A framework for the analysis of firm risk communication

In this paper, we propose a framework for the analysis of risk communication and an index to measure the quality of risk disclosure. Mainstream literature on voluntary disclosure has emphasized that quantity can be used as a sound proxy for quality. We contend that, in the analysis of the disclosure of risks made by public companies, attention has to be paid not only to how much is disclosed but also to what is disclosed and how.We apply the framework to a sample of nonfinancial companies listed in the ordinary market on the Italian Stock Exchange. To verify that the framework and synthetic index are not influenced by the two factors recognized in the literature as the most powerful drivers of disclosure behavior for listed companies, we use an OLS model. The regression shows that the index of disclosure quantity is not influenced either by size or industry. Thus, the synthetic measure can be used to rank the quality of the disclosure of risks.     

Exploring efficient sets and equilibria on risky assets with APABO DSS prototype version 2.1

ABAPO 2.1 (Assets/Business(es) Analyser and Portfolio Optimizer) is a DSS prototype for portfolio managers. It assists the decision maker in two important stages of his task. First, it provides an integrated synthesis of the returns scenario in order to support the decision maker in the selection of the assets to retain, in accordance with his strategy. Second, on the retained assets it computes and shows the E- efficient solutions. For each efficient portfolio ABAPO supplies immediately a lot of information that should help the decision maker to single out the portfolio which fits his goals best.ABAPO works on an integration of elements derived from the Portfolio Selection Theory, the Capital Asset Pricing Model, the Utility Theory. ABAPO uses the principal component, the univariate, the bivariate regression and the correlation analysis, a parametric quadratic programming model and an algorithm based on the critical line method.ABAPO is implemented in C language under AIX operating system and runs on a IBM RT PC 6150. It is a ductile, interactive procedure that involves graphics in order to increase the efficiency and the effectiveness of the what if simulations.This version 2.1 improves upon the previous one by the evaluation of the Security Market Line, some statistics on the returns of the efficient portfolios, the evaluation of the quadratic indifference curves associated to the efficient portfolios.Research supported by the Italian National Research Council (CNR), grant n. 88.03065.10. ABAPO DSS 2.1 prototype has been developed with the support of the CNR (grant n. 87.1210.10), of the Banca Popolare di Verona, of the Cassa di Risparmio di Verona Vicenza e Belluno, of the Società Cattolica di Assicurazione, at the Istituto di Matematica, Università di Verona.     

Product attributes and models of multiple discreteness

Demand for product characteristics is examined within the context of models that allow for both corner and interior solutions corresponding to zero and non-zero demand. Product attribute information is associated with marginal utility and curvature (satiation) parameters of various utility functions. Empirical applications demonstrate the need for incorporating characteristics in a fairly general way. We also compare our approach to an ideal point and pure Lancasterian versions of our nonlinear utility model. The data support our model over either the ideal point or Lancasterian variants.     

Patterns of corporate governance and technical efficiency in Italian manufacturing

The purpose of this paper is to analyse the relationship between the corporate governance system and technical efficiency in Italian manufacturing. We use a non‐parametric frontier technique (DEA) to derive technical efficiency measures for a sample of Italian firms taken from nine manufacturing industries. These measures are then related to the characteristics of the corporate governance system. Two of these characteristics turn out to have a positive impact on technical efficiency: the percentage of the company shares owned by the largest shareholder and the fact that a firm belongs to a pyramidal group. Interestingly, a trade‐off emerges between these influences, in the sense that one is stronger in industries where the other is weaker. Copyright © 2007 John Wiley & Sons, Ltd.     

Government guarantees and self-fulfilling speculative attacks

We develop a model in which government guarantees to banks’ foreign creditors are a root cause of self-fulfilling twin banking-currency crises. Absent guarantees, such crises are not possible. In the presence of guarantees banks borrow foreign currency, lend domestic currency and do not hedge the resulting exchange rate risk. With guarantees, banks will also renege on their foreign debts and declare bankruptcy when a devaluation occurs. We assume that the government is unable or unwilling to fully fund the resulting bailout via an explicit fiscal reform. These features of our model imply that government guarantees lead to self-fulfilling banking-currency crises.     

New Evidence from Brazil on Trade Liberalization and Productivity Growth*

This article presents evidence on the positive effect of international trade on productivity growth using industrial level data preceding and following Brazil's trade liberalization in 1988–90. Our data reveal large and widespread productivity improvement across industries after barriers to trade were drastically reduced. Econometric results confirm the association between trade liberalization and productivity growth and show that the impact was indeed substantial: The observed tariff reduction in the period brought a 6% estimated increase in total factor productivity growth rate and a similar impact on labor productivity.     

Occupational diversification as an adaptation to rainfall variability in rural India

Occupational diversification among household members in rural India is investigated as an adaptation strategy against the risks arising from the variability of local rainfall. Nationally representative household‐level survey data are combined with the coefficient of variation of rainfall constructed based on historical rainfall data at the district level. The analysis finds that high rainfall variability has significant negative effects on the agricultural specialization of within‐household occupational choices. This result is reinforced by the finding that improved access to irrigation, education, credit, roads, and postal services, is associated with a lower occupational diversification within families and a greater specialization of household members in agricultural‐related employment.     

Gender and age distribution of motorcycle crashes in Spain

This study analysed motorcycle crashes in Spain. Ninety-nine thousand three hundred and four motorcycle crash reports filed in the years 2006–2011 were extracted from the Directorate General of Traffic database of crashes with victims. These data were analysed in terms of gender, age groups, trip purpose, type of crash, speed violation, day of the week, harm caused, use of helmet and psychophysical conditions of the driver to study the characteristics of motorcycle crashes in Spain and to assess the differences between male and female motorcycle drivers in these crashes. Significant differences were found in all the variables considered in the study, which implies gender differences in the profile of the injured motorcycle driver. The severity of motorcycle crashes suffered by male drivers is higher than that of women. These results corroborate the need to develop measures differentiated by gender, based on their profile.     

Police-Monitored Cameras and Crime*

We study the effects of police monitoring on crime. We exploit detailed information on the location and date of installation of police-monitored surveillance cameras, coupled with data at the street-segment level on all reported crimes in the city of Montevideo, Uruguay. We find that the introduction of police-monitored surveillance cameras reduces crime by about 20 percent in monitored areas relative to a pure control group located outside the city. We also explore potential displacement effects, and we do not find evidence of such effects.     

Deferred taxation under default risk

In this article, we have used a continuous EBIT-based model to study deferred tax liabilities under default risk. Quite surprisingly, default risk has been disregarded in research on deferred taxation. In order to underline its importance, we first calculated the probability of default, over a given time period, together with the contingent value of tax deferral. We then applied our theoretical model to a sample of 27,749 OECD companies. We showed that, when accounting for both firms with a negative EBIT and firms with a probability of default higher than 50% (over a 10-year period), a relevant percentage of firms were close enough to default. Hence, the expected present value of deferred taxes is much lower than that obtained in a deterministic context. From the Government’s point of view, deferred tax liabilities are a risk-free loan. Since only a portion are subsequently repaid, the Government should account for future losses due to companies’ default. So far, these estimates have been missing, although techniques do exist and are quite practical.