Optimum pricing of mutual guarantees for credit

The main finding of this paper is that under financial market impediments and asymmetric information, a mutually guaranteed and correctly schemed and priced insurance credit contract should have an abnormal actuarial profit. Such a contract improves welfare by simultaneously eliminating underinvestment (UI) and overinvestment (OI) and by reducing the probability of the insurer’s ruin. This solution is relevant for mutual credit insurance agencies and international or governmental agencies interested in increasing the value creation of small and medium enterprises that suffer from limited access to equity and debt markets.     

Performance of French destinations: Tourism attraction perspectives

In this paper, we assess and compare the performance of French tourism destinations, using the Data Envelopment Analysis (DEA) two-stage procedure, where in the first stage the efficiency score are calculated, and then followed in the second stage by a bootstrapped truncated regression model. In the context of France such analysis takes an additional importance, especially as the country is expected to face a decrease in its tourism competitiveness. A discussion in terms of D-attraction and E-attraction is also proposed and policy recommendations are derived.     

Productivity and efficiency analysis of Shinkin banks: Evidence from bootstrap and Bayesian approaches

This paper analyzes the productivity and efficiency of Shinkin banks and the various prefectures in Japan, over the period from 2000 to 2006. We obtain estimates of efficiency growth and productivity growth, using the bootstrapped Malmquist index, and estimates of efficiency using the Bayesian distance frontier approach. We confirm that the efficiency growth and productivity growth of Shinkin banks did not improve significantly over the period of this study. In addition, we show that the efficiency of Shinkin banks is homogenous, with little variation across the banks analyzed. Methodologically, we also prove that a failure to impose theoretical regularity on the distance function could lead to false conclusions about the average efficiency or efficiency ranking of Shinkin banks. The study also includes an analysis of the correlates of productivity and efficiency growth, and provides efficiency and productivity estimates of the prefectures in which the banks are located.     

The performance of the Slovenian hotel industry: evaluation post‐privatisation

This study analyses the technical efficiency of Slovenian hotels using the data envelopment analysis method. Multiple inputs and outputs are included in the analysis, ranging over the period 2005–2007. The results reveal an increase in efficiency over the period analysed. The results also confirm that factors such as the hotel's year in business, star rating and size are positively related to efficiency variations between hotels. Copyright © 2010 John Wiley & Sons, Ltd.     

Turkish bank efficiency: Bayesian estimation with undesirable outputs

This paper analyzes the productivity and efficiency of Turkish banks from 2002 to 2010. We obtained estimates of efficiency, productivity growth and efficiency growth using a Bayesian stochastic frontier approach and focused on accounting for Non-Performing Loans (NPLs) for use in our model. Specifically, we introduce NPLs as a bad output in an input distance function, and estimate a system of non-linear equations subject to endogeneity. We confirm that the productivity growth of Turkish banks was positive over the period of this study, which was mainly due to the improvement in technology, while efficiency growth continued to be negative over the same period. Methodologically, we also prove that not accounting for NPLs in estimating the frontier model might seriously distort the efficiency and productivity results. The study also provides measures of shadow prices for NPL and discusses the results in terms of several interesting trends in Turkish banking. Finally, the paper provides efficiency and productivity comparisons between domestic and foreign banks.     

The Importance of Cash-Flow News for Financially Distressed Firms

Previous studies have shown that stock prices are moved primarily by news about discount rates (expected returns). I argue that when a firm experiences financial distress, news about cashflows becomes more dominant in driving its stock returns. Applying Campbell's (1991) variance decomposition framework to financially distressed firms supports this argument. Furthermore, I find that more bankruptcies occur after negative shocks to expected cashflows than after positive shocks to discount rates; and that stock prices of distressed firms are less sensitive than those of sound firms to changes in equity risk.     

Capital income taxation under majority voting with aging population

An old person typically has a mixed attitude toward the welfare-state benefits, when they are financed by capital taxes, because her income derives mostly from capital. We develop a majority-voting model which focuses on the effect of aging on this dilemma. Surprisingly, the theory predicts that tax rates on capital income could actually rise as the population ages, even though older individuals would be expected to own more capital than the young and thus vote against higher taxes. We then confront the key prediction of the model with panel data for ten European Union countries, over the period 1970–1996. We investigate the asymmetric effect of aging on the taxation of capital and labor. The implications of the model are shown to be consistent with panel data. JEL no. H0, H5, P1     

FDI Flows and Domestic Investment: Overview

The paper surveys theories of FDI and supporting evidence. Anew theory flashes out a unique feature of FDI: hands on managementstyle that enables investors to react in real time to changingeconomic environments. Equipped with superior intangible knowhow in screening firms, foreign direct investors can out bidportfolio equity investors for the top productivity firms. Theimplications of the theory are that investment is both moreefficient (namely, made dependent on the firm-specific productivity)and, in plausible cases, also larger. The theory can explainboth two way flows of FDI among developed economies, and oneway flows between developed and developing economies. Thesepredictions of the theory are consistent with panel data: largerFDI coefficients in domestic investment and output growth regressions,than those of the debt and portfolio equity coefficients. Theyare also consistent with gravity equations which explain FDIinflows by informational variables and degree of corporate transparencyin the host country.(JEL F2)     

Distress Anomaly and Shareholder Risk: International Evidence

Financially distressed stocks in the United States earn puzzlingly low returns giving rise to the distress risk anomaly. We provide evidence that the anomaly exists in developed countries, but not in emerging ones. Using cross‐country analyses, we explore several potential drivers of returns to distressed stocks. The distress anomaly is stronger in countries with stronger takeover legislation, lower barriers to arbitrage, and higher information transparency. In contrast, shareholder bargaining power and expected stock return skewness in a country do not affect the anomaly. These findings suggest that various aspects of shareholders’ risk play an important role in shaping distressed stocks returns.