidies for GSE stockholders. Currently, stockholders are allowed to encourage managers to exploit taxpayers by tying incentive compensation implicitly to increases in the discounted present value of expected future subsidies. To counteract this inappropriate incentive, managers should be made accountable to taxpayers for returning all compensation that can be fairly attributed to increases in subsidies captured by GSE stockholders.     

The change in information uncertainty and acquirer wealth losses

A large body of literature demonstrates that acquisitions are on average value destroying for the acquirer. We investigate whether the change in the acquirer??s information uncertainty contributes to acquirer wealth losses. Information uncertainty affects the discount rate (the cost of capital), which in turn influences stock price. Our results indicate that acquisitions lead to increases in information uncertainty, as proxied by analysts?? earnings forecast dispersion. We also find that the change in information uncertainty is negatively related to acquirer long-term stock performance, after controlling for the acquirer??s fundamentals. Taken together, this evidence is consistent with the conclusion that increases in information uncertainty resulting from acquisitions contribute to acquirer post-acquisition wealth losses     

Spending Down Assets to Maximise the Pension: Identifying and Exploring the Ethical Issues

This article explores the ethical issues associated with accounting practitioners providing financial planning advice to clients about spending down or consuming assets for the primary purpose of satisfying age-pension eligibility. I t may seem that there is nothing wrong with this activity but a deeper analysis suggests that it may be unethical. This article employs a broad framework that may be applied to any situation having ethical implications.     

Small business lending and the bank-branch network

I examine the role of bank’s distance to the borrower and the proximity of other lenders for the transmission of financial shocks across the bank network. I use a novel dataset of small business lending based on information from the Community Reinvestment Act, which measures lending at census tract groups within each county and yields rich variation in the bank–borrower and borrower–competitor distance. I document that small banks with increased liquidity from proximity to local oil booms, originate more loans to firms far from these booms, and lenders with above-average geographic exposure to residential booms reduce lending in census tract groups with stable house prices. Bank–borrower distance is important for credit expansions, with closer firms receiving more credit, but not for contractions. Proximity of competitors plays a key role: consistent with theoretical predictions, both credit expansions and contractions disproportionately affect markets where the bank faces higher competition.