Operations of a Pension Fund after the Asian Crisis: The Thai Experience*

During and after the Asian crisis, institutional investors and pension funds in Asian financial markets have been confronted with a number of difficulties effecting their performance and the way they carry out their role within the national pension system. We analyze these problems by comparing the actual investment policy of an institutional investor with an optimal investment strategy derived from the insights of modern portfolio theory. We also analyze whether the organizational set‐up of a pension fund allows it to adequately perform its role within the pension system. As an example, we examine the operations of the Thai Government Pension Fund (GPF). We find that allowing international investments and reducing restrictions on equity investments while lowering the implicit requirements for investments in government debt would allow the GPF to further diversify its investment risk and to increase its risk‐adjusted return. We also show that some changes in the governance structure of the GPF would lower the occurrence of conflicts of interest for the management and increase the efficiency of the GPF operations.     

OWNERSHIP STRUCTURE AND FIRM EXIT ROUTES

ABSTRACT

Our study presents empirical evidence about the role of ownership structure for firm exit probability by explicitly differentiating between distinct exit routes (bankruptcy and forced liquidation, voluntary liquidation, mergers and acquisitions – M&A, and removal from the court register). Based on the population of Slovenian firms in the 2006–2012 period and using multinomial probit, our findings support the predictions of agency theory. Ownership concentration, share of the largest owner, and the difference in shares between two largest owners all decrease the likelihood of exit for all studied exit routes but M&A. The magnitude of their impact is largest for exits, in which owners play a decisive role, i.e. voluntary liquidation and removal. The link between the number of primary owners and exit likelihood is U-shaped with the lowest exit probability for firms with around two owners.     

The European refugee crisis and the natural rate of output

The European Commission follows a harmonized approach for calculating structural (potential) output for EU member states that takes into account labour as an important ingredient. This article shows how the recent huge migrants’ inflow to Europe affects trend output. Due to the fact that the immigrants immediately increase the working population but effectively do not enter the labour market, we illustrate that the potential output is potentially upward biased without any corrections. Taking Germany as an example, we find that the average medium-term potential growth rate is lower if the migration flow is modelled adequately compared to results based on the unadjusted European Commission procedure.     

REPORTING GUIDELINES FOR META-ANALYSIS IN ECONOMICS

Meta-analysis has become the conventional approach to synthesizing the results of empirical economics research. To further improve the transparency and replicability of the reported results and to raise the quality of meta-analyses, the Meta-Analysis of Economics Research Network has updated the reporting guidelines that were published by this Journal in 2013. Future meta-analyses in economics will be expected to follow these updated guidelines or give valid reasons why a meta-analysis should deviate from them.     

Estimating the demand for reserve assets across diverse groups of countries

This paper takes a fresh look at the determinants of the holding of reserves with the aim of highlighting similarities and differences among emerging markets (EMs), advanced economies (AEs), and low‐income countries (LICs). We apply two panel estimation techniques: fixed effects (FE) and common correlated effects pooled mean group (CCEPMG). FE regression results suggest that precautionary savings’ motives, both current account‐ and capital account‐related, are generally the most important determinants of reserves’ holding for all country groups. Nonetheless, there is considerable heterogeneity across country groups and over time. The intertemporal motive, a novelty of this paper, has gained importance everywhere. The CCEPMG results confirm the importance of precautionary motives and suggest that current account motives matter only for EMs and LICs and capital account motives matter for all groups while being more relevant for EMs. The CCEPMG results also point to the importance of taking into account the heterogeneous impact of unobserved common factors that affect coefficient estimates and the dynamic process through which reserves adjust to changes.     

Effectiveness of Absurdity in Advertising Across Cultures

This paper examines the effect of absurd advertising on memory and persuasion across cultures. Drawing on Hofstede's cultural dimensions, it is hypothesized that the effect of absurdity on recall is culturally invariant, whereas the effect on attitude toward the ad is contingent on the recipients’ cultural orientation. The assumptions are tested using a between-subjects experimental design, in which we manipulated type of absurdity and used the cultural dimensions as blocking variables. Data was collected from 274 students in the United States, Germany, Russia, and China. We discuss theoretical and managerial implications of these findings as well as guidelines for further research.     

I Have Paid Less Than You! The Emotional and Behavioral Consequences of Advantaged Price Inequality

This study examines the emotion blends and the subsequent customer reactions that occur in advantaged price inequality situations, that is, when consumers learn that retailers charged them a lower price than what the same retailers charged another customer. Drawing on the appraisal theories of emotion and on social comparison theory, an experiment (n = 272) and a field study (n = 261) are conducted. The results reveal that in advantaged price inequality situations, customers experience a host of positive and negative emotions depending on two factors: the quality of relationship that the customer has with a disadvantaged other customer (neutral, positive, or negative) and the attribution of agency for the price advantage (situational attribution to competition, external attribution to store policies, or internal attribution to customer abilities). Positive emotions include happiness, gratitude, pride, and malicious joy; while negative emotions include pity, outrage, and guilt. These emotions are shown to mediate the occurrence of customer reactions (i.e., customer satisfaction, loyalty, WOM referral, and WOM activity). The article concludes with theoretical implications and recommendations for retail practitioners on how to use dynamic pricing.     

Does Foreign Direct Investment Induce Domestic Mergers?

This paper examines the impact of foreign firm entry on the industry consolidation process in a host country that operates through mergers and exits of incumbent firms. Using a three-stage oligopolistic model, the paper shows that foreign direct investment (FDI) may trigger consolidation via a merger since the approval of a domestic merger by the antitrust authority is more likely in the case a foreign firm enters via FDI and a firm’s incentive for a domestic merger is greater and that, in turn, the possibility to merge and become more efficient modifies the outcome of the game by making FDI compared to exports less likely.