Political Connections and Leverage: Firm‐level Evidence from Pakistan

This study investigates the impact of political connections on corporate financing decisions using a sample of listed Pakistani firms over the period 2002–2010. We find a positive and significant link between long‐term debt and political connections, which reflects greater access to credit. Such preferential treatment escalates with the strength of the connected politician. Furthermore, positive effects of political connections are seen to be stronger for large firms and those affiliated with business groups. Copyright © 2014 John Wiley & Sons, Ltd.     

Direct and Indirect Exporting and Productivity: Evidence from Firm‐Level Data

This paper examines the separate productive impacts of direct and indirect exporting to further our understanding of the mechanisms underlying learning‐by‐exporting effects by utilizing a method that allows us to check the robustness of the results to the selection on unobservables. We found that the productivity effects of exporting are mainly associated with direct exporting, indicating that knowledge spillover, and thus, productive impact of exporting grows with increased interaction with international firms and consumers. Indirect exporters are unlikely to be able to efficiently exploit the productive capacity of foreign technology and knowledge. Copyright © 2013 John Wiley & Sons, Ltd.     

Price Stickiness in the US and Europe Revisited: Evidence from Internet Prices*

This paper compares price stickiness on the Internet and in traditional brick‐and‐mortar stores and examines differences across five countries: France, Germany, Italy, the UK and the US. Contrary to conventional retail prices, we find that Internet prices change less often in the US than in EU countries. However, this does not hold for all product categories. Second, prices on the Internet are not necessarily more flexible than prices in brick‐and‐mortar stores. Third, our dataset reveals substantial heterogeneity in the frequency of price changes across Internet shops. Finally, panel logit estimates suggest that the likelihood of observing a price change is a function of both state‐dependent and time‐dependent factors.     

Multinationals' Offshore Operations,Tax Avoidance,and Firm‐Specific Information Flows: International Evidence

Using a large sample of multinational enterprises (MNEs) over the period 1999–2009, this study investigates whether and how offshore operations via offshore financial centers (OFCs) impact the extent to which firm‐specific information is incorporated into stock price, relative to common information. Our analyses show that, irrespective of whether a firm is a Type I offshore firm (directly having headquarters registered in OFCs) or a Type II offshore firm (indirectly setting up subsidiaries in OFCs), the amount of firm‐specific information flowing into stock price is lower for offshore firms than for non‐offshore firms. We also find that as offshore firms become more aggressive in their tax avoidance strategies, their stock prices impound a lower amount of firm‐specific information relative to common information. Finally, we find that a strong offshore proclivity also deters firm‐specific information flows, thereby driving up stock price synchronicity. Our results suggest that the opaque and complex nature of business and financial transactions in OFCs, coupled with their institutional characteristics, that is, weak and flexible legal enforcement, zero or extremely low taxation, and low litigation risk, provide offshore firms with not only stronger incentives but also the opportunities and means to adopt opaque disclosure policies and aggressive earnings management.     

Labour Demand,Flexible Contracts and Financial Factors: Firm‐Level Evidence from Spain*

We estimate models of labour demand for a panel of 3,400 Spanish manufacturing firms over the period 1985–2001. We examine the roles of fixed‐term contracts, financial factors and a policy reform in 1997 affecting permanent contracts by lowering payroll taxes and dismissal costs. Compared with permanent employment, the demand for flexible labour displays: (i) greater sensitivity to financial factors; (ii) greater cyclical sensitivity; (iii) a larger average wage elasticity; and (iv) less inertia. Our analysis of the 1997 policy reform suggests that a 5 percentage point reduction in the payroll tax is associated with an 8% increase in permanent labour demand.     

Quality Meets Structure: Generalized Reciprocity and Firm‐Level Advantage in Strategic Networks

In this paper we extend previous research by combining network structural and network process approaches. Specifically, in a six‐year, three‐wave study of 41 firms in two strategic networks, we found that the interaction between generalized reciprocity among a focal firm's partners and network tie intensity and betweenness centrality improved firm performance. No influences were observed for the interaction involving degree centrality and generalized reciprocity. Our research suggests that managers in strategic networks may need to consider the balance between relationship‐extensive and relationship‐intensive strategies.     

