Financial development,institutions and industrialization in sub-Saharan Africa

Using a panel data covering more than 100 countries worldwide, we have estimated a dynamic panel model to investigate the relationship between financial development and manufacturing industries’ growth. More specifically, we have estimated the effect that institutional quality might have in this relationship in sub-Saharan Africa (SSA). The results show that lower quality institutions in SSA are a hindrance to the role financial development plays in the growth of the manufacturing industrial sector, as compared with developed countries. These findings are robust when a quantile regression model is used. Furthermore, the results confirm that the relationship between per capita GDP and industrialization is nonlinear. Finally, in SSA, the abundance of natural resources has an adverse effect on the manufacturing industrial value added, providing more evidence for the Dutch disease hypothesis.     

Stepwise Investment in Circular Plastics Under the Presence of Policy Uncertainty

Environmental and Resource Economics - The use of recycled plastics is critical in the transition to a circular economy. However, for certain types of plastics, the recycling process is...     

To make or to buy from a common supplier? Strategic considerations and welfare consequences

Consider two downstream firms that each can either produce an input in-house or purchase it from an upstream supplier. We show that depending on the difference between the supplier's and the downstream firms' in-house production costs, outsourcing by both firms could help them achieve a Pareto improvement or leave them trapped in a prisoner's dilemma. Furthermore, we find that two downstream firms may play a chicken game in which each makes a sourcing decision different from its rival if the input supplier is not as efficient as in the previous cases. The welfare implications of various sourcing outcomes are explored.     

CEO contractual protection and debt contracting

Chief Executive Officer (CEO) contractual protection, in the forms of CEO employment agreements and CEO severance pay agreements, is prevalent among S&P 1500 firms. While prior research has examined the impact of these agreements on corporate decisions from shareholders’ perspective, there is little research on the impact from debt holders’ perspective. We find that, compared with other loans, loans issued by firms with CEO contractual protection on average contain more performance covenants and performance-pricing provisions. This effect increases with CEOs’ risk-taking incentives and opportunities, but it decreases with CEOs’ preference for and opportunity of enjoying a quiet life. Furthermore, for loans issued by firms with CEO contractual protection, debt holders include stricter covenants, charge a higher interest rate and use a more diffuse syndicate structure. Collectively, these results shed light on the impact of CEO contractual protection on debt contracting.     

Do investors affect financial analysts’ behavior? Evidence from short sellers

We examine how short sellers affect financial analysts’ forecast behavior using a natural experiment that relaxes short-sale constraints. We find that increased ease of short selling improves analyst earnings forecast quality by reducing forecast bias and increasing forecast accuracy. The improvements can be explained by both the disciplining pressure from short sellers and increased price efficiency from incorporating information in a timely manner. Although it is well documented that financial analysts can affect investors, our paper provides novel evidence on how sophisticated investors, short sellers, can affect analysts.