CORPORATE DEBT RESOLUTION AND THE ROLE OF FOREIGN CAPITAL IN THE POST‐CRISIS RESTRUCTURING OF THE REPUBLIC OF KOREA

The outbreak of the financial crisis in the Republic of Korea in 1997 exposed the structural weaknesses in the country's economy. Heated debates have failed to generate definitive answers on just what caused the financial crisis. Considering the importance of restructuring the corporate sector, this paper analyzed how the resolution of corporate debts was accomplished and examined the role of foreign capital in Korea's post‐crisis corporate restructuring. Special attention was given to the measures devised to recover nonperforming loans for the liquidation of corporate debts, to the foreign capital inflows through cross‐border M&As or privatization processes, and to the changes in control through corporate governance reforms. This paper concluded that the resolution of corporate debts has been satisfactory and successful and that foreign capital contributed significantly to effective corporate restructuring and debt resolution in the post‐crisis restructuring of Korea.     

Quantifying the vulnerabilities of China’s corporate sector with contingent claims

This paper measures and analyzes the default risk and debt sustainability of China’s non-financial corporate sector both on an aggregate level and within a sector by employing the contingent claims approach (CCA). Our results suggest that the vulnerabilities of Chinese firms are heterogenous in terms of investment source, ownership group, corporate form, industry type, and geographic unit etc. First, foreign capital enterprises have a lower default risk than domestic capital enterprises. Within domestic capital enterprises, state-owned firms have the lowest default risk, whereas private and collective firms are most unsustainable despite that they have the highest returns on assets. Second, state-controlled firms, private stock limited firms, and Chinese foreign cooperative firms are least vulnerable in the state-owned corporate sub-sector, the private corporate sub-sector and the foreign corporate sub-sector, respectively. Third, all industries except the coal industry are sustainable by industry type. Fourth, the vulnerabilities of local state-owned sub-sectors are diverse across China’s administrative regions. Moreover, we provide robustness tests which support our findings. In Sum, our study shed key light on ensuring the soundness of China’s non-financial corporate sector and thereby maintaining the stability and sustainability of the Chinese economy.     

Net foreign assets of Dutch commercial banks: A comment

Conclusion The article provides a contribution to the discussion on the net foreign assets of the commerical banks, by drawing renewed attention to the possible passivity of the banking sector, which has gained topicality with the striking developments of 1989. Indeed, the banking sector may be considerably more reactive in regards to net foreign assets formation than has been assumed by various authors and in macroeconometric models on the basis of portfolio optimizing behaviour. However, due to the above-mentioned methodological and empirical shortcomings, Bakkers's study certainly does not provide the final answer to this question.     

广东省上市公司并购模式创新探讨——基于广东省2004年上市公司并购数据

广东省2004年上市公司并购数据显示，广东省上市公司大多数并购方通过并购实现了产业的多元化扩张，控制权市场逐步活跃。广东省上市公司并购呈现出交易增长、并购活动趋向于集中某些行业、外资并购有所攀升等特点。广东省上市场公司的并购模式可从企业与政府两个层次创新：公司并购以提升核心竞争力为目标，股权交易推动控制权市场的发展，以此来完善公司治理外部机制，以并购整合为契机推动制度创新；政府应从政策指导，培育并购的良好环境、加强法律规范等角度来推动上市公司的并购。     

Net foreign assets of Dutch commercial banks, 1984–1990

Summary In many econometric models it is assumed that the amount of net foreign assets of the commercial banks is determined by the commercial banks themselves. In this article we show that it is more likely that net foreign assets are determined by the transactions of the private sector.The author thanks Jakob de Haan, Flip de Kam, Simon Kuipers, Elmer Sterken, Cees Sterks, Dick Zelhorst and an anonvmous referee for their valuable comments on an earlier version.     

