An information-based trade off between foreign direct investment and foreign portfolio investment

The paper develops a model of foreign direct investments (FDI) and foreign portfolio investments (FPI). FDI enables the owner to obtain refined information about the firm. This superiority, relative to FPI, comes with a cost: a firm owned by the FDI investor has a low resale price because of asymmetric information between the owner and potential buyers. The model can explain several stylized facts regarding foreign equity flows, such as the larger ratio of FDI to FPI inflows in developing countries relative to developed countries, and the greater volatility of FDI net inflows relative to FPI net inflows.     

Why is Convertible Debt Subordinated? An Investment‐Based Agency Theory

This paper offers an agency‐based explanation for the junior priority status of convertible bonds. Using a simple economic model, I show that when convertible and straight debt have equal priority, shareholders can prefer value‐decreasing projects, which results in wealth transfers from bondholders to shareholders; and I prove that this problem is solved when convertible debt is subordinated. Empirical evidence supports the theory. I find that firms with greater potential for investment‐based agency conflicts are more likely to issue subordinated convertible debt, and firms with senior convertible debt are more likely to deviate from the optimal investment policy.     

Hotel efficiency: A bootstrapped metafrontier approach

This paper introduces the metafrontier concept to account for the environmental and technological differences between various hotels groups. The interesting feature of the model is that it ensures that heterogeneous hotels are compared based on one homogenous technology. We test the model using a panel data sample of 78 Taiwanese hotels. The results clearly indicate that the size, ownership, and classification of a particular hotel have a significant impact on its efficiency. More implications of the results are provided.     

Performance analysis of the Gulf hotel industry: A Malmquist index with bias correction

This study uses the Malmquist index with bias correction to analyze the performance of hotel chains from the UAE, Saudi Arabia and Oman. We show that Saudi Arabia hotel chains have the highest productivity growth, followed by the UAE and Omani hotel chains. A further decomposition of productivity indicates that a small number of hotel chains experienced an increase in revenues for lower occupancy rate, while most other hotel chains experienced an increase in occupancy rate for lower revenues. Related market discussions of the results are provided.     

Portuguese tour operators: A fight for survival

This article looks at the efficiency of Portuguese tour operators focusing on firm size, group ownership, and mergers and acquisitions. It has been argued that changed market conditions in Europe make it hard for tour operators to achieve economies of scale and market growth without increasing firm size or being part of a more high profile company.     

MIGRATION into the WELFARE STATE: tax and migration competition

Despite big gains from easing restrictions on international labor mobility, liberalizing migration flows is not pursued unilaterally or negotiated among countries in a way that international trade negotiations are pursued. Among several key explanations is the fiscal burden imposed by immigration on native-born. The paper focuses on a central tension faced by policy makers in countries that receive migrants from lower wage countries. Such countries are typically high productivity and capital rich, and the resulting high wages attract both skilled and unskilled migrants. A generous welfare state may attract low-skill migration deter skilled migration, since it is likely to be accompanied by higher redistributive taxes. Assuming that a group of host countries faces an upward supply of immigrants, the analysis demonstrates that tax competition does not indeed lead to a race to the bottom; competition may lead to higher taxes than coordination. There exists a fiscal externality (fiscal leakage) that causes tax rates (on both labor and capital), and the volume of migration (of both skill types), to be higher in the competitive regime than in the coordinated regime.     

Accounting for size in efficiency comparisons of airports

This paper adopts the metafrontier model to analyze and compare the technical efficiency of small and large UK airports. The interesting feature of the model is that it takes into account the technological differences in the estimation of efficiency, and thus increases the accuracy in the efficiency comparison between heterogeneous airports. Results show that large airports are generally more technically efficient and have less operational wastage than small airports. Along with size, factors such as location, technological access, and capital investments could contribute to the efficiency difference between small and large airports.     

Persistence Characteristics of Tourism Arrivals to Australia

This paper examines the degree of persistence in international monthly arrivals to Australia by using data disaggregated by tourism‐source countries. We employ two competing models, which are very general in the sense that they include (seasonal and non‐seasonal) unit roots as particular cases of interest. The first model is based on a long‐memory process in the non‐seasonal part of the series along with a short‐memory autoregressive (AR) seasonal structure. The second model is based on a long‐memory process for the seasonal structure of the series, the short‐term evolution being described through a non‐seasonal AR(1) process. Results based on the residuals and forecasting assessment indicate that the second model is preferable in terms of fitting the data. We provide persistence ranking of all countries included in the study and discuss the managerial implications of the main findings. Copyright © 2011 John Wiley & Sons, Ltd.     

Alternative Solutions to Underinvestment, Under Equity and Credit Rationing

We compare alternative solutions to underinvestment (UI) problems in firms subject to limited access to equity markets, interest ceilings, and constraints on the volume of debt. Collaterals (assets or compensating balances) and credit insurance ('regular' or 'outcome' insurance whereby the premium is paid at the end of the insurance period) are compared on the basis to their costs and their effective use of financial sources. It is shown that when there is no moral hazard problem, credit insurance is the most effective instrument. Otherwise, 'outcome' insurance program is the most effective one.     

CONVERTIBLE DEBT AND RISK‐SHIFTING INCENTIVES

I argue that convertible debt, in contrast to its perceived role, can produce shareholders’ risk‐shifting incentives. When a firm's capital structure includes convertible debt, every investment decision affects not only the distribution of the asset value but also the likelihood that the debt will be converted and thereby the distribution of the firm's leverage. This suggests that managers can engage in risk‐increasing projects if a higher asset risk generates a more favorable distribution of leverage. Empirical evidence using 30 years of data supports my argument.