Do price limits hurt the market?

Under an artificial stock market composed of bounded-rational and heterogeneous traders, this paper examines whether or not price limits generate the negative effects on the market. Through testing the volatility spillover hypothesis, the delayed price discovery hypothesis, and the trading interference hypothesis, we find that no evidence of volatility spillover is observed. However, the phenomena of delayed price discovery and trading interference indeed exist, and their significance depends on the level of the price limits.     

Existence of solutions to principal–agent problems with adverse selection under minimal assumptions

We prove an existence result for the principal–agent problem with adverse selection under general assumptions on preferences and allocation spaces. Instead of assuming that the allocation space is finite-dimensional or compact, we consider a more general coercivity condition which takes into account the principal’s cost and the agents’ preferences. Our existence proof is simple and flexible enough to adapt to partial participation models as well as to the case of type-dependent budget constraints.     

Management is the solution: Now what was the problem? On the fragile basis for managerialism

This paper critically investigates the impact and meaning of managerialism in a pharmaceutical firm by exploring its shaky basis. Managers’ explanations of the failure in research leading to new products showed considerable variety. This reflects the absence of any shared understanding of research inefficiencies and difficulties to determine the roots of the problems. Despite this people blame bad management and put hope to improved responsibility of managers. The study highlights the ambiguity of causes of the research inefficiencies and how this is suppressed as well as exploited by the introduction of a vague managerialist agenda.     

How Do Controls Impact Employee Trust in the Employer?

Do organizational controls facilitate or hinder employees’ trust in their organization? We addressed this question through a mixed‐methods design using three studies. Based on a literature review and an open‐response survey study (Study 1), we developed a theoretical model proposing that organizational control is positively related to employees’ trust in their organization, and that this relationship is mediated by procedural fairness and organizational prestige. This mediated model was tested and supported in a quantitative survey of 582 European managers and professional employees from a range of organizations (Study 2). A complementary, qualitative interview‐based study (Study 3) confirmed that well‐implemented controls facilitate trust in the organization; however, poorly implemented control systems that are inconsistent, overly rigid, or incentivize untrustworthy behavior can undermine trust in the organization. © 2015 Wiley Periodicals, Inc.     

Do policymakers need to cool the UK housing market?

The combination of government schemes and a recovery in the wider economy underpinned a robust pickup in housing transactions and house prices through 2013. But there is no evidence of a housing bubble across most of the country. Across the majority of regions prices are still below previous peaks in nominal terms and much lower still in real terms. Meanwhile measures of affordability and indebtedness are in a much better state than they were prior to the financial crisis. The exception is London, where supply shortages and strong demand have pushed both the price‐to‐income ratio and average income multiple back to previous highs. An improving macroeconomic backdrop and ongoing support from Help to Buy should ensure that demand continues to strengthen, supporting further growth in transactions. There has been a strong supply response over the past nine months and this should continue, which will help to keep a lid on price growth. Divergent macroeconomic prospects across the regions will lead to a wide variation in house price growth, with London expected to lead the way. We do not see a case for changing the terms of Help to Buy, particularly given that the most likely source of a bubble is London, where the impact of Help to Buy is likely to be small. In our view, the average income multiple is crucial and macro prudential tools should be used if it continues to rise above previous peaks in any regions. The most likely cause of a bubble at the national level would be an inadequate supply response. Alongside its policies to support demand, the government should implement a series of measures aimed at increasing supply, including planning reform, and it could also consider using its low borrowing costs to fund public sector house building.     

Do foreign institutions outperform in the Taiwan options market?

This paper investigates comparative information advantage for foreign and domestic institutions on Taiwan's index options by examining the intraday information content of limit orders placed by foreign and domestic institutions, respectively. The height and length of limit order book provided by either foreign or domestic institutions exhibit predictive power on subsequent price changes in options, especially for put options. The information advantage is more significant for foreign institutions with respect to both call and put options. On the other hand, the results are mixed when order imbalance is used as the proxy of information on limit order book. Foreign institutions outperform domestic institutions for put options, not call options. Order imbalance, ignoring differential aggressiveness of limit orders, fails to capture comparative information advantage for foreign institutions. The superior information advantage for foreign institutions persists during the financial tsunami of 2008–2009 and periods of substantial price changes.     

Do Pan-African banks have the best of both worlds?

There has been a large expansion of foreign banks in Africa over the last two decades, with Pan-African banks playing a key role in this phenomenon. This paper questions if this development is beneficial for bank efficiency in African countries by investigating if Pan-African banks are more efficient than other types of foreign and domestic banks. We analyse the relation between ownership type and bank efficiency on a large sample of African banks covering 39 African countries over the period 2002–2015. We find that Pan-African banks are the most efficient banks in the African banking industries. We explain this finding with the fact that these banks combine the best of both worlds: they have the global advantages of foreign banks and the home field advantages of domestic banks. They are therefore able to be more efficient than both foreign banks from developed countries and domestic banks. This suggests that favouring the entry of Pan-African banks would be beneficial to bank efficiency in Africa.     

Inflation Target Credibility: Do the Financial Markets Find the Targets Believable?

We investigate the credibility of inflation targeting (IT) central banks (CBs) by estimating perceived inflation targets of the financial markets. We calculate financial markets’ beliefs about the inflation targets of 24 IT countries. Then, we analyse whether the financial markets’ beliefs about inflation targets match the announced targets. We conclude that the perceived upper bound of the inflation target is significantly higher than the announced one in many countries. Additionally, the perceived target band is narrower and asymmetric around the mid‐point of the target for most CBs. We examine the implications of these findings and find that IT CBs are more likely to miss their targets when the perceptions of the financial markets are higher than the announced IT targets. These results indicate that IT CBs should pay attention to the perceptions of the announced targets when implementing policy actions.     