The market for corporate subsidiaries in Japan: An empirical study of trades among listed firms

We investigate trades of wholly- or partially-owned subsidiaries between firms listed on the Tokyo Stock Exchange (TSE) for the years 1996–2010, to explore the economic impact in terms of strategic refocusing, stock market valuation and performance effects. By pairing both sides to each deal, we show differences in firm characteristics, returns, and subsequent performance of buying and selling firms. Unlike mergers between whole firms, most subsidiary deals straddled different industries. Most sellers were larger, more diversified and less profitable than buyers. Our event study reveals that abnormal returns were positive for buyers yet insignificantly different from zero for sellers. However, subsidiary sales in the core business earned negative returns, the more so the larger the deal. An analysis of ex-post operating results shows that the performance of sellers often declined after the trade, in particular for firms that divested a core-related subsidiary. We conclude that subsidiary trades in Japan in this period contributed importantly to strategic repositioning and a more efficient use of corporate assets.     

Macroeconomic policy-induced wealth effects on Chinese foreign housing investments

The unpegging of China's currency in 2005 creates positive wealth effects that trigger Chinese foreign buyers' responses to pay 3.42% more in housing prices relative to other foreign buyers. We find evidence of a higher propensity to purchase housing units with more visible features among Chinese foreign buyers after the policy shock relative to other foreign buyers. Chinese foreign buyers pay 11.0% premiums for high-floor units, 7.25% premiums for large units and 4.61% for luxury (more expensive) units after experiencing positive incomrtde shocks. We find that conspicuous consumption motives are augmented in high-income neighborhoods and neighborhoods with strong enclaves and social networks comprising residents from China. We show that conspicuous consumption motives are more significant for Chinese foreign buyers who are owner occupiers than for those who are investors. The results survive a slew of robustness and falsification tests, and we cannot reject the finding of wealth-induced conspicuous consumption by Chinese foreign buyers in Singapore's private housing market.     

The Largest Trans-nationals of Developing Economies

Industrial concentration is broadly defined as a few firms controlling a substantial share of assets or sales of the market. In the multinational industrial sector, this paper shows that the largest 50 and 100 in the developing economies control substantial amounts of assets and sales, both foreign and total. Two well known indexes of concentration were used, the Herfindahl and Theil’s entropy, to check the levels of concentration between 1994 and 2003 for the top 50 and between 2004 and 2006 for the top 100. It was found that although the sizes of the multinationals in assets and sales increased during the period, the relative concentration remained somewhat static.     

Measuring Net Foreign Assets： The Case of China

This paper discusses two methods of measuring net foreign assets（NFA）： directly using the financial account and indirectly using the current account. The former method is found to be more accurate than the latter method. The paper also includes a detailed discussion of the valuation methodology. The results show that China＇s NFA are much lower than the cumulative current account surplus or the cumulative foreign exchange reserves. This leads to an underestimation of growth in foreign direct investment and an overestimation of the capacity of foreign exchange reserves to cope with possible withdrawals. Therefore, the Chinese Government should pay more attention to valuation issues to obtain more accurate measurement of NFA. Meanwhile, the Chinese monetary authority should relax its control on the foreign exchange settlement system, allow the private sector to hold a certain amount of foreign exchange, and encourage foreign assets to be denominated in RMB to solve structural problems, including entity and currency mismatch     

Determinants of bond market development in Asia

One of the major reasons behind the Asian financial crisis in 1997 was the excessive dependence of the Asian economies on commercial banks for domestic financing. The region failed to diversify its sources of corporate financing as it relied mainly on banks since its other types of financing, namely bond markets, were still underdeveloped and their sizes were quite small. On the other hand, the 2008 global financial crisis and the ongoing European debt crisis have led to constraints in acquiring local currency and foreign currency liquidity in the corporate sector in Asia as foreign banks withdrew investments from Asia. Furthermore, Asia needs large long term capital (US$ 750 billion per year for 2010–2020) for developing infrastructure connectivity within and across its economies. Local and regional capital can be channeled for long-term infrastructure projects and other productive investment through bond markets. Having a well-developed local currency bond markets can enhance the resilience of domestic financial sector to external shocks and it can facilitate better intermediation of savings into productive investments in Asia. To enhance corporate bond financing, it is important to examine factors that affect the effective development of bond markets in Asia. The study attempts to identify the determinants of bond market development in Asian economies through examining the relationship of bond issuance with selected key financial and economic factors. It also intends to provide policy recommendations for the further development of the Asian bond market. Major determinants for bond market development in Asia include the size of an economy, the stage of economic development, the openness of an economy, the exchange rate variability, the size of the banking system, and interest rate variability.     

