Exceptional performance of multinational suppliers: theory and evidence

Review of World Economics - This paper focuses on an unexamined area of trade—the behaviour of heterogeneous intermediate suppliers facing final producers of different ability and pursuing...     

Institutions for private sector development and pro‐poor growth: Evidence from Vietnam

Using the Vietnam Household Living Standards Survey 2008, we explore the differences in pro‐poor growth performance in provinces in Vietnam according to the quality of the provinces’ institutions that support private sector activity. We exploit the localized and varying effect of French colonial legacy across Vietnamese provinces to address the endogeneity of institutions. We find strong and robust evidence of a positive effect of good‐quality institutions that support private sector activity on pro‐poor growth and that enhanced working hours and hourly wage and extended income from non‐farm self‐employment play critical roles in this outcome.     

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.     

Estimating the gravity model when zero trade flows are frequent and economically determined

ABSTRACT

Since the 1950s, we have known that the presence of zero-valued dependent variables can seriously bias econometric estimates whether the zeros are included or excluded. Yet the widely-used gravity model is frequently estimated on samples that include large fractions of zeros. An influential paper by Santos Silva and Tenreyro – based on simulations that include no economically-determined zeros – concludes that the bias problems resulting from zeros and those resulting from heteroscedasticity and nonlinearity can be solved using the Poisson Pseudo-Maximum-Likelihood (PPML) model including the zero values. This paper begins by adapting the Santos Silva and Tenreyro experimental design to include economically-determined zeros to see whether this conclusion continues to hold. With this design, it finds that alternative estimators have lower bias than PPML. Changing to a Monte Carlo design that replicates the much-higher real-world frequency of predicted values near zero restores the finding of lower bias with the PPML estimator. The results highlight the need for very careful design of Monte Carlo experiments when evaluating alternative estimators of the gravity model.     

Institutional quality,investment efficiency,and the choice of public–private partnerships

We examine a sample of 625 public–private partnership (PPP) firms from 1980 to 2015 that straddle nine countries with varying degrees of economic development and PPP markets. We find that the motivations of the firms that undertake PPP investments vary. While private sector firms in economies with low institutional quality choose to engage in PPPs to alleviate capital constraints attributed to underinvestment, those in economies with high institutional quality participate in PPPs to solve the problem of overinvestment due to an abundant cash flow. In the long run, the benefits of lower capital constraints through PPP investments are more pronounced in economies with high institutional quality.     

Shipping cost and development of the landlocked developing countries: Panel evidence from the common correlated effects approach

We estimate the impact of shipping cost on development for landlocked developing countries (LLDCs). Since container trade is important to them, we construct a country-specific measure of shipping cost, called HarpexCost, which combines the global cost of container shipping with information on how exposed to container shipping each LLDC is. We employ the common correlated effects (CCE) estimator of Pesaran (Econometrica, 2006; 55: 967) to first estimate the impact of HarpexCost on the LLDCs’ development, and then recover the actual impact of shipping cost from these estimates. Overall, we observe that shipping cost has large negative effects on the LLDCs. Building upon these results, we provide new estimates on the cost of landlockedness and how trade benefits their development.     

Can Management Turnover Restore the Financial Statement Credibility of Restating Firms? Further Evidence

This paper investigates the association between management turnover following financial restatements and the probability of subsequent restatements. We find that restating firms that replace management (CEO and/or CFO) are more likely to restate their financial statements again. We also find that subsequent restatements are mainly attributable to the new management. Overall, our results suggest that management turnover following restatements may not be an effective mechanism to remediate financial restatements, but the change to a new management results in a greater possibility of lower earnings quality (i.e., higher probability of subsequent financial restatements and accruals‐based earnings management). Our study supports prior literature's findings that the change in the top management leads to organizational instability and higher accounting information risk. Our findings have implications for internal decisionmaking with regard to top executive replacement.     

Does Greater Amount of Information Always Bolster Attitudinal Resistance?

Previous research suggests that attitudinal resistance to information that challenges a prior evaluation increases with the amount of information underlying the prior evaluation. We revisit this proposition in a context in which a set of important claims about a target brand are presented either alone—a lower amount of isolated information—or along with other favorable, but less important claims—a higher amount of embedded information. Results from two experiments show that when the challenge occurs immediately after the initial evaluation, a greater amount of embedded initial information does produce greater attitudinal resistance. However, when the challenge occurs after a delay, a lesser amount of isolated information produces greater attitudinal resistance. The findings qualify previous assumptions about the role of prior information in attitudinal resistance, and support a constructive view of judgment revision and attitudinal resistance.     

Analyzing the Memory Impact of Advertising Fragments

Marketers are making increasing use of very brief messages that mention just a brand name or a brand name with a short headline, as in event sponsorship and program endorsements. There has been debate over the effectiveness of these advertising fragments. This paper introduces an approach for controlled testing of the effects of advertising fragments. Using a reaction-time based procedure, we show that a key effect of advertising fragments is to revive established brand associations, even though these associations are not explicitly communicated. This reactivation occurs not only when these names receive focal attention, but also when they receive nonfocal attention.