Toward a model of governance and legality in transforming economies: Empirical evidence from China

This article develops and empirically examines a model of governance and legality of organizations in countries under significant system transformation. While previous research has focused on issues of governance structures, this study suggests that organizational legality is equally important. An analysis of survey data from 127 Chinese managers demonstrates that governance and legality are distinct dimensions. We suggest that an application of this empirically corroborated model to other transformational economies may reveal different configurations of the organizational field, mirror contrasting reform strategies, and indicate the possibility for alternative routes of organizational transformation. © 2005 Wiley Periodicals, Inc.     

Nonlinear Purchasing Power Parity under the Gold Standard

Hegwood and Papell (2002) conclude on the basis of analysis in a linear framework that long-run purchasing power parity (PPP) does not hold for 16 real exchange rate series, which were analyzed in Diebold. I lusted, and Rush (1991) for the period 1792-1913 under the Gold Standard. Rather, PPP deviations are mean-reverting to a changing equilibrium—a quasi PPP (QPPP) theory. We analyze the real exchange rate adjustment mechanism for their data set assuming a nonlinear adjustment process allowing for both a constant and a mean shifting equilibrium. Our results confirm that real exchange rates at that time were stationary, symmetric, nonlinear processes that revert to a nonconstant equilibrium rate. Speeds of adjustment were much quicker when breaks were allowed.     

VENTURE CAPITAL AND IPO LOCKUP EXPIRATION: AN EMPIRICAL ANALYSIS

Most initial public offerings (IPOs) feature “lockup” agreements, which bar insiders from selling the stock for a set period following the IPO, usually 180 days. We examine stock price behavior in the period surrounding lockup expiration for a sample of 2,529 firms from 1988 to 1997. We find that lockup expirations are, on average, associated with significant and negative abnormal returns, but the losses are concentrated in firms with venture capital backing. For the venture‐capital‐backed group, the largest losses occur for high‐tech firms and firms with the greatest post‐IPO stock price increases, the largest relative trading volume in the period surrounding expiration, and the highest quality underwriters. JEL classification: G14, G24     

Financial development,corporate governance and cost of equity capital

Existing research suggests that external governance is more relevant than internal governance in affecting a firm’s value. We contribute to the literature by explicitly examining the interactive role played by country-level financial development and legal institutions in influencing the impact of firm-level governance on the cost of equity capital. Using a comprehensive sample of 7380 firm years drawn from 22 developed countries, we show that firm-level corporate governance attributes affect the cost of equity capital primarily in the Common Law countries with high levels of financial development. Our study is the first to highlight the complementary effects of legal origin, financial development and firm-level governance attributes in influencing the cost of equity capital.     

Political institutions and government spending behavior: theory and evidence from Iran

This study examines how the quality of political institutions affects the distribution of the government budget in Iran. We first introduce a mechanism through which democracy can shift government expenditure from national defense (military) to productivity-enhancing public spending (e.g., education). Using impulse response functions and a variance decomposition analysis on the basis of a vector autoregressive (VAR) model, our results imply that the response of military spending to an improvement (a deterioration) of democratic institutions is negative (positive) and statistically significant, whereas that of education spending is positive (negative) and significant. Our results are robust to other indicators of political institutions, different orderings of variables in the VAR, and alternative specifications of government spending categories.     

The effects of wrongful discharge protection on foreign multinationals: Evidence from transaction‐level data

Using detailed micro‐level data from 1977 to 1994, we analyze the impact of employment protection measures adopted across US states on the number and the value of new inbound foreign direct investment (FDI) transactions completed by foreign‐owned companies. Our findings point to a robust negative association between the implementation of employment protection laws and both the extensive and the intensive margins of FDI in the US. When states adopt regulations that increase employers’ firing costs, FDI transactions by foreign multinational companies become less frequent and decrease in value, with stronger negative impacts in more labour‐intensive industries. There is also some evidence of diversion and spillover effects from the adoption of these measures by neighbouring states.     

Precious metals,oil and the exchange rate: contemporaneous spillovers

We investigate the contemporaneous spillovers among precious metals, crude oil and the US$ exchange rate. We contend that conventional reduced-form vector autoregressive (VAR) models based on lead/lag relations do not fully capture the interactions among these series as these models ignore the contemporaneous effects. Using a Structural VAR model, we identify these contemporaneous spillovers, which are shown to be strong and asymmetric. We further show that not taking into consideration the contemporaneous interactions among these assets leads to inaccurate findings and inevitably to inaccurate interpretations of the causal relations among them.     

Antecedents of Taiwan Chinese Consumers’ Purchase Intentions Toward U.S.- and Japanese-Made Household Appliances

ABSTRACT

The purpose of this article is to understand the factors influencing Taiwan's Chinese consumers’ purchase intentions toward U.S. and Japanese household appliances. The authors attempt to develop and test a comprehensive model linking such purchase intentions to several constructs including Taiwan Chinese consumers’ openness to foreign cultures, consumer nationalism, product familiarity, traditional cultural values orientation, and product-country image. The result of analysis using structural equation modeling shows that consumer nationalism has a strong indirect effect on purchase intention via the product-country image construct. Taiwan Chinese consumers’ traditional cultural values orientation and openness to foreign cultures have direct effects on consumer nationalism and, hence, are important antecedents in explaining the purchase intentions toward foreign-made goods by Taiwan Chinese consumers. With the growing importance of the Chinese domestic market, this study provides international marketing managers with practical implications in important areas such as market segmentation, branding strategy, and market research and practices in the Chinese consumer market.