The Dynamics of Intra-industry Trade in ASEAN*

The decision to establish the ASEAN Free Trade Area (AFTA) by the year 2008 has resulted in producers in all ASEAN countries except Singapore raising concerns relating to potential loss of market share and adjustment pressures. Underlying these concerns is the view that the expected growth in intra-ASEAN trade will be dominated by inter-industry or net trade (NT) rather than intra-industry trade (IIT). If most of the expected growth in trade is intra-industry, however, then the short-run resource re-allocation costs are likely to be lower. In this study, we employ a new methodology to analyse the dynamics of IIT in ASEAN. We overcome problems associated with using movements in the value of the Grubel-Lloyd (GL) index by deriving a formula that decomposes the growth in trade into the contributions of growth in IIT and NT. Our results suggest that the role of IIT in trade growth has been increasing in importance, and thus much of the recent concern that threatens the viability of AFTA may be misplaced.     

新型城镇化视阈下村干部的角色转向

社会转型构成村庄治理的基本语境,新型城镇化凸显村干部角色的历史转向。村干部的角色研究是规避乡村社会稳定风险,引领乡村可持续发展的重要着力点。对比村干部的历史角色,聚焦乡村场域的制度转向、空间转向及需求转向,明晰社会转型规律和潜在风险,推进村干部角色的稳定与发展职能互补,经济与社会功能并举,生存与生活风险齐控,对于统筹城乡发展具有重要的理论与实践意义。     

Role of TFP in China's Growth*

This paper uses the dual approach to growth accounting to examine the role of total factor productivity (TFP) in recent Chinese growth. Most previous growth accounting studies on China have followed the primal approach, which depends heavily on the national income accounts. Unfortunately, despite efforts to rectify them, Chinese national income accounts data continue to have problems that affect primal approach growth accounting results. The dual approach, in contrast, allows independent price information to play a role. Recent research has focused on the following two questions: (i) How significant has TFP's role been in post‐reform Chinese growth? (ii) Has TFP growth rate slowed down in more recent years? This paper finds that: (i) the TFP growth rate for mainland China computed using the dual approach also proves high; and (ii) there has been some slowdown in TFP growth rate in recent years.     

The Role of Cost Allocations in the Acquisition and Use of Common Resources*

Abstract. For a common resource, we suggest that the benefits of fixed cost allocations lie not in inducing optimal utilization of available capacity but in deciding how much capacity to acquire. In the presence of sequential information asymmetry between the owner and two symmetric users of the resource, we show that cost allocations form a part of the optimal incentive contract. We derive an optimal cost allocation scheme and provide an explicit link between the allocated costs under this scheme and the fixed costs of the resource. Résumé. Selon les auteurs, pour une ressource commune, les avantages de la répartition des coûts fixes résident non pas dans l'induction d'une utilisation optimale de la capacité disponible, mais dans la décision relative à la capacité devant être acquise. En présence d'asymétrie de l'information séquentielle entre le propriétaire et deux utilisateurs symétriques de la ressource, les auteurs démontrent que la répartition des coûts est un élément qui entre dans le contrat d'intéressement optimal. Ils dérivent un plan optimal de répartition des coûts et établissent un lien explicite entre les coûts répartis au moyen de ce plan et les coûts fixes de la ressource.     

Recession-Induced Stress and the Prediction of Corporate Failure*

Abstract. In this paper we examine whether the occurrence of recession-induced stress is an incrementally informative factor that contributes to the predictive and explanatory power of accounting-based failure prediction models. We show that accounting-based statistical models used to predict corporate failure are sensitive to the occurrence of a recession. Moreover, after controlling for the intertemporally unconditioned “stressed” and “unstressed” types of corporate failure, we find that models conditioned on the occurrence of a recession still add incremental explanatory power in predicting the likelihood of corporate failure. This source-related characterization of stress appears distinct from other types of corporate failure that have been identified. Résumé. Les auteurs se demandent si l'occurrence du stress amené par la récession est un facteur qui apporte une information supplémentaire contribuant au pouvoir prédictif et explicatif des modèles de prévision des faillites reposant sur la comptabilité. Ils montrent que les modèles statistiques fondés sur la comptabilité utilisés pour prévoir les faillites des entreprises sont sensibles à l'occurrence d'une récession. De plus, une fois contrôlée la nature de la faillite de l'entreprise — faillite annoncée par le stress et faillite non annoncée par le stress sans conditionnement intertemporel —, les auteurs en viennent à la conclusion que les modèles conditionnés par l'occurrence d'une récession ont encore un pouvoir explicatif accru dans la prédiction de la probabilité de faillite de l'entreprise. Cette définition du stress liée à la source semble différente des autres types de faillite de l'entreprise qui ont été cernés.     

