Global impact of loss of confidence in Asian emerging markets

With the interest rate hike in the US and, more recently, in the UK, sudden stops in investments and capital reversals are apparent in the Asian emerging economies. A modelling approach is taken, using the G-Cubed model, to simulate the potential global economic impacts, with a focus on Asia. The results demonstrate that myopic fiscal interventions in Asian emerging economies could result in short-term stimulus, at the expense of long-term growth. The stimulus in advanced economies too would be short-lived, diverting the benefits to unintended fractions in the global economy. Advanced economies that minimally change their trade and investment patterns tend to avoid distortionary impacts of the crisis.     

The internationalization of emerging stock markets

Stock markets in developing countries today account for about 7 per cent of world equity market capitalization, and this share is rising rapidly. Foreign investors have in the past often faced restrictive barriers to access to these emerging markets. A growing number of developing countries have now started to dismantle these barriers, however, resulting in an increasing interest by international portfolio managers in these emerging stock markets.     

Trading activity in stock index futures markets: The evidence of emerging markets

This study investigates the trading activity of the Taiwan Futures Exchange (TAIFEX) and Singapore Exchange Derivatives Trading Limited (SGX‐DT) Taiwan Stock Index Futures markets by analyzing the intraday patterns of volume and volatility. In addition, the market closure theory, which may explain such patterns, is examined. Overall, the trading pattern appears to be U‐shaped for the TAIFEX futures and U+W‐shaped for the SGX‐DT. For the SGX‐DT futures, volatility follows the same pattern as that of the number of price changes. For the TAIFEX futures, however, after the peak at the close of the spot market, the volatility in the TAIFEX futures drops consistently until the end of the day while volatility in the SGX‐DT still reaches a smaller peak at the close of the futures market. In addition, a visual inspection of the intraday patterns of these two markets shows that the market closure theory can effectively explain the intraday patterns of these two markets. The empirical results support the market closure theory in that liquidity demand from traders rebalancing their portfolios before and after market closures creates larger volume and volatility at both the open and close. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:983–1003, 2002     

International R&D spillovers in emerging markets: The impact of trade and foreign direct investment

While economic theory predicts that growth in developing countries will gain significantly from technology spillovers, the empirical evidence on this issue remains relatively scarce. The present study focuses on a panel of 27 transition and 20 developed countries between 1990 and 2006 and uses the latest developments in panel unit root and cointegration techniques to disentangle the effects of international spillovers via inflows of trade and FDI on total factor productivity (TFP). The findings show that imports remain the main channel of diffusion for both sets of countries, while FDI, although statistically significant, has a lower impact on productivity of the recipients. The domestic R&D capital stock plays an active role in Western Europe while in the Eastern part it is less significant owing to lower levels, transitional disinvestment and relative obsolescence. Human capital affects TFP directly as a factor of production as well as indirectly by enhancing a country's absorptive capacity. In aggregate, the results show that transition countries from Eastern Europe and Central Asia seem to enjoy bigger productivity gains from the international diffusion process than their Western counterparts.     

The tail risk of emerging stock markets

We investigate tail risk in emerging stock markets at the country, regional and world levels, by comparing the investable and non-investable segments in terms of the expected shortfall of standardized returns and tail dependence on the world market. Employing the skewed Student-t GJR-GARCH model and the SJC copula, we show that most investable portfolios have lower tail risk but higher tail dependence than non-investable ones; emerging markets are likely more dependent on the world market during large joint losses than large joint gains; and tail dependence of the aggregate and investable markets on the world market varies across countries and regions.     

Professional services in emerging asian markets: The Indonesian case

In 1946, at the age of 25, the author founded a oneman accounting firm in Manila, serving small companies that were opening their doors in the wake of World War II. Having achieved a leadership position in the Philippines by the early 1960s, the author's growing firm, SGV, expanded its operations in East Asia by establishing joint ventures with other leading Asian professional services firms. The SGV Group, the resulting multinational organization, provided professional services for various projects and enterprises in the developing countries of Asia, Africa, and the Middle East. After becoming the largest professional firm in Asia, in 1985 the SGV Group joined Arthur Andersen & Co. Societé Cooperative, the worldwide leader in business information and computer technology. The partners of the SGV Group were aware that world class computer technology had to come from the developed countries, while Arthur Andersen could see the advantages of a relationship with the largest Asian professional services group. In this article, the author offers the perspective of a firm based in a developing country expanding into one of the most important emerging markets, Indonesia.     

