Creditor rights,financial health,and corporate investment efficiency

This paper analyzes the influence of creditor rights on investment efficiency and how firms’ financial health shapes this influence. Using time-series changes within a country and cross-country variations in creditor rights, I find that stronger protection of creditors improves investment efficiency in healthy firms but worsens it in distressed firms. The impact on investment efficiency operates more through changes in overinvestment than in underinvestment. Alternative proxies for creditor rights control for both contractual and enforcement rights. The results are robust to alternative model specifications and to controls for omitted variables.     

Democracy and dividend policy around the world

This paper investigates how democracy influences corporate dividend policy. With a sample of 228,628 observations from 37 countries, we find that democracy is negatively associated with both the likelihood to pay dividends and the payout ratio. Moreover, we document that this effect is stronger when shareholders (creditors) are weakly (strongly) protected. These findings imply that the effect of democracy on corporate dividend policy is transmitted mainly through democratic procedures. Besides, we find that democracy also negatively affects dividend initiations.     

On-the-job human capital investment and intertemporal substitution: New evidence on intertemporal substitution elasticity

This paper argues that estimates of intertemporal elasticity of substitution (IES) obtained from standard life-cycle models are subject to a downward bias because they neglect the life-cycle and demographic patterns of on-the-job human capital investment. Taking into account the fact that part of a worker's time at work goes to acquiring human capital in addition to his main task of producing goods, we extend the standard life-cycle model to include time spent on investing in on-the-job human capital and propose a new framework for identifying the IES. We obtain statistically significant evidence that conventional estimates of IES for total hours at work are biased downward about 20% at the intensive margin. The corresponding IES estimates for production hours are biased downward even more, which provides an explanation for why output fluctuation is greater than hours/employment fluctuation over the business cycle.     

长期股权投资与企业合并的会计核算探讨

在金融危机下,原料价格上涨、人民币升值、股市动荡、房价疯涨等问题正在考验中国经济的持续健康发展。长期股权投资与企业合并在金融创新和产业创新的支持下,成为吸引我国资本金融发展的方向。比如有资料显示,据权威机构统计,2009年共有80支投资于中国大陆地区的私募股权投资成功募集资金355．25亿美元,较2008年的300亿美元增长许多。本文为此具体探讨了长期股权投资与企业合并的相关会计核算方法与内容。     

The relationship between information technology capability,inventory efficiency,and shareholder wealth: A firm-level empirical analysis

Inventories represent an important strategic resource for firms, with implications for shareholder wealth. As such, firms expend considerable effort in managing their inventories efficiently. Among other factors, information technology (IT) capability can play an important role in enabling inventory efficiency and financial performance. However, insight into the chain-of-effects linking IT capability, inventory efficiency, and stock market returns and risk remains limited. In this paper, we provide a conceptual model outlining the relationships between these constructs. Next, we evaluate the model using secondary information on firms from multiple industries across the 10-year time period of 2000–2009. Our analysis confirms that firms’ IT capability plays a significant role in enhancing their inventory efficiency, which, in turn, is observed to increase stock market returns. Our results also reveal that firms’ IT capability directly reduces their stock market risk and enhances their stock market returns. Taken together, these findings, along with the conceptual model that we advance, have important research and managerial implications.     

Financial constraints and corporate investments during the current financial and economic crisis: The credit crunch and investment decisions of Slovenian firms

We investigate the effect of financial constraints on the investment decisions of Slovenian firms during the current financial and economic crisis. By estimating the error-correction model and the Euler-equation specification, we found that corporate investments were significantly affected by financial constraints during the crisis. The effect of financial constraints intensified in 2009 and alleviated slightly in 2010, although still being significantly more intense than before the crisis hit the economy. By estimating a switching regression model with unknown sample separation that enabled us to address the problem of judgemental sample separation, we were also able to estimate the error-correction model separately for financially constrained and financially unconstrained firms. The results indicate that financial constraints have a significant effect on both financially constrained and financially unconstrained firms, although corporate investments were more severely affected in financially constrained firms.     

Foreign investors and stock price efficiency: Thresholds,underlying channels and investor heterogeneity

This paper examines the relationship between foreign shareholding and stock price efficiency for Malaysian public listed firms over the 2002–2009 sample period. We use stock price delay as an inverse measure of price efficiency, and consider the speed of adjustment to local and global common factor information. The results show that foreign investors accelerate the incorporation of both types of common information into the prices of Malaysian stocks, mainly due to their superior skills in processing systematic market-wide factors. However, we find evidence of optimality in foreign shareholding, suggesting that the efficiency benefit disappears after foreign ownership exceeds a certain threshold level. Further analyses shed lights on the channels and moderating variables driving this non-monotonic relationship. Our disaggregate analysis on foreign investor heterogeneity shows that foreign investors who trade through nominee accounts are elite processors of public market-wide and firm-specific news in the Malaysian stock market.     

