Labour unions and leverage: evidence from firm-level union data

ABSTRACT

Using firm-level labour union data from Japan, this paper investigates the effect of labour unions on firm leverage. We find that as union coverage increases, both the level of and extent of change in leverage decreases. These relations remain robust when a firm falls into deficit. We also find that firms with higher union coverage have a higher interest coverage ratio. In addition, we find that firms with higher union coverage are less likely to choose issuing debt compared to issuing equity when they face financial distress. Our results imply that significant employee influence enhanced by labour unions increases fixed costs, crowds out the firm’s debt capacity and consequently reduces the firm’s leverage.     

Pro-poor growth,poverty and inequality in rural Vietnam

This study explores the effects of Vietnam's transition on the welfare of different ethnic groups in rural Vietnam. It draws on three rounds of national household surveys in 2002, 2004 and 2006. It is first observed that the pace of poverty reduction for minorities surpassed the majority over the period 2002–2006, although poor people were still concentrated in the minority groups throughout the period. Secondly, the disparity in living standards has been widening. In particular, inequality within both the majority and minority groups increased over the period. Thirdly, the study shows that the effect of economic growth on poverty is estimated to have been greater if inequality remained constant. It is also noted that the impacts of economic growth on poverty vary across different ethnic groups. Finally, regression decompositions of within inequality have confirmed that the main driver of inequality is not the same among ethnic groups. Given the diversity across different ethnic groups, we can conclude that government policy aimed at equal access to infrastructure and more equal distribution of assets, such as land, for ethnic minority groups would lead to more equal distribution of consumption and poverty reduction of those groups. Also, consideration of local needs would be necessary in designing and implementing public policies, given the heterogeneous socio-economic circumstances surrounding each ethnic minority group.     

Soft related lending: A tale of two Korean banks

In this paper, we present indirect evidence that the IMFs insistence on foreign control of two large nationwide Korean banks in exchange for short-term support during the 1997 financial crisis helped restrain soft related lending practices. News signaling the likely sale of a bank to a foreign financial institution yields an average daily decrease of about 2% in the stock price of related borrowers. News indicating difficulty in finding an interested foreign investor generates an increase in the stock price of related borrowers of about the same magnitude. These signals have larger impacts on less-profitable, less-liquid, and more bank-dependent firms.     

A cointegrated commodity pricing model

We propose a commodity pricing model that extends the Gibson–Schwartz two‐factor model to incorporate the effect of linear relations among commodity spot prices, and provide a condition under which such linear relations represent cointegration. We derive futures and call option prices for the proposed model, and indicate that, unlike in Duan and Pliska (2004), the linear relations among commodity prices should affect commodity derivative prices, even when the volatilities of commodity returns are constant. Using crude oil and heating oil market data, we estimate the model and apply the results to the hedging of long‐term futures using short‐term ones.     

Option Values, Switches, and Wages: An Analysis of the Employment Guarantee Scheme in India

Consistent with real option theory, the authors argue that the value of the Employment Guarantee Scheme (EGS) in rural India and its impact on workers' behavior does not depend so much on its income supplementation as on enlargement of opportunities in the uncertain local labor market. The choice between the EGS and other activities is modeled in a dynamic optimization framework, taking into account a fixed wage rate and certainty of employment under the EGS and a stochastic wage rate under other activities. Specifically, volatility of wages in the rural labor markets has important implications for switches into the EGS and for concomitant welfare effects. Under such conditions, the higher the EGS wage, the greater is its attractiveness to relatively skilled and affluent workers, and for those already in it to continue. These and related predictions of the model are validated by panel data estimation.     

Is protection really for sale? A survey and directions for future research

This paper critically and selectively surveys the literature on protection for sale and discusses directions for future research in this area. It suggests that the standard approach needs to be augmented to provide more compelling tests of this model.     

Container storage and transshipment marine terminals

This study addresses the storage arrangement of transshipment containers on a container yard, in order to carry out efficiently the ship handling operations at a terminal where mega-containerships call. An optimization model is specified to investigate the flow of containers from the mega-containership to feeder ships using intermediate storage at the yard. A heuristic based on the lagrangian relaxation is formulated. The quality of the heuristic approach is tested in a number of experiments. In the experiments, various situations are analyzed with respect to mega-containership arrival rates, some strategies for stack arrangements and terminal layouts.     

The evolution of a national banking market in pre-war Japan

This paper assesses banking market integration in Japan during the period 1889-1938 using annual data on loan rates and spreads between loan and deposit rates. Banks in prefectures further from the financial centers exhibited higher loan rates and greater spreads than banks closer to the center, however, distance effects diminished over time, suggesting that banking markets became increasingly integrated due to declines in transaction costs. Additionally, loan rates and spreads varied negatively with the intensity of local bank competition, consistent with the notion of market segmentation. We speculate that Japan’s anti-competitive banking regulation might have slowed the process of banking market integration.     

On the Hoggard–Whalley–Wilmott Equation for the Pricing of Options with Transaction Costs

The Hoggard–Whalley–Wilmott equation is introduced to model portfolios of European type options incorporating transaction costs. The model gives rise to a nonlinear parabolic partial differential equation (PDE), whose nonlinearity reflects the presence of transaction costs. We show analytically the existence of solutions which are not necessarily convex nor concave. Numerical treatments are also given, which are devised to effectively handle an infinite domain and unbounded solutions.