ARE FINANCIAL AND SOCIAL EFFICIENCY MUTUALLY EXCLUSIVE? A CASE STUDY OF VIETNAMESE MICROFINANCE INSTITUTIONS

A major debate in microfinance focuses on the existence of a trade‐off between the financial sustainability of microfinance institutions (MFIs) and their outreach to poor clients. This paper adds to this debate by analyzing whether financial and social efficiency are mutually exclusive in a context of implicit subsidies by the state and international donors. We use data from a sample of 28 Vietnamese MFIs and apply Data Envelopment Analysis (DEA) to identify the existence of a trade‐off. Our analysis shows that for Vietnamese MFIs financial and social efficiency are not related. We interpret this as evidence for the fact that there is no support to believe that there is such a trade‐off. Subsidies, based on which most Vietnamese MFIs currently operate, helps them to show high financial efficiency, while at the same time being able to attain their social goals. Nevertheless, this model may not be sustainable in the long‐term.     

TO LIST OR TO MERGE? ENDOGENOUS CHOICE OF PRIVATIZATION METHODS IN A MIXED MARKET

When and how to privatize a public firm? This paper suggests that a welfare‐enhancing privatization may be triggered by a negative demand shock. When the shock is relatively mild, it is optimal to privatize a public firm by means of stock market listings; when the shock is sufficiently large, a public–private‐firm merger becomes optimal. This paper also considers a government that cares about privatization revenues and about social welfare. It characterizes how the weight attached to privatization revenues and the improvement in production efficiency of the privatized public firm through a stock market listing may affect the government's choices concerning privatization.     

DO PSYCHOLOGICAL SHOCKS AFFECT FINANCIAL RISK TAKING BEHAVIOR? A STUDY OF U.S. VETERANS

Traditional economic theories assume that individuals are endowed with certain risk preferences that are unaltered by experiences. However, recent evidence indicates that macroeconomic shocks do have an effect on an individual's willingness to take financial risks. In the context of investment decisions, we examine empirically whether an individual's risk preferences are affected by other types of traumatic life experiences. Using a unique proprietary data set, we investigate whether personal traumatic experiences—such as the combat experiences of veterans—have long‐term effects on financial risk‐taking behavior. We find that having experienced combat decreases the probability of investing in risky assets. Key policy implications are noted. (JEL G11, D14)     

WAL‐MART AND BANKS: SHOULD THE TWAIN MEET? A PRINCIPLES‐BASED APPROACH TO THE ISSUES OF THE SEPARATION OF BANKING AND COMMERCE

The application in July 2005 by Wal-Mart to obtain a specialized bank charter from the state of Utah and to obtain federal deposit insurance reopened a national debate concerning the separation of banking and commerce. Though Wal-Mart withdrew its application in March 2007, the issue and the debate continue. This article offers a principles-based approach to this issue that begins with the recognition that banks are special and that safety and soundness regulation of banks is therefore warranted. Building on that recognition, the article lays out the principle that the "examinability and supervisability" of an activity should determine if that activity should be undertaken by a bank. Even if an otherwise legitimate activity is not suitable for a bank, it should be allowed for a bank's owners (whether the owners are individuals or a holding company), so long as the financial transactions between the bank and its owners are closely monitored by bank regulators. The implications of this set of ideas for the Wal-Mart case and for banking and commerce generally are then discussed . ( JEL G21, G28)     

DO SOCCER ASSOCIATIONS REALLY SPEND ON A GOOD THING? EMPIRICAL EVIDENCE ON HETEROGENEITY IN THE CONSUMER RESPONSE TO MATCH UNCERTAINTY OF OUTCOME

The purpose of this study is to analyze whether previous results describing the effect of uncertainty of outcome on match attendance in team sports have been driven by heterogeneity in fan demand. We apply censored quantile regression methods and place particular emphasis on the relationship between match uncertainty and attendance demand, as previous results are highly ambiguous. This is more surprising, as each season association and league officials continue to spend millions on enhancing this uncertainty. We also control for season ticket holders, who are unlikely to be influenced by match specificities. Based on data from German soccer, our results indicate that fan demand shows heterogeneity across quantiles and that increasing match uncertainty of outcome exclusively benefits teams who already face strong attendance demand. ( JEL D12, C14, C24, L83)