How Debt Creates Pressure to Perform when Information Asymmetries are Large: Empirical Evidence from Business Start‐ups

In this paper, we empirically examine how leverage affects firm performance when information asymmetries are large. We argue that entrepreneurs are strongly incentivized to maximize earnings when leverage is high in order to reduce the likelihood of adverse credit decisions and firm liquidation. Our empirical tests focus on the effects of leverage on firm profitability and growth in earnings during a 5‐year window after start‐up for a large and unique sample of newly established ventures in Belgium. Accounting for the endogeneity of leverage, the data reveal that more highly indebted business start‐ups are not only more profitable but also realize larger earnings growth. Moreover, the positive effect of leverage on firm profitability intensifies as the venture matures.     

Too Good to be True: Board Structural Independence as a Moderator of CEO Pay‐for‐Firm‐Performance

Whether voluntary or mandatory in nature, most recent corporate governance codes of best practice assume that board structural independence, and the application by boards of outcome‐based incentive plans, are important boundary conditions for the enforcement of Chief Executive Officer (CEO) pay‐for‐firm‐performance; that is, for optimal contracting between owners and executive agents. We test this logic on a large Australian sample using a system Generalized Method of Moments (GMM) approach to dynamic panel data estimation. We find that Australian boards exhibiting best practice structural arrangements – those chaired by non‐executives and dominated by non‐executive directors at the full board and compensation committee levels – are no more adept at enforcing CEO pay‐for‐firm‐performance than are executive‐dominated boards. These findings suggest that policy makers' faith in incentive plans and the moderating influence of structural independence per se may be misplaced. Our findings also hold significant implications for corporate governance theory. Specifically, the findings lend further support to a contingency‐based understanding of board composition, reward choice and monitoring; an approach integrating the insights afforded by behavioural approaches to Agency Theory and by social‐cognitive and institutional understandings of director outlook, decision‐making and behaviour.     

Pricing Practices of Resellers in the Airline Industry: Posted Price vs. Name‐Your‐Own‐Price Models

I find that when a reseller with market power serves an airline company and only linear contracts are feasible, the airline prefers that the reseller utilizes the Name‐Your‐Own‐Price (NYOP) (a la Priceline) instead of the Posted Price (PP) (a la Hotwire) model. Essentially, the airline can better extract the surplus of the reseller if power over pricing is in the hands of numerous consumers, each bidding according to her preferences, instead of being concentrated in the hands of the reseller. Introducing two part tariff contracts or competition among resellers eliminates the distinction between the two pricing models. Either form of pricing generates the same outcome as vertical integration of the airline with the downstream market of resellers.     

Macroeconomic Adjustment and the Poor: Analytical Issues and Cross‐Country Evidence

Abstract.  This paper studies the links between macroeconomic adjustment and poverty. The first part summarizes some of the recent evidence on poverty in the developing world. The second reviews the various channels through which macroeconomic policies affect the poor, whereas the third is devoted to the specific role of the labor market. It presents an analytical framework that captures some of the main features of the urban labor market in developing countries and studies the effects of fiscal adjustment on wages, employment, and poverty. The fourth part presents cross‐country regressions linking various macroeconomic and structural variables to poverty. Higher levels and growth rates of per capita income, higher rates of real exchange rate depreciation, better health conditions, and a greater degree of commercial openness lower poverty, whereas inflation, greater income inequality, and macroeconomic volatility tend to increase it. Moreover, the impact of growth on poverty appears to be asymmetric; it seems to result from a significant relationship between episodes of increasing poverty and negative growth rates.     

Exchange Rate Pass‐through to Trade Prices: The Role of Nonlinearities and Asymmetries*

A standard assumption in the empirical literature is that exchange rate pass‐through is both linear and symmetric. This study tests these assumptions for export and import prices in the G7 economies. It focuses on non‐linearities in the reaction of profit margins to exchange rate movements, which may arise from the presence of price rigidities and switching costs. Nonlinearities are characterized by augmenting a standard linear model with polynomial functions of the exchange rate and with interactive dummy variables. The results suggest that nonlinearities and especially asymmetries cannot be ignored, although their magnitude varies noticeably across countries.     

Analyzing moviegoing demand: an individual‐level cross‐sectional approach

Previous work analyzing the demand for movie theater visits have had to rely entirely on highly aggregate time series data. Inevitably, this masks the significance of individual‐specific effects that place constraints on such trip making. Further, while there have been cross‐sectional revenue model estimates at the film‐level, there have not been, hitherto, any cross‐sectional studies of moviegoing by individuals. This study thus presents the first detailed microeconometric analysis of the factors that increase or lower the probability that an individual will go to a movie theater. Copyright © 2005 John Wiley & Sons, Ltd.     

