The interplay between home and host country institutions in an emerging market context: Private equity in Latin America

This study examines how the interplay between home and host country regulatory institutions affects the investment strategy of private equity (PE) firms in an emerging market context. To answer this question, we consider three different mechanisms: (1) the institutional hazard avoidance effect, (2) the institutional escapism effect, and (3) the dysfunctional institutions effect. Contrary to conventional wisdom, we argue that regulatory institutional differences between home and host countries can sometimes have a positive rather than a negative effect on investment likelihood. Our findings show that when a host emerging market has a strong regulatory institutional system relative to other emerging markets, it is more likely that this country will attract PE investments from firms based in home countries with very strong and very weak institutional systems. The empirical analyses, based on a polynomial specification and a dataset covering more than 300 PE firms that made close to 1500 investment transactions in Latin America during 1996–2011, are consistent with our main theoretical arguments.     

Private enforcement,corruption, and antitrust design

We examine how the rationale for enabling versus precluding private antitrust enforcement depends on whether antitrust enforcement is corruption-free or plagued by corruption. Corruption in courts affects the incentives to bring forth private antitrust lawsuits. This, in turn, along with corruption in antitrust agency enforcement, alters the incentives to commit antitrust violations. The social welfare effect of enabling private antitrust enforcement in the presence of corruption depends on whether corrupt officials in the ensuing bribery contests favor a particular firm and if so which one and to what extent. Under some circumstances, corruption actually increases the social desirability of private antitrust enforcement relative to the no-corruption scenario. Our analysis highlights that the effects of a given legal arrangement for antitrust enforcement critically depend on the corruption environment and, thus, that the appropriate design of antitrust institutions is context-specific.     

Coordinating China's economic growth strategy via its government-controlled association for private firms

Scholars in economics and political science argue that one major function of government is to overcome coordination failure in economic development, especially during times of rapid environmental changes. But, how and through what means does the state coordinate firms to follow the changing directions of its economic objectives? This paper focuses on the case of a government-controlled business association, namely the All-China Federation of Industry and Commerce (ACFIC), and shows that the ACFIC may be serving, at least partially, as a means of avoiding the kind of coordination failures that are often associated with policy reform programs in authoritarian regimes like China when the government deems it necessary to radically and suddenly change its policy objectives. It does so by comparing the activities of firms that are members of ACFIC with non-members before and after the world financial crisis of 2008–09 which induced a significant change in government objectives. Before that crisis when priority in government objectives was “outward” (to stave off balance of payments crises that had befallen many other developing countries), ACFIC member firms were able to engage in exports and foreign investment to a greater extent than non-member firms, and even than those whose owners are members of the Congresses or Chinese Communist Party. After viewing the crises in international markets, and government objectives had turned more “inward”, ACFIC members were more likely to focus on domestic sales and investments.     

Death spiral PIPEs: a reconsideration of the evidence

We challenge the view that PIPEs lead to unfavourable outcomes for issuing firms. We show that structured PIPEs do not have significant negative CARs when a matched firm benchmark is used for computing CARs and when sample selection bias is taken into account. Indeed, structured PIPEs have significantly higher positive skewness, indicating superior optionality, consistent with the real option argument. We also show that the 2002 intervention by the Securities and Exchange Corporation (SEC) has led to unintended consequences, with the substitution of ‘mom and pop’ investors for hedge fund investors in the structured PIPE market.     

Private benefits from control block trades in the Spanish stock exchange

A control block trade can be explained by the expectation of financial gains, shared by all shareholders, or by the expectation of private benefits, exclusive to the buyer and possibly at the expense of other shareholders’ rents. The market for corporate control contributes to social welfare when it improves the efficiency of the allocation of resources. When the objective of a block transaction is private benefits, social welfare may be negatively impacted as minority shareholders could withdraw from the market. Therefore the estimation of private benefits would allow the efficiency of the market for corporate control to be assessed. Specifically, the aim of this paper is to calculate private benefits in the Spanish market for partial control. Using a sample of partial control transactions over the period 1990–2016, we find that the median of private benefits is negative, therefore it appears that there is no inefficient use of resources in the Spanish partial control market as a whole, however private costs are detected. The variability of private benefits is explained in a significant way by variables related to the control structure of the target firm, such as the controlling position of the buyer after the transaction, the contestability of control and the cross-shareholdings between the buyer and large shareholders. Performance and the size of the firm are significant as well.     