Do the Rich Stay Unemployed Longer? An Empirical Study for the UK

This paper investigates the impact of individual asset holdings on the probability of leaving unemployment. According to the theory, higher levels of financial wealth will result in higher reservation wages and longer unemployment durations. I estimate the impact of financial assets on the hazard rate, using data for Great Britain. The empirical findings indicate that individual asset holdings affect significantly the escape rate out of unemployment. In particular, negative (positive) levels of wealth increase (reduce) the hazard of leaving unemployment. The size of the impact is, however, rather small. Increasing by 100% the level of wealth of a representative individual, with net wealth and other individual characteristics equal to the sample mean, increases the duration of the unemployment spell by half a week.     

Expatriate selection: back to basics?

Expatriate assignments are becoming increasingly unattractive to potential candidates making the unwieldy myriad of proposed selection criteria of decreasing practical value to internationally assigning firms. When the issue is more to find anyone willing to do the job rather than selecting the best candidate from a large pool of applicants, maybe basic personal characteristics can better guide corporations in their search for suitable expatriate candidates. To examine this proposition, a large sample of Western business expatriates in Hong Kong responded to a mail survey about their sociocultural and psychological adjustment. The results of the hierarchical regression analysis indicated that age had a positive association with general, interaction and work adjustment of the expatriates as well as with psychological adjustment. Gender was not associated with any kind of adjustment whereas being married had a positive relation with work adjustment. The implications for international firms of these results are discussed in detail.     

Do we go shopping downtown or in the ‘burbs?

We combine spatial and monopolistic competition to study market interactions between downtown retailers and an outlying shopping mall. Consumers shop at either one marketplace or at both, and buy each variety in volume. The market solution stems from the interplay between the market expansion effect generated by consumers seeking more opportunities, and the competition effect. Firms’ profits increase (decrease) with the entry of local competitors when the former (latter) dominates. Downtown retailers vanish swiftly when the mall is large. A predatory but efficient mall need not be regulated, whereas the regulator must restrict the size of a mall accommodating downtown retailers.     

Do Liberalising Reforms Harm the Environment? Evidence from the Post‐Communist Transition

Whether or not economic freedom and capitalism are associated with better or worse environmental performance gives rise to a heated political debate. This article sheds empirical light on the debate by examining the association between economic and political freedom on the one hand and environmental performance on the other. Estimating the effects of economic freedom and democracy on four environmental measures since 1993 across 27 formerly communist countries shows that liberalising the size of the public sector is associated with less environmental damage, although only in autocracies. The consequences of regulatory activity, market openness and the rule of law are more mixed.     

What Do Cities Have to Do with Democracy?

The relationship between urbanization and democratization remains under‐theorized and under‐researched. Radical urban theory has undergone a veritable normative turn, registered in debates about the right to the city, spatial justice and the just city, while critical conceptualizations of neoliberalism present ‘democracy’ as the preferred remedy for injustice. However, these lines of thought remain reluctant to venture too far down the path of political philosophy. The relationship between urban politics and the dynamics of democratization remains under‐theorized as a result. It is argued that this relationship can be usefully understood by drawing on lessons from avowedly normative styles of political theorizing, specifically post‐Habermasian strands of critical theory. Taking this tradition seriously helps one to notice that discussions of urbanization, democracy, injustice and rights in geography, urban studies and related fields invoke an implicit but unthematized democratic norm, that of all‐affected interests. In contemporary critical theory, this norm is conceptualized as a worldly register of political demands. It is argued that the conceptual disaggregation of component values of democracy undertaken through the ‘spatial turn’ in recent critical theory reorients the analysis of the democratic potentials of urban politics around the investigation of the multiple forms of agency which urbanized processes perform in generating, recognizing and acting upon issues of shared concern.     

Do services hold the key to an improved UK trade performance?

The UK has established a central role in the global market for trade in services, ranking second to the US in terms of its share of global exports. Our modelling finds that the key factor behind the UK's success is that its exports are focused on the markets where demand has been growing quickest. This represents a notable contrast with research on UK goods exports, which has found that the geographical focus of goods exports has been the main reason for the UK's persistent underperformance. The global financial crisis caused significant damage to the UK's export performance, particularly to the key financial sector which accounts for a quarter of UK services exports and almost two‐fifths of the UK's surplus on services trade. However, the UK's export performance is on the mend and we expect it to retain its position as a key global player in the market for services over the coming five years.     

Do Euro Area Countries Respond Asymmetrically to the Common Monetary Policy?

We investigate the possible existence of asymmetries among Euro Area countries reactions to the European Central Bank monetary policy. Our analysis is based on a Structural Dynamic Factor model estimated on a large panel of Euro Area quarterly variables. Although the introduction of the euro has changed the monetary transmission mechanism in the individual countries towards a more homogeneous response, we find that differences still remain between North and South Europe in terms of prices and unemployment. These results are the consequence of country‐specific structures, rather than of European Central Bank policies.     

Do common currencies facilitate the net flow of capital among countries?

Earlier studies have hypothesized that membership in a common currency arrangement (either a currency union or a currency board) is associated with larger current account imbalances (either deficits or surpluses) for participating countries. This paper examines a panel of 128 countries over the period 1976–2005, and finds that the current account balances of common currency participants are more highly correlated with fundamental factors (such as net foreign assets, incomes, growth rates, fiscal policy, demographics, resource endowments) than the current accounts of non-participants. Furthermore, this greater sensitivity to fundamentals leads to larger current account imbalances. Participation in a common currency is typically associated with a 1.6 percent increase in a country's current account imbalance. Larger current account imbalances under common currency arrangements could be a sign of increased financial integration. Alternatively, they could reflect the difficulties of current account adjustment under fixed exchange rates.