Preference hierarchies for internal finance, bank loans, bond, and share issues: evidence for Dutch firms

We estimate the incremental financing decision for a sample of some 150 Dutch companies for the years 1984 through 1997, thereby distinguishing internal finance and three types of external finance: bank borrowing, bond issues, and share issues. First, we estimate a multinomial logit model, which confirms several predictions of both the static trade-off theory and the pecking order theory as to the determinants of financing choices. Next, we estimate all possible ordered probit models to determine which financing hierarchy fits the data best. The results suggest that Dutch firms have a unique most preferred financing hierarchy: (i) internal finance, (ii) bank loans, (iii) share issues, and (iv) bond issues.     

Defining,measuring, and modeling accruals: a guide for researchers

Research on accounting accruals is pervasive. Yet the measurement and modeling of accruals has developed in an ad hoc manner, resulting in a fragmented and incomplete body of research. Our goal is to rectify this situation by (i) providing a comprehensive definition of accruals, (ii) formulating a corresponding empirical measure of accruals, (iii) offering two decompositions of our measure that encapsulate the major classes of accruals studied elsewhere, (iv) combining and expanding prior models of the fundamental determinants of accruals into one parsimonious model, and (v) identifying the primary determinants of each of the major classes of accruals. We close by providing guidance for researchers in tailoring the selection of accruals to the research question at hand.     

Foreign Bank Entry: Experience, Implications for Developing Economies, and Agenda for Further Research

In recent years foreign banks have expanded their presence significantlyin several developing economies. In Argentina and Chile in LatinAmerica and in the Czech Republic, Hungary, and Poland in EasternEurope, foreign-controlled banks now hold more than half oftotal banking assets. In other regions the trend is similar,though foreign bank entry has been slower. Despite the growingnumber of countries embracing foreign bank entry, importantquestions are still being debated: What draws foreign banksto a country? Which banks expand abroad? What do foreign banksdo once they arrive? How do foreign banks' mode of entry andorganizational form affect their behavior? This article summarizescurrent knowledge on these issues. Because the existing literaturefocuses heavily on developed economies, it also puts forth anagenda for further study of the causes and effects of foreignbank entry in developing economies.      

Seeking Capital Abroad: Motivations,Process, and Suggestions for Success

Until fairly recently, the ownership of companies has remained largely with investors in home countries with stocks listed only on domestic exchanges. But a growing number of firms are now raising equity capital on foreign stock exchanges in response to opportunities created by the increasing integration of global capital markets. The authors identify several reasons why seeking capital abroad is an attractive strategy for companies, including greater access to capital, a more liquid share price, easier means of offering employees equity interests in the firm, greater opportunities to make acquisitions, and at least the potential for a stronger reputation and higher valuation, stemming in part from better governance law and greater protection for minority investors in certain jurisdictions. But along with such potential benefits, companies that raise capital abroad also inevitably face liabilities of foreignness (LOF) in their dealings with foreign investors and capital markets. The authors propose a number of ways of minimizing such liabilities, that including signalling the firm's commitment to strengthening its internal governance system, adopting host country business practices, and enlisting the help of reputational intermediaries.     

Governance Matters III: Governance Indicators for 1996, 1998, 2000, and 2002

Six dimensions of governance are estimated covering 199 countriesand territories for four periods: 1996, 1998, 2000, and 2002.The indicators are based on several hundred individual variablesmeasuring perceptions of governance drawn from 25 data sourcesconstructed by 18 organizations. These individual measures areassigned to categories capturing key dimensions of governance.An unobserved-components model is used to construct six aggregategovernance indicators in each of the four periods. Point estimatesof the dimensions of governance are provided as well as themargins of errors for each country for the four periods. Methodologicalissues are also addressed, including tests for potential biases,and the interpretation and use of the data, given the estimatedmargins of errors for the indicators. The data and a Web-basedgraphical interface are available online at www.worldbank.org/wbi/governance/govdata2002/index.html.     

Equity,efficiency, and discounting : The reasons for discounting intergenerational effects

Confusion between the ethical norm of intergenerational equity and the practical technique of discounting only obscures the basic issues of efficiency and equity. The author distinguishes between the discounting approach and the equity argument, and explains their essentially complementary roles in long-term investment decisions. He argues that the discounting method is an important tool in the achievement of intergenerational equity since it can determine the amount of compensation to be paid to future generations, a sum which by definition will compensate them for the damage our action has caused.     