The Economic Effects of Special Purpose Entities on Corporate Tax Avoidance

This study provides the first large-sample evidence on the economic tax effects of special purpose entities (SPEs). These increasingly common organizational structures facilitate corporate tax savings by enabling sponsor firms to increase tax-advantaged activities and/or enhance their tax efficiency (i.e., relative tax savings of a given activity). Using path analysis, we find that SPEs facilitate greater tax avoidance such that an economically large amount of cash tax savings from research and development (R&D), depreciable assets, net operating loss carryforwards, intangible assets, foreign operations, and tax havens occur in conjunction with SPE use. We estimate that SPEs help generate over $330 billion of incremental cash tax savings, or roughly 6 percent of total U.S. federal corporate income tax collections during the sample period. Interaction analyses reveal that SPEs enhance the tax efficiency of intangibles and R&D by 61.5 percent to 87.5 percent. Overall, these findings provide economic insight into complex organizational structures supporting corporate tax avoidance.     

The survival of foreign subsidiaries and domestically-owned companies in Denmark, 1895–1995

Abstract

Over a long time period, 1895-1995, foreign subsidiaries in Denmark were found to have a lower survival-probability than domestically-owned manufacturing companies. The difference is highly significant and robust to control for size and industry effects. Since the number of foreign subsidiaries increased enormously throughout the period, lower relative survival rates are probably not an indicator of performance failure from the viewpoint of the parent companies. While low survival rates in foreign subsidiaries may be attributable to a number of factors (including differences between sales and production subsidiaries), this paper proposes governance differences between foreign subsidiaries and domestically-owned companies as a possible explanation. Consistent with hypothesized differences in corporate governance, domestically-owned companies are found to have higher equity reserves (equity/ assets ratios), which is found to have a positive impact on survival. For given equity - asset ratios no significant survival differences were found between the two groups.     

Restructuring of financial institutions and the corporate sector in Korea

This paper explores causes of the Korean currency crisis which started in November 1997. This paper also presents restructuring proposals and introduces the progress made so far. The urgency for quick restructuring and the necessity of the injection of money from both the government and foreign investors are emphasized. Restructuring of financial and corporate sectors should be pursued simultaneously. In the financial sector, the restructuring of banks should take precedence over other financial institutions. The key task in terms of bank restructuring involves the resolution of bad loans, recapitalization and the expedited reorganization of nonviable banks. Corporate reform is also important. Banks should play a central role in corporate workouts, especially in lowering excessive corporate debt and triggering corporate restructuring based on core competence. Transparency of corporate management, internationally accepted accounting practices, fuller disclosure requirements and stronger monitoring by minority shareholders are prerequisites for effective market discipline. Reform of ownership and governance structure are also important in enhancing managerial accountability of corporates as well as financial institutions.     

CAPITAL CONTROLS AND THE LENDING BEHAVIOUR OF SOUTH AFRICAN BANKS: PRELIMINARY FINDINGS ON THE EXPECTED IMPACT OF BASEL II

Banking regulation has developed rapidly over the past few years. There is a growing realization that the regulatory environment must keep pace with globalization and with advances in the financial sector. The 1988 Basel Capital Accord was an attempt to align regulatory capital with the actual underlying risks that banks face, thereby improving the soundness of the banking sector. The New Basel Capital Accord, due for implementation in South Africa in 2007, refines this principle and remedies some of the flaws of the 1988 Accord. This paper considers whether such implementation would have an effect on lending patterns and credit expansion in South Africa. It falls into five parts. Section 1 examines the rationale for the 1988 Basel Accord and outlines the relevant features of the New Accord. Section 2 reviews some of the criticisms directed towards the New Accord, concentrating on the speculation that its implementation will adversely affect bank credit expansion. Section 3 proposes a method of research for assessing the effect of the New Accord in South Africa. Section 4 analyses the trends in South African banking and considers how the New Accord may affect bank behaviour. Section 5 concludes.     