The inner workings of the board: Evidence from emerging markets

We survey non-executive directors in emerging markets to obtain detailed information about the inner workings of corporate boards across a variety of institutional settings. We document substantial variation in the structure and conduct of boards as well as in directors' perceptions of the local legal environment. Our analysis indicates that directors who feel adequately empowered by local legislation are less likely to vote against board proposals. They also form boards that play a stronger role in the company's strategic decision-making. The evidence suggests that a supportive legal environment allows directors to focus more on their advisory role rather than on their monitoring role.     

Speculative attacks in emerging markets: The role of macroeconomic fundamentals

The recent currency crises in several emerging markets have touched off a debate about their causes. Whereas some blame fickle speculators for triggering speculative attacks virtually at random, others argue that the typical currency crisis is attributable to myopic economic policies. This paper examines common patterns of a large number of balance-of-payments crises focusing on a comprehensive sample of 26 emerging markets. Following a consistent categorising of events in the foreign exchange markets, it analyses the behaviour of a set of relatively easily accessible variables prior to speculative attacks. Applying univariate as well as multivariate statistical methods, it gives support to the view that in the past countries were not hit randomly by attacks on their currencies. The views expressed in this paper are those of the author and do not necessarily reflect those of the Deutsche Bundesbank. Earlier drafts of this paper were presented at the 73^rd Annual Conference of the Western Economic Association International, Lake Tahoe, in June 1998, at a Workshop of the Austrian National Bank, in July 1998, and at the ZEI Summer School on International Macroeconomics, Bad Honnef, in August 1998. The author would like to thank the participants of these meetings, and Michael Dueker, Jürgen von Hagen, Pu Shen, Andrew Rose and his colleagues for helpful comments and suggestions.     

The impact of confidence in expectations on consumer satisfaction

Research into the construct relationships that form consumer satisfaction has advanced to a stage in which moderator variables need to be examined. The present research proposes and tests confidence in expectations as a potential moderator of these relationships. A laboratory study tests these hypotheses and finds support for them. Specifically, high‐confidence subjects use both disconfirmation and perceived performance to form feelings of satisfaction, whereas low‐confidence subjects use only perceived performance. Implications for both research and managerial practice are discussed. © 2001 John Wiley & Sons, Inc.     

Consumer protection in countries of emerging markets: The example of Russia

The paper aims at a preliminary analysis of the RCPA (Russian Consumer Protection Act of 1992) and the ZoR (Act on Advertising of 1995). Russian consumer legislation develops dynamically. It is hybrid in so far as one certainly cannot neglect its transitory character in an economy of change. It is part of the change and instrument for change of the Russian society and economy in the interest of the consumer. Some solutions appear extremely specific and can only be understood as an attempt to deal with the problems of the day. Others are rather innovative, e.g., a positive approach to consumer protection by giving the consumer certain rights which can be enforced by an agency, consumer associations, or individual consumers; the recognition of the specificity of consumer law; a general information obligation of manufacturers, sellers, and suppliers; a detailed set of remedies in sales law which go beyond the legal traditions of most EC Member States as far as the extent and the persons responsible are concerned; strict liability for defective products and services; compensating the consumer for moral harm; the responsibility for consumer protection and advertising by a state authority with regional offices, namely the SCAP; a group action system tailored to the specific needs of consumer associations. On the other hand, there are certainly some deficits. Suggestions for reform include: The improvement of legislation to better protect the consumer in the pre-contractual phase; reshaping of the legal technique of the acts; creation of a specific liability of importers both in sales and in product liability legislation; elimination or modification of provisions which owe their origin to still existing seller's markets once the Russian economy becomes more competitive; development of specific rules to eliminate abuses in the financial services sector, e.g., rules on disclosure and deception.

