The asymmetry in firms’ mechanisms of cash holdings adjustments: evidence from the G-5 economies

Review of Quantitative Finance and Accounting - Using a G-5 country sample (France, Germany, Japan, the UK, and the US) from 1980 to 2007, I find new evidence of the asymmetry in firms’...     

Does bank competition promote financial inclusion? A cross-country evidence

The idea of financial inclusion has recently been discussed as one of the key strategies to enhance economic development (World Bank 2014). We move this discussion forward by examining if bank competition is a crucial component enforcing financial inclusion, which is arguably a finance supply-side driven process. In this study, we compute the financial inclusion index built on Sarma (2008) approach to better reflect banks’ willingness and capability to provide financial services. Applying System Generalized Method of Moments to the panel of 93 countries, we find that bank competition promotes financial inclusion.     

LIQUIDITY AND ASSET PRICING UNDER THE THREE‐MOMENT CAPM PARADIGM

We examine whether the use of the three‐moment capital asset pricing model can account for liquidity risk. We also make a comparative analysis of a four‐factor model based on Fama–French and Pástor–Stambaugh factors versus a model based solely on stock characteristics. Our findings suggest that neither of the models captures the liquidity premium nor do stock characteristics serve as proxies for liquidity. We also find that sensitivities of stock return to fluctuations in market liquidity do not subsume the effect of characteristic liquidity. Furthermore, our empirical findings are robust to differences in market microstructure or trading protocols between NYSE/AMEX and NASDAQ.     

Capital structure around the world: The roles of firm- and country-specific determinants

We analyze the importance of firm-specific and country-specific factors in the leverage choice of firms from 42 countries around the world. Our analysis yields two new results. First, we find that firm-specific determinants of leverage differ across countries, while prior studies implicitly assume equal impact of these determinants. Second, although we concur with the conventional direct impact of country-specific factors on the capital structure of firms, we show that there is an indirect impact because country-specific factors also influence the roles of firm-specific determinants of leverage.     

Characterizations of negative multinomial distributions based on conditional distributions

In this paper characterizations of negative multinomial distributions based on conditional distributions have been studied.     

Inter-market competition for exchange traded funds

We examine how the different mix of informed and liquidity trading in the market for ETFs affects the nature of inter-market competition. We find that both the characteristics of the securities and the structures of the competing markets jointly determine the nature of inter-market competition. Given the superior execution quality on the ECNs and the low adverse selection costs in the ETF market, anonymous market such as the ECNs, attract both liquidity and informed traders. We also find that markets compete in a subset of ETFs. In addition, we find that quotebased competition is prevalent in the market for ETFs.     

Nonlinearities and heterogeneity in environmental quality: An empirical analysis of deforestation

We use a panel data set of 59 developing countries over the 1972–1994 period to study the deforestation process. Relying on both parametric and semiparametric models, we examine nonlinearities and heterogeneity in the deforestation process. We first study the existence of an Environmental Kuznets Curve (EKC) and then analyze determinants of deforestation. Our data sample provides no evidence of an EKC. We also find that political institution failures may worsen the deforestation process in developing countries.     

Existence of a competitive equilibrium in a one sector growth model with heterogeneous agents and irreversible investment

Summary. We prove existence of a competitive equilibrium in a version of a Ramsey (one sector) model in which agents are heterogeneous and gross investment is constrained to be non negative. We do so by converting the infinite-dimensional fixed point problem stated in terms of prices and commodities into a finite-dimensional Negishi problem involving individual weights in a social value function. This method allows us to obtain detailed results concerning the properties of competitive equilibria. Because of the simplicity of the techniques utilized our approach is amenable to be adapted by practitioners in analogous problems often studied in macroeconomics. Received: September 13, 2001; revised version: December 9, 2002 RID="*" ID="*" We are grateful to Tapan Mitra for pointing out errors as well as making very valuable suggestions. Thanks are due to Raouf Boucekkine and Jorge Duran for additional helpful discussions. We also thank an anonymous referee for his/her helpful comments. The second author acknowledges the financial support of the Belgian Ministry of Scientific Research (Grant ARC 99/04-235 “Growth and incentive design”) and of the Belgian Federal Goverment (Grant PAI P5/10, “Equilibrium theory and optimization for public policy and industry regulation”). Correspondence to: C. Le Van     

Distribution Dynamics of CO<Subscript>2</Subscript> Emissions

This paper uses nonparametric methods to examine the convergence in CO₂ emissions per capita on a sample of 100 countries for the period 1966–1996. Industrial countries show a convergence pattern. However, there is little evidence of convergence for the whole sample.     

Clawbacks,Holdbacks, and CEO Contracting

“Clawbacks” are much discussed in the context of senior executive compensation, yet the discussion has largely ignored the presence of holdbacks that are already in place in many firms. Holdbacks are deferred compensation that is potentially foregone in the event that the CEO leaves the firm without good reason or they are dismissed for wrong‐doing. They are explicit or written features of a CEOs employment contract. Holdbacks are already in use at 70% of S&P 500 firms and average $18.4 million each. Firms with higher CEO replacement costs, greater information asymmetry, a recent bad experience (fraud, lawsuit, or restatement), or in more certain environments are more likely to have a holdback. In contrast, clawback adoptions are mainly driven by firms' bad experiences and external pressure from shareholders. Holdbacks and incentive‐based compensation are substitutes, as termination incentives can reduce the need for incentive compensation. As managers reasonably demand a premium for accepting risky compensation, a measure of abnormal compensation is positively associated with holdbacks, but there is no significant association between clawbacks and holdbacks. These findings suggest that the holdbacks many firms already have in place could help an “ex‐post settling up” in the event of financial misconduct, or even simply misstated financials. As companies have more control over the amounts held back ex‐ante, holdbacks are potentially more efficient.