Regional Asymmetries in the Impact of Monetary Policy Shocks on Prices: Evidence from US Cities*

Variations in real exchange rates across US cities are smaller than corresponding international variations, but nevertheless substantial. We find that a proportion of these variations can be explained by asymmetric responses to federal monetary policy shocks, and that a large part of the asymmetry can be explained by city‐specific economic characteristics including the composition of local industry, bank size, house prices and the age distribution of the population.     

Industry Dynamics and Competition from Low‐Wage Countries: Evidence on Italy

This article analyses the effect of competition from low‐wage countries on domestic activity, using data on 230 Italian manufacturing sectors between 1995 and 2007. It finds that low‐wage import penetration is negatively related to employment and other measures of activity. The effect is significantly smaller in more skill, capital and R&D‐intensive sectors and in more vertically differentiated sectors. There is also evidence of significant effects of low‐wage competition through inter‐industry linkages: employment is negatively related to low‐wage import penetration in downstream sectors but positively related to low‐wage import penetration in upstream sectors.     

Real and Accrual‐Based Earnings Management in the Pre‐ and Post‐IFRS Periods: Evidence from China

The purpose of this study is to investigate the prevalence of both accrual‐ and activities‐based earnings management for Chinese A‐share firms surrounding the adoption of substantially IFRS‐convergent accounting standards. Since 2007, all listed A‐share firms in China have been required to comply with a new set of accounting standards that have substantially conformed to IFRS. The new reform also produced a set of new auditing standards and internal control reporting requirements. Based on a sample of 4,050 firm‐year observations from 2002 to 2011, we find that Chinese firms in the post‐IFRS period (2007–2011) are less likely to engage in accrual‐based earnings management. The magnitude of discretionary accruals also declines after IFRS adoption. In response, we see firms turning to real activities manipulation as a substitute for upward earnings management. The reduction in accrual‐based earnings management could stem from higher quality accounting standards associated with IFRS adoption and/or concurrent changes in the governance regimes introduced with the IFRS mandate. A further analysis, however, indicates that the benefits of IFRS adoption in curbing upward accrual‐based earnings manipulation are not evenly distributed across firms. Specifically, the benefit diminishes for firms that are controlled by Chinese central or local governments, are located in less developed regions, and that have weak financial performance and therefore subject to delisting status. We also find that the benefit is less pronounced for manufacturing firms than for their non‐manufacturing counterparts.     

城市化、土地价格与产业结构调整——基于面板VAR模型的研究

城市化与产业结构调整是新时期我国经济增长的主要动力,一方面土地作为一种重要生产要素,对提升城市化水平、促进产业结构调整起着十分重要的推动作用;另一方面我国土地价格存在着双重扭曲,这又加大了城市化与产业结构调整的困难。文章运用最新的面板VAR模型,利用1998—2011年间我国30个省市的面板数据,从三者间的影响机理、因果关系、动态路径等三个方面进行全面考察,并将东中西部不同区域进行对比分析,为各地区因地制宜制定符合自身发展阶段的城市化、土地价格和产业结构调整政策提供理论依据和政策参考。     

Building Permit Policy and Land Price Distortions: Empirical Evidence

This study examines the impacts of building permit policy on suburban land prices. The central premise of this study is that building permit policy may be a binding constraint and may lead to price distortions in land markets. We use a database of 354 suburban land sales to examine the impact of permit policy on land prices in 26 municipalities in a suburban county of Philadelphia. Our study offers evidence of price distortions. We find that land prices go up with planned increases in residential building permits. We also find that a progrowth building permit policy causes land prices to rise more in municipalities where developable land is scarce and vice versa.     

国内外工程价格调整公式初探

对几种国内外工程项目成本价格调整公式的探讨,包括建设部、水利部、铁道部、FIDIC合同所使用的调价公式,还举例介绍一般经验的调价公式,阐述调价公式的实质及使用,最后提出:价格调整对业主和承包商来说是公平的,提醒EPC承包商利用价格调整公式来规避风险。     

Instability of the Inflation–Output Trade‐Off and Time‐Varying Price Rigidity

This paper studies the time instability of the Phillips curve by paying particular attention to the inflation environment and price stickiness. We identify various inflation episodes and investigate the changing nature of the curve across these periods for five advanced countries over 1960–2013. We show that the mean inflation, the slope of the curve and the threshold mean inflation that erodes price rigidity are time varying. The inflation environment is a key determinant of the inflation–output relationship, rejecting the evidence of a flat curve and restoring the inflation–output trade‐off above certain inflation thresholds.