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Verbraucherschutz in Ländern mit sich entwickelnder Marktwirtschaft: Das Beispiel Rußland

Zusammenfassung Die Arbeit versucht eine erste Analyse des russischen Verbraucherschutzgesetzes von 1992 (RCPA) sowie des Werbegesetzes von 1995 (ZoR). Das russische Verbraucherrecht entwickelt sich dynamisch. Es ist hybrid angelegt, weil man seine Übergangscharakter in einer sich veränderenden ökonomischen Struktur beachten muß. Es ist Teil und Instrument der Veränderung der russischen Gesellschaft und Wirtschaft im Interesse des Verbrauchers.Einige Lösungen des russischen Verbraucherrechts erscheinen sehr speziell und können nur als Reaktion auf Tagesprobleme angesehen werden. Andere sind durchaus innovativ, etwa ein positiver Beitrag zum Verbraucherschutz durch Schaffung von Verbraucherrechten, die durch eine zentrale Behörde (das Anti-Monopolkommitee — SCAP) mit ihren Regionalverwaltungen, durch lokale Beratungs- und Beschwerdestellen, durch Verbraucherorganisationen und individuelle Verbraucher durchgesetzt werden können. Weiterhin erscheint bemerkenswert: die Anerkennung der Besonderheiten des Verbraucherrechts; eine allgemeine vertragliche Informations-verpflichtung der Anbieter; eine Reihe detaillierte Rechtsbehelfe bei Verletzung von Verbraucherrechten; die verschuldensunabhängige Haftung für fehlerhafte Produkte und Dienstleistungen ohne den Entlastungsbeweis für Entwicklungsfehler; Entschädigung auch für moralische (d.h. nichtwirtschaftliche) Schäden; die Einführung eine Art Verbandsklage bei Kollektivschäden.Auf der anderen Seite gibt es sicherlich eine Reihe von Defiziten in der Gesetzgebung. Reformvorschläge betreffen u.a.: die Verbesserung des Verbraucherschutzes bei der Vertragsanbahnung, da das Werbegesetz im Bereich irreführender Werbung insoweit noch unvollständig ist; die Einführung einer besonderen Haftung von Importeuren sowohl im Kauf- wie im Produkthaftungsrecht; Streichung von Vorschriften aus der Zeit der Existenz der Planwirtschaft mit Verkäufermärkten; Schaffung besonderer Regeln zum Schutz bei Finanzdienstleistungen, insbesondere über Angabepflichten und Täuschungsverbote.

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Norbert Reich is Professor of Civil, Commercial, and EC Law at the University of Bremen, Universitätsallee, D-28359 Bremen 33, Germany.The paper results from the author's contributions during 1994/95 to the TACIS project of the EU on technical assistance to the Russian State Committee for Antimonopoly Policy and Support of New Economic Structures (SCAP). The author owes thanks to the EC Commission for financing the research, to Professor Thierry Bourgoignie who heads the project for his support and permission to publish the results, to the collaborators in SCAP who willingly provided any information that was needed, and to Professor Ol'ga Zimenkova who helped the author to understand some intricacies of Russian law.     

Differentiation strategies in emerging markets: The case of Latin American agribusinesses

This study furthers the research agenda on Porter's generic strategies by exploring their implementation by firms that suffer from under representation in the literature. It focuses on agribusinesses based in emerging markets that specialize in high value added products. Relying on information collected through interviews, and a survey with 66 agribusinesses based in eight countries of Latin America, it examines the factors that distinguish firms implementing a differentiation strategy (DS). The findings provide interesting insights for scholars and practitioners alike, illustrating the strategic initiatives that DS firms use to ensure they command higher than average prices.     

Benchmarks in the spotlight: The impact on exchange traded markets

The Fix for precious metals is a global pricing benchmark that provides pricing and liquidity provision for market participants. We exploit the gradual change in the century old auction process to quantify the efficiencies related to more transparent pricing. Our focus is in the market impact of this change on exchange listed products. We find that reforms to the Fix have reduced quoted and effective bid-ask spreads and improved overall market depth. The results imply a positive spillover effect stemming from timelier and more accurate pricing information. The conditions under which we observe the benefits from transparency are related to product liquidity and the degree of market segmentation.     