Dynamics of Capital Structure: The Case of Korean Listed Manufacturing Companies*

In this paper, we develop a model of dynamic capital structure choice based on a sample of Korean manufacturing firms and estimate the unobservable optimal capital structure using a wide range of observable determinants. Unbalanced panel data of Korean listed firms for the period 1985–2002 is used. In addition to identifying and estimating the effects of the determinants of capital structure, we take into consideration some Korea‐specific features, such as the structural break before and after the financial crisis and firms’ affiliation to chaebol business groups. Our results indicate that the optimal capital structure has been affected by the financial crisis. Although the results suggest that chaebol‐affiliated firms have higher optimal level of leverage and adjust their capital structure faster than non‐chaebol firms, firms’ leverage might be associated with factors other than chaebol‐affiliation, such as size, profitability and growth opportunity.     

政府：引导区域间要素运动

地域间经济要素的合理流动与有效配置是促进各区域经济协调发展的重要保证。缩小地区差距的一个重要因素,就是欠发达地区缺乏的要素能否从内部更多地积累,并吸引发达地区的要素流入。不可流动要素的状况是决定要素运动的重要方面,而要素运动又与经济发展水平直接相关。因而,若能有效改善一个地区不可流动要素的状况,则有助于该地区要素的积累和流入,从而带动经济发展。一些不可流动要素的状况是无法改变的,如一个地区的土地、能源、矿产资源等,但是,诸如交通、通讯、网络等公共基础设施及促进生产要素结合的各种制度性及体制性因素则可以改善,而在这方面,政府的作用是不可替代的。如果政府能够改善落后地区公共基础设施的状况,同时切实改善体制与制度环境,则一方面能够吸引可流动要素的流入,另一方面也可加强本地区薄弱要素的培育,从而促进该地区经济增长,弥合区域经济差距,实现各地区协调发展。     

Capital Inflows Problem in Selected Asian Economies in the 1990s Revisited: The Role of Monetary Sterilization*

This paper develops a simple model to examine the reasons behind the capital inflow surges into selected Asian economies in the 1990s prior to the financial crisis of 1997–98. The analytical model shows that persistent uncovered interest differentials and consequent capital inflows may be a result of complete monetary sterilization, perfect capital mobility, sluggish response of interest rates to domestic monetary disequilibrium, or some combination of all three. Using the model as an organizing framework, the paper undertakes a series of related simple empirical tests of the dynamic links between international capital flows, the extent to which they are sterilized and uncovered interest rate differentials in the five crisis‐hit economies (Indonesia, Korea, Malaysia, the Philippines and Thailand) over the period 1990:1–1997:5.     

Accounting Information and CEO Compensation: The Role of Cash Flow from Operations in the Presence of Earnings*

We examine the role of cash flow from operations (CFO) in chief executive officer (CEO) cash compensation. We predict that CFO is contract‐relevant in the presence of earnings, and more so when (1) the quality of earnings relative to the quality of CFO as a measure of performance is low and (2) the need for CFO as a financing source is high. Our analysis is motivated principally by normative arguments and anecdotes from financial disclosures linking CFO to managerial effort and contracts, notwithstanding the traditional role of earnings in performance measurement. We find that the weight of CFO in the compensation model is positive and significant in the presence of earnings and stock returns. We also find that the relative quality of CFO compared with that of earnings has a positive (negative) impact on the weight of CFO (earnings). We further find that the relative weight of CFO is enhanced substantially when enterprise activities crucially depend on internally generated cash flow. These findings are unaltered when we include CEO age, firm size, and risk in the model and allow the coefficients to vary across industries.     

The Efficacy of Third‐Party Consultation in Preventing Managerial Escalation of Commitment: The Role of Mental Representations*

Avoiding continued investment in poorly performing projects is an important function of management control systems. However, prior research suggests that managers fail to use accounting information indicating that a project is performing poorly to discontinue it; that is, they escalate commitment to the project. We perform two experiments to investigate the efficacy of a potential control mechanism, third‐party consultation, in preventing managerial escalation of commitment. We hypothesize that the information‐processing objective (that is, purpose) assigned to consultants influences the mental representations they construct to process and store information, which ultimately influences their recommendations regarding the continuation of a poorly performing project. Results suggest that consultants will not construct mental representations amenable to making high‐quality project‐continuation recommendations unless they are assigned that specific purpose. Results further suggest that applying additional effort likely will not overcome the adverse effects of having inappropriate mental representations when making project‐continuation recommendations. An implication of our study is that third‐party consultants likely will not prevent managerial escalation of commitment unless consultants have a specific mandate of making a project‐continuation recommendation in mind when they encounter relevant accounting information.