定向增发、大股东认购方式与上市公司绩效的关系——来自中国上市公司的经验证据

本文以2006～2008年间定向增发中控股股东向上市公司进行资产认购的公司为研究对象,主要研究大股东分别以现金认购和资产认购对公司绩效的影响。研究发现,大股东以现金认购与公司绩效呈正相关,而大股东以资产认购与公司绩效呈负相关;资本市场投资者对大股东的资产认购方式做出了明显的反应;认购资产的评估增值率与公司绩效呈明显的负相关。本文结论对投资者投资决策,政府部门进一步完善定向增发监管政策有一定的借鉴意义。     

Impact of Outward Foreign Direct Investment on Chinese Manufacturing Firms' Financialization and Servitization

This study examines the impact of outward foreign direct investment (OFDI) on Chinese manufacturing firms' financialization and servitization. Using a difference-in-differences approach with propensity score matching, we found that OFDI encouraged firms' financial and service activities. The effects of OFDI on financialization were stronger for firms specializing in short-term financial assets, operating in labor and technology-intensive sectors, investing overseas to pursue production, resources and markets there, and investing in non-OECD and Belt and Road Initiative (BRI) countries. Meanwhile, firms investing overseas were more likely to provide services at the sale or postsale stages. Outward foreign direct investment has also boosted the service activities of firms operating in the technology-intensive sector by investing overseas to seek resources and markets, as well as investing in non-OECD and BRI countries. Finally, OFDI partially influenced the extent of financialization and servitization of firms by affecting their profit-making ability.     

COMPETITION BETWEEN INTERMEDIATED AND DIRECT TRADE AND THE TIMING OF DISINTERMEDIATION

This paper analyses how intermediation by a middleman who buysfrom sellers and sells to buyers is affected if direct tradebetween buyers and sellers becomes possible. Without coordinationamong sellers and buyers, disintermediation may not occur whenit would be welfare-improving. With such coordination, disintermediationmay occur too early. If direct trade is active, the supply anddemand for intermediation become interdependent: an increasein the bid price thus increases both supply and demand. Thisprocess of interdependence by which the two trade mechanismscompete for trade is a feature of competing markets generally.     

Postscript to the Survey of Recent Developments: On Causes and Cures for the Rupiah Crisis

The dramatic fall of the rupiah has been driven largely by panic, rather than by careful analysis of Indonesia's economic fundamentals The catalyst for the panic appears to have been a sudden reassessment of the exchange rate risk faced by unhedged domestic firms and foreign investors This reassessment was triggered by the abrupt decision of the That government to float the baht. The policy focus now must be on helping the private sector adjust to the floating rate environment, and aiming to maintain economic growth. Belt-tightening measures are counterproductive in these circumstances. The process of adjustment might be assisted by a clearly articulated decision by the government for Bank Indonesia (BI) to divest itself rapidly of a large portion of its foreign exchange assets, given that its need for them is greatly diminished in a genuinely floating regime.     

Notes on 'a code for fiscal stability'

This note comments on two central issues for fiscal policy designin the UK, highlighted in the recent 'Code for Fiscal Stability'proposed by the new Labour government. The first concerns themerits of the so-called 'golden rule of public sector investment'- the proposition that, over the cycle, government borrowingshould not exceed government (net) capital formation. The secondconcerns the case for attempting to construct a more comprehensivebalance sheet of public sector assets and liabilities, includingtangible public sector assets and certain contingent claims.The two main conclusions are that the golden rule is withoutmerit but that, subject to some important caveats, the constructionof a more comprehensive government balance sheet is a worthwhileenterprise.     

THE TECHNICAL INEFFICIENCY EFFECTS OF TURKISH BANKS AFTER FINANCIAL LIBERALIZATION

The banking sector in Turkey has grown significantly over the last two decades of financial liberalization. One of the aims of the financial liberalization was to improve efficiency through restructuring programs including the privatization of state banks and the encouragement of mergers. In this paper we identify key factors determining the technical efficiency differentials among Turkish commercial banks in the pre‐ and post‐liberalization periods, using the technical inefficiency effects model. We found that loan quality, size, ownership of the banks, and profitability have a positive and significant impact on the technical efficiencies of banks. The results warrant implementation of effective regulatory measures to improve the quality of the earning assets of commercial banks. Furthermore, steps by the government to encourage acquisitions or mergers for private banks and the privatization of state‐owned banks seem to be consistent in improving the overall efficiency of commercial banking in Turkey.