Counterfactual analysis of bank mergers

We introduce a counterfactual analysis of banks mergers, combining the pre-merger equilibrium setting with post-merger environmental characteristics, while accounting for endogenously propagated changes in market structure. Using this procedure we are able to estimate the effects on loan flows and interest rates that would have been observed if the pre-merger equilibrium was not altered. Results are obtained for firms, households, and banks inside and outside the merging circles separately. We find that mergers increased firms’ access to credit, but had an opposite effect on households and led to a widespread decrease in interest rates.     

Financialization and Vested Interests: Self-Regulation vs. Financial Stability as a Public Good

I propose an institutionalist analysis of financialization through the lens of Thorstein Veblen, built on some peculiar characteristics of money and related financial instruments in a market-based capitalist economy. Following the case of the overcapitalization of farmlands, studied by Veblen (1919), I argue that modern capitalism is a financialized society dominated by vested interests that rely on financial liberalization-led speculative overcapitalization, often leading to a perverse accumulation process and resulting in systemic catastrophes. Consequently, one of the major constituent institutions of liberal finance, market-dependent selfregulation, proves unable to deal with society-level issues like financial stability. This latter issue must be handled at a systemic level, as a public good. Therefore, specific public regulation and action mechanisms must be designed to maintain society (and dominant vested-interests) within some viability limits to ensure a smooth functioning of the economy.     

Urban recreation research: An overview

Despite the fact that the population of the United States ha shifted from largely rural to largely urban in this century, the commitment to research in recreation, inadequate as it is, has remained in the hinterlands. There is no critical mass of recreation researchers focusing on urban recreation as there now is focused on outdoor recreation. Urban recreation studies have been noncumulative in nature due to the wide range their sponsors, staff, substantive topics, lack of generalizability, and inevitable tensions between practitioners and researchers. Ironically, urban recreational research, and support of it, has diminished in this country at the same time that there has been an increasing concern for such information and knowledge. The future looks bleak insofar as the development of a strong, major, national urban recreation research program is concerned.     

Trust in Companies and in CEOs: A Comparative Study of the Main Influences

Trust is a crucial factor for the long-term economic success of a company. However, not only does the company establish trust, but the CEO representing the company builds up trust as well and, therefore, also influences the company’s success. Our study examines how different dimensions of trust (i.e., ability, integrity, benevolence, and information quality) influence the degree of overall trust in a company and in CEOs. Nevertheless, dimensions that influence trust in a CEO can be completely different to those influencing trust in companies. Companies and CEOs that act on an international level can hardly be experienced individually, and thus people get information about the company via media use. Therefore, additionally we examine which kind of media is used for getting information about a company or CEO and whether a relationship exists between media use and trust. Findings from a survey in Switzerland (n = 245) show that companies are more trusted than CEOs and that the items which influence overall trust differ between CEOs and companies. Social responsibility as a benevolence item is important for both groups. Regarding information on different media channels, users of traditional media like newspapers, TV, and radio are most critical regarding trust in companies and CEOs.     

Empirical tests of canonical nonparametric American option‐pricing methods

Alcock and Carmichael (2008, The Journal of Futures Markets, 28, 717–748) introduce a nonparametric method for pricing American‐style options, that is derived from the canonical valuation developed by Stutzer (1996, The Journal of Finance, 51, 1633–1652). Although the statistical properties of this nonparametric pricing methodology have been studied in a controlled simulation environment, no study has yet examined the empirical validity of this method. We introduce an extension to this method that incorporates information contained in a small number of observed option prices. We explore the applicability of both the original method and our extension using a large sample of OEX American index options traded on the S&P100 index. Although the Alcock and Carmichael method fails to outperform a traditional implied‐volatility‐based Black–Scholes valuation or a binomial tree approach, our extension generates significantly lower pricing errors and performs comparably well to the implied‐volatility Black–Scholes pricing, in particular for out‐of‐the‐money American put options. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 30:509–532, 2010     

Restructuring of the Hungarian Electricity Industry

Restructuring the monopolistic, state-owned, obsolete and polluting utility industries of post-socialist economies poses a challenge for the utility deregulation wave travelling around the world. Utility restructuring in the Central and Eastern Europe (CEE) region is unique from several perspectives, including the domination of foreign capital vs. national resources as the only feasible vehicle for a drastic change in the industry and the ambitious goals of harmonisation with the EU liberalisation schedule to accelerate accession. It is also widely expected that deregulation will help bring down world-record high energy intensities in these economies. Hungary has been the pioneer among economies in transition in unbundling, deregulating and privatising the utility industries and taking the first steps towards EU-conforming market liberalisation within less than half a decade. The first stages of privatisation and restructuring have been declared a success story in the Western media. However, what is a success story from a foreign perspective may be seen differently from other viewpoints. The article describes the process of utility restructuring in Hungary and examines its impact from the economic, environmental and policy perspectives. The article also compares the pioneer Hungarian deregulation with other CEE countries' restructuring of their energy sectors. However, the lessons to be learned from the Hungarian electricity industry restructuring are not only vital for other economies in transition but are often universally applicable.     

Bank Capital and the Credit Crunch: The Roles of Risk-Weighted and Unweighted Capital Regulations

We investigated whether in recent years banks have increased their holdings of securities at the expense of their holdings of business loans in response to shortfalls of their capital relative to risk-weighted capital standards and relative to a capital standard that made no explicit allowance for credit risk. We estimated that bank credit fell by about $4.50 for each $1 that a bank's capital fell short of the unweighted capital standard. Banks that had less capital than required by the risk-weighted standard appear to have shifted away from assets with low risk weights (securities and single-family mortgages) and to have shifted toward assets with higher risk weights (commercial real estate and commercial and industrial loans). When we included both shortfall variables in a regression, shortfalls relative to the unweighted capital standard significantly affected bank credit, while shortfalls of capital relative to the risk-weighted standard did not. We found no significant effects of capital shortfalls at other, local-competitor banks on bank portfolios. Delinquencies in a given category of a bank's loans generally had significantly negative effects on that bank's holdings of loans in that category. In contrast, banks tended to increase holdings of loans in categories in which local-competitor banks were experiencing higher delinquency rates.     

Beyond offshoring: assess your company's global potential

In the past few years, companies have become aware that they can slash costs by offshoring: moving jobs to lower-wage locations. But this practice is just the tip of the iceberg in terms of how globalization can transform industries, according to research by the McKinsey Global Institute (MGI). The institute's yearlong study suggests that by streamlining their production processes and supply chains globally, rather than just nationally or regionally, companies can lower their costs-as we've seen in the consumer-electronics and PC industries. Companies can save as much as 70% of their total costs through globalization--50% from offshoring, 5% from training and business-task redesign, and 15% from process improvements. But they don't have to stop there. The cost reductions make it possible to lower prices and expand into new markets, attracting whole new classes of customers. To date, however, few businesses have recognized the full scope of performance improvements that globalization makes possible, much less developed sound strategies for capturing those opportunities. In this article, Diana Farrell, director of MGI, offers a step-by-step approach to doing both things. Among her suggestions: Assess where your industry falls along the globalization spectrum, because not all sectors of the economy face the same challenges and opportunities at the same time. Also, pay attention to production, regulatory, and organizational barriers to globalization. If any of these can be changed, size up the cost-saving (and revenue-generating) opportunities that will emerge for your company as a result of those changes. Farrell also defines the five stages of globalization-market entry, product specialization, value chain disaggregation, value chain reengineering, and the creation of new markets-and notes the different levers for cutting costs and creating value that companies can use in each phase.