Pricing for Multiline Insurer: Frictional Costs,Insolvency, and Asset Allocation

This article examines multiline insurance pricing based on the contingent claim approach in a limited liability and frictional costs environment. Capital allocation is based on the value of the default option, which satisfies the realistic assumption that each distinct line undertakes a pro rata share of deficit caused by insurer insolvency. Premium levels, available assets, and default risk interact with each other and reach equilibrium at the fair premium. The assets available to pay for liabilities are not predetermined or given; instead, the premium income and investment income jointly influence the available assets. The results show that equity allocation does not influence the overall fair premium. For a given expected loss, the premium-to-expected-loss ratio for firms offering multiple lines is higher than that for firms only offering a single line, due to the reduced risk achieved through diversification. Premium-to-expected-loss ratio and equity-to-expected-loss ratio vary across lines. Lines having a higher possibility or claim amount not being paid in full exhibit lower premium-to-expected-loss ratio and higher equity-to-expected-loss ratio. Positive correlation among lines of business results in lower premium-to-expected-loss ratio than when independent losses are assumed. Positive correlation between investment return and losses reduces the insolvency risk and leads to a higher premium-to-expected-loss ratio.     

商业银行存款竞争:趋势、挑战与应对研究

在回顾和总结商业银行存款竞争理论基础上,从存款总量、存款产品结构变化、存款期限结构、竞争主体结构等方面,分析近年来国内存款市场的变化特征及最新发展趋势。指出当前国内商业银行存款竞争面临金融"脱媒"速度加快、利率市场化、现代信息技术发展、商业银行转型以及监管政策调整等诸多挑战,但存款在商业银行经营中的基础性地位和作用短期内不会动摇。当前形势下,商业银行应通过完善一体化综合营销平台、加大存款产品创新力度、持续优化存款业务流程、用互联网覆盖客户存款等基础服务能力的建设来提升存款竞争力。     

Formal and Informal Markets for Water: Institutions, Performance, and Constraints

Water markets—either formal or informal—can be anefficient method for reallocating scarce water supplies. Atthe same time certain constraints can raise the transactioncosts of trading water. This paper reviews the conditions necessaryto establish successful water markets, identifies potentialproblems, and offers mitigating strategies. It also uses examplesof several informal and formal water markets already in operationto illustrate these problems and the solutions to them.      

New Models for Old-Age Security: Experiments, Evidence, and Unanswered Questions

The escalating costs of traditional social security systemsare forcing countries to reevaluate the formal programs thatprovide income maintenance support to the aging. This articlesuggests a reform strategy built around three systems, or "pillars,"to provide old-age security—a public pillar with mandatoa private, mandatory savings plan, and a voluntary savings system.Three variations of this model are being implemented in differentcountries: the Latin American model, in which individual workerschoose an investment manager for their retirement finds; theOECD model, in which employers, union trustees, or both choosethe investment manager for an entire company or occupation;and the Swedish notional account model, a reformed pay-as-you-gofirst pillar that may be supplemented by a second, funded pillar.Preliminary empirical evidence on the efficiency and growtheffects of pension reform, mostly from Chile, indicates thatthe impact on national saving and financial market developmentand, through these, economic growth, has been positive and possiblylarge. Problems concerning high administrative costs and regulationsthat distort investment decisions remain to be resolved, however.      

Merging for Capacity and a Capacity for Merging: Politicians,Citizens, and Discourses in Public Administrations

It is assumed in many countries that the merger of municipalities can increase the capacity of their public administrations. This paper concentrates primarily on the activities preceding the implementation of the merger, by analyzing the ex‐ante stages of the process. Using a case study, the paper analyzes the activities used to explain the merger initiative to citizens and to overcome any potential resistance. The analysis is developed using the Foucauldian concepts of discourse and technology of the self. The aim is to explain the way human resources can and should be managed during the implementation of a capacity‐building initiative.     

Selecting a Bond-Pricing Model for Trading: Benchmarking, Pooling, and Other Issues

Abstract:  Does one make money trading on the deviations between observed bond prices and values proposed by bond-pricing models? We extend Sercu and Wu's (1997) work to more models and more data, but we especially refine the methodology. In particular, we provide a normal-return benchmark that markedly improves upon the Sercu-Wu ones in terms of noisiness and bias, and we demonstrate that model errors contribute more to the variance of residuals—actual minus fitted prices—than pricing errors made by the market. Trading on the basis of deemed mispricing is profitable indeed no matter what model one uses. But there is remarkably little difference across models, at least when one re-estimates and trades daily; and with pooling and/or longer holding periods the results seem to be all over the place, without any relation to various measures of fit in the estimation stage. We also derive and implement an estimator of how much of the typical deviation consists of mispricing and how much is model mis-estimation or mis-specification. Lastly, we find that pooled time-series and cross-sectional estimation, as applied by e.g., De Munnik and Schotman (1994) , does help in stabilizing the parameter, but; hardly improves the trader's profits.     

E-finance: Promises kept,promises unfulfilled,and implications for policy and research

Growth of electronic, Internet-based commerce, or e-commerce, has been truly explosive. However, innovations and growth of e-finance have lagged those of e-commerce in general. E-cash has stumbled along but not lived up to its early promise or its current potential. This paper discusses the current status of e-finance, some of the problems that have stood in the way of its growth and development, and implications for government policy and research. Lengthy, detailed discussion of such ancillary issues as encryption technology, e-cash algorithms, and other technical detail at the microlevel of implementation is avoided.