Bank ownership and cost efficiency: New empirical evidence from Russia

This paper investigates the cost efficiency of Russian banks with regard to their heterogeneity in terms of ownership form, capitalization and asset structure. Using bank-level quarterly data over the period 2005–2013, we perform stochastic frontier analysis (SFA) and compute cost efficiency scores at the bank and bank group levels. We deduct from gross costs the negative revaluations of foreign currency items generated by official exchange rate dynamics rather than by managerial decisions. The results indicate that the core state banks, as distinct from other state-controlled banks, were nearly as efficient as private domestic banks during and after the crisis of 2008–2009. Foreign banks appear to be the least efficient market participants in terms of costs, which might reflect their lower (and decreasing over time) penetration of the Russian banking system. We further document that the group ranking by cost efficiency is not permanent over time and depends on the observed differences in bank capitalization and asset structure. We find that foreign banks gain cost efficiency when they lend more to the economy. Core state banks, conversely, lead in terms of cost efficiency when they lend less to the economy, which can result from political interference in their lending decisions in favor of unprofitable projects Private domestic banks that maintain a lower capitalization significantly outperform foreign banks and do not differ from the core state banks in this respect.     

The (non-)Keynesian effects of fiscal austerity: New evidence from a large sample

We empirically assess whether the negative response of private consumption and private investment to fiscal consolidation usually expected is reversed. We focus on a sample of 174 countries between 1970 and 2018 to determine episodes of fiscal consolidations using three alternative measures of the cyclically adjusted primary balance: (1) an International Monetary Fund (IMF)-World Economic Outlook (WEO) based measure, (2) a Hodrick-Prescott–based measure, and (3) a measure based on Hamilton (2018). We find that, first, increases in government consumption have a Keynesian effect on real per capita private consumption; second, tax increases have a positive effect on private consumption when a fiscal consolidation occurs; and, third, fiscal contraction has a crowding-in effect on private investment. Moreover, expansionary fiscal consolidations occur in highly indebted advanced economies, in particular, after an increase in taxes. We conclude that the negative effects of taxation on private consumption are larger when developing economies are experiencing a financial crisis and are not consolidating.     

New evidence on the efficiency of Italian airports: A bootstrapped DEA analysis

A bootstrapped DEA procedure is used to estimate technical efficiency of 18 Italian airports during the period 2000-2004. Departing from previous studies, we separate the efficiency related to ability to manage airside activities (operational) from that related to the management of all business activities (financial). In general, Italian airports operate at poor levels of efficiency, with slightly better performance in terms of their financial activities. In the current study, selected intrinsic and environmental characteristics are considered as possible drivers of Italian airport performance. In particular, we found that: (i) the airport dimension does not allows for operational efficiency advantages, (ii) on the other hand, the airport dimension allows for financial efficiency advantages for the case of hubs and disadvantages for the case of the smallest airports (iii) the type(s) of concession agreement(s) might be considered as important source of technical efficiency differentials for those airports running marginal commercial activities; (iv) the introduction of a dual-till price cap regulation might create incentives which lead to the increase of financial efficiency at the detriment of the operational performance. Lastly, the development of a second hub (Milano Malpensa), has negatively affected the performance of the country’s national hub (Roma Fiumicino).     

The effects of trade exposure on technical efficiency: New evidence from the Turkish rubber industry

When a country's foreign trade regime becomes more open, international trade theory suggests that domestic firms face more competition and start to operate more efficiently to reduce their production costs. This proposition is empirically examined by using plant-level data from the Turkish rubber industry during a period of substantial trade liberalization: technical efficiency levels improved significantly when Turkey's trade regime shifted from a restrictive to a more liberalized one. Incumbent plants located closer to international markets improved technical efficiency more than the other plants. These findings suggest that the improvement in technical efficiency was due largely to trade liberalization.     

Bank efficiency and access to credit: International evidence

This paper examines the impact of bank efficiency on access to credit. We test the hypothesis that higher bank efficiency, meaning a better ability of banks to operate at lower costs, favors access to credit for firms. To this end, we perform a cross-country analysis with firm-level data on access to credit and bank-level data to compute bank efficiency, using a sample of about 54,000 firms from 76 countries. We find that greater bank efficiency improves access to credit for firms. The beneficial impact of bank efficiency to alleviate credit constraints takes place through the demand channel by reducing borrower discouragement to apply for a loan. Whereas the positive impact of bank efficiency on credit access is observed for firms of all sizes, the effect tends to be more pronounced in countries with a better economic and institutional framework. Our results therefore support policies favouring bank efficiency to enhance access to credit.     