结构性违约、信用分层与评级机构的策略性反应——来自中国信用债市场的证据

2014年以来，以主要集中于民企的"结构性违约"宣告了中国信用债市场刚性兑付的"结构性打破"，债券市场进入了新的发展阶段。利用2013-2017年债券数据，本文深入分析了结构性违约对评级机构行为和效率的影响，主要有如下发现：首先，信用评级的市场公信力会因政府隐性担保导致的"刚性兑付"而削弱；其次，结构性违约爆发之后，信用评级的整体效率有所提升，但在不同发行主体呈现分化，对于非城投类企业，信用评级对发行利差的影响显著增大，意味着评级公信力的显著提升，而对于城投类企业，评级效率并未明显改善；进一步研究表明，出现这种情况的原因在于评级机构在违约后采取了差异化的评级策略，对于违约风险较大的非城投类债券，评级机构倾向采取"收紧评级"的策略；对于违约风险较低的城投债，评级机构倾向于采取"放宽评级"的策略。这种策略性行为是导致市场"信用分层"的重要原因，并有可能推升民营企业的融资成本。     

Ownership discrimination and private firms financing in China

This study examines the financing/funding of private firms in China. Our results show that private firms are significantly less funded through formal financing channels such as bank loans than state-owned firms, and hence have to resort to alternative financing such as trade credit. Consistent with the theoretical expectation and literature, there is a substitution effect between trade credit and bank loans for private firms, but this effect is much weaker compared to that of state-owned firms. Moreover, while the univariate comparisons indicate that private firms obtain more notes payable than state-owned firms, the multivariate regression analyses show that the relation between bank loan and notes payable is positive and indifferent between private and state-owned firms.     

The use–make framework and the derivation of functional forms in production theory

The use–make framework is employed to explain functional forms in production theory, including Cobb–Douglas and Leontief. Productivity and efficiency are interrelated by augmenting the framework with a linear program that determines the frontier output.     

工业体系和民营企业兴起——基于252家中国最大民营制造业企业的经验研究

主流经济学家把改革开放后民营企业的大规模兴起，主要归因为市场经济条件下发挥企业家精神和遵循比较优势的必然结果。但是这无法解释为什么民营企业在兴起之初就广泛和快速地进入到各个工业，尤其是技术和资本密集型工业。基于中国工业史和252家中国最大民营制造业企业创业发展史的历史证据，文章找回"工业体系"这一被主流所忽略的重大历史现象和学术概念，从而首次提出一种理解中国民营企业发展独特性的结构性解释。文章发现：从计划经济时期继承而来的门类齐全和独立完整的工业体系，是解释民营企业创业和发展独特性的关键变量；已有的由国有企业和科研院所组成的工业体系，从市场机会、技术能力和组织资源等方面塑造了民营企业的创业选择和发展路径。所以，中国民营企业的快速发展不是仅凭自由市场就会自动出现的普遍现象，而是在市场条件下充分利用工业体系提供的技术和市场条件才得以出现的特殊现象。     

Parking behaviour: Bundled parking and travel behavior in American cities

We investigate the relationship between bundled residential parking and travel behavior, with a particular focus on use of public transportation, and controlling for vehicle ownership. When the cost of parking is bundled into the price of housing, the time and stress of finding parking near home falls. These lower costs may lead households with bundled parking to drive more and use transit less than households without parking, even if both households own vehicles. To date this idea has been difficult to examine empirically. In this article we test this prediction using the public transportation module of the 2013 American Housing Survey. We confirm the association between bundled parking and travel. Households with bundled parking use transit less, spend more on gasoline, and—when they do take transit—are more likely to drive from their homes to the transit stop.