The impact of external reference price on consumer price expectations

Comparative pricing practices are frequently used where actual product prices are accompanied by higher external reference prices. All types of stores, regular-price department stores as well as discount stores, use comparative price claims to frame price deals as attractive [Marketing Science 4 (1985) 199]. In this paper, a quadratic model is specified for the impact of external reference price (ERP) on consumer price expectations. Based on the research on communication discrepancy and advertising claim discrepancy, which in turn draw on assimilation-contrast, attribution, and prospect theories, we hypothesize a quadratic effect of external reference prices on consumer price expectations. An interactive, computer-controlled experiment using multiple levels of ERP is used to estimate the proposed model. As hypothesized, support for an inverted U-shape relationship is found between consumers’ updated price expectations and the difference between ERP and initial price expectations. That is, as the difference between ERP and subjects’ initial price expectations increases, subjects’ updated price expectations increase to a point and then start to decrease. We find that the fit of the quadratic model specification for the effect of external reference price on price expectations is noticeably superior to that of linear, logarithmic, square root, and S-shaped specifications. Finally, we provide implications of our results for both retail managers and for regulatory authorities alike.     

The kidnapping of Europe: High-order moments' transmission between developed and emerging markets

The paper proposes a semi-nonparametric methodology consistent with dynamic conditional correlations and high-order moments to jointly estimate transmissions in volatility, skewness and kurtosis in highly volatile scenarios among developed and emerging markets. As a by-product of the SNP-VSK model, we measure co-movements between conditional correlations and high-order moments, and tail dependence. Our results depict European markets as full receivers and North American and Asia-Pacific as transmitters of high-order moments' risk. The analyses also indicate that conditional correlation is positively correlated to volatility and kurtosis and negatively correlated to skewness, and that conditional kurtosis between markets is high and positive.     

Selecting optimal intermediary channels in emerging markets: The case of Vietnamese toiletries

Abstract

Domestic distribution in Vietnam is characteristic of an emerging market in the beginning stages of modernization, with frequent changes in retail format, a fragmented distribution structure, and ambiguous regulations. This study uses field surveys and comparative analyses of individual enterprises in Vietnam’s toiletry products industry to identify suitable channel strategies for emerging markets in the early stages of distribution modernization. The results indicate that partnership channels are more suitable than hierarchy and market governance channels. Moreover, among the various types of intermediaries, distributors provide a key role in emerging markets where transportation functions are undeveloped. Finally, the study investigates the various methods of partner selection, finding that effectiveness-oriented networks are superior to large-scale efficiency-oriented networks because they have greater channel coverage in modernizing emerging markets. The findings demonstrate the optimal channel structures and partner selection criteria for distributors in emerging markets.     

The financial determinants of corporate cash holdings: Evidence from some emerging markets

This paper investigates corporate cash holdings in developing countries. In particular, we look into the effect of capital structure and dividend policy on cash holdings in Brazil, Russia, India, and China and compare our results with a control sample from the US and the UK. Our sample contains 1992 firms across these countries for the period 2002–2008. We employ Instrumental Variables analysis to control for the endogeneity of the financial policies (cash holdings, capital structure, and dividend policy). Our results show some evidence that capital structure and dividend policy affect cash holdings. There are similarities between developed and developing countries on the factors determining corporate cash holdings. The results of our cross-country model provide evidence that capital structure, dividend policy, and firm size are important factors in determining cash holdings. Finally, we show that firms operating in countries with low shareholder protection hold more cash.     

Corporate ownership and control contestability in emerging markets: The case of Colombia

This study examines the structure of voting control and blockholders’ contestability for a sample of 233 non-financial listed firms in Colombia during 1996–2004. Corporate control is characterized by high ownership concentration and blockholder power, which implies low separation ratios between cash flow rights and voting rights. On average the separation ratios for the largest voting block is 0.95, while that for the fourth largest shareholder is 0.75. Corporate control is privately biased when there is direct monitoring of firm management by controlling owners. Regression results show that a more equal distribution of equity among large blockholders has a positive effect on firm value. Contestability matters most when firm shares are liquid and actively traded on the stock market. This finding is reinforced when the probability that the largest block can form a winning coalition decreases and performance variables, such as market to sales ratio and return on equity, are included in the estimating equations as substitutes for firm value. In addition, our estimations provide evidence that diversion of rents (tunneling) is limited by blockholders’ contestability.