The impact of uncertainty on firm investment: evidence from machinery industry in Liaoning province of China

We test the impact of uncertainty on investment of Chinese firms during market transition with a sample of 195 firms in the machinery industry in Liaoning province of China during 1993–1998. The system Generalized Method of Moments (GMM) estimates show that both demand and labor costs uncertainties do not affect investment of state enterprises, while labor costs uncertainty has a positive effect on investment of collective firms. This result suggests that managers of state enterprises have little incentive to respond to uncertainty probably due to the ex ante arrangements of the contract responsibility system, while collective firms show risk-taking behavior during market transition. We also find that sales growth is an insignificant signal for investment of both state and collective enterprises, violating the standard accelerator principle. We provide a few possible explanations to this result.     

The effects of financial openness and financial efficiency on Chinese macroeconomic volatilities

This paper builds an open-economy DSGE model to study the effects of financial openness and financial efficiency on the macroeconomic volatilities and estimate the model with the Bayesian method and Chinese quarterly data from 2001Q1 to 2017Q4. We further test the validity of model predictions with panel analyses of Chinese provincial data from 1987 to 2016 and various robustness tests. The results show that: first, further financial openness will lead to an increase in output volatility but U-shaped changes in consumption and investment volatilities. Second, financial efficiency improvement helps to reduce the macroeconomic volatilities but has a diminishing marginal benefit. Third, our estimates of China's degree of financial openness and financial efficiency are both at the medium level close to the thresholds. It implies that further financial openness will dramatically increase the macroeconomic volatilities but whether financial efficiency improvement can mitigate instability is uncertain.     

Financial globalization and technological innovation: International evidence

Country’s technology progress and innovation development not only depends on internal knowledge stock and human capital, but also external financial resources. This paper explores the effect of financial globalization on technological innovation through empirical investigations by using the system generalized method of moment method and panel data from 110 countries over the period of 1985–2015. Our empirical results suggest that financial globalization exerts a significant enhancing effect on technological innovation and this effect becomes stronger for countries with better institution quality. A one unit change of financial globalization can bring about a 0.6 % increase in patent applications. The comprehensive evidence shows that financial development, not trade integration, is the main channel through which financial globalization promotes national innovation. Subsample analysis shows that financial globalization only promotes innovation development of Non- Organization for Economic Co-operation and Development (OECD) countries. Our findings offer new insights into the influence of financial openness on technology progress.     

Real rigidities, productivity improvements and investment dynamics

The theoretical literature on business cycles predicts a positive investment response to productivity improvements, a prediction we question from theoretical and empirical perspectives. We show that a short-term negative response of investment to a positive technology shock is consistent with a reasonably parameterized new Keynesian dynamic stochastic general equilibrium (DSGE) model in which firm-specific capital introduces an additional real rigidity, and monetary policy is not fully accommodative. Employing Bayesian techniques, we provide evidence that permanent productivity improvements have short-term, contractionary effects on investment. Although this result can be obtained from both firm-specific and rental capital models, only in the case of the former is the average price duration in line with the microeconometric evidence.     

Raiders of the lost high-frequency forecasts: New data and evidence on the efficiency of the Fed's forecasting

We introduce a new dataset of real gross domestic product (GDP) growth and core personal consumption expenditures (PCE) inflation forecasts produced by the staff of the Board of Governors of the Federal Reserve System. In contrast to the eight Greenbook forecasts a year the staff produce for Federal Open Market Committee (FOMC) meetings, our dataset has roughly weekly forecasts. We use these data to study whether the staff forecasts efficiently. Prespecified regressions of forecast errors on forecast revisions show the staff's GDP forecasts exhibit time-varying inefficiency between FOMC meetings, and also show some evidence for inefficient inflation forecasts.     

Bank competition,financial development and macroeconomic stability: Empirical evidence from emerging economies

In this study, we investigate the potential contribution of bank competition to macroeconomic stability, and the interactive role of financial development. We classify macroeconomic stability into economic and financial stability. Economic stability is represented by the volatility of actual and unexpected output growth, whereas financial stability is assessed by the aggregate Z-score and volatility of the private credit-to-gross domestic product ratio. We employ two structural and two non-structural measures of bank competition in our analysis. Applying a two-step dynamic panel system (GMM) to macroeconomic data from 48 developing nations from 1999 to 2018, we find a bell-shaped relationship between bank competition and macroeconomic stability. The findings imply that a higher level of bank competition promotes macroeconomic stability by reducing output growth volatility, fluctuations in private credit, and the probability of bank default. There is an optimal level of bank competition beyond which it may foster economic and financial instability. Moreover, financial development enhances bank competition’s positive impact on macroeconomic stability.