The Multijurisdictional Disclosure System and Value of Equity Offerings

The Canada and US multijurisdictional disclosure system (MJDS) implemented in 1991 lowered the indirect barriers for investors and issuers by easing reporting and disclosure requirements for cross‐border issues. This paper examines the impact of the MJDS and related regulatory changes on Canada–US equity market segmentation using a sample of Canadian seasoned equity offerings in the 1991–1998 period. We find that the number of cross‐border issues by Canadian firms increased, and the typical negative stock price reaction that accompanies seasoned equity issues declined over time, supporting increased integration between the two markets after the MJDS. We also document that cross‐border issues experience about 1.4 per cent lower negative stock price reaction compared with domestic issues, consistent with Canada–US market segmentation. We find mixed support for Merton's (1987) investor recognition hypothesis. While Canadian firms cross‐listed in the US experience a less adverse price reaction to their cross‐border offerings compared with their non‐US‐listed peers, there is no significant difference between the two groups in the case of purely domestic issues.     

Negotiating ‘solidarity’ and internationalism: the response of Polish trade unions to migration

In the context of massive outward migration after Poland's accession to the EU in 2004, this article explores the possibilities for cross‐border collaboration by Polish trade unions. The findings are based on interviews with the two main trade union/trade union federations, Solidarity and Ogolnopolskie Porozumnie Zwi?zków Zawodowych: All‐Poland Alliance of Trade Unions, at national, regional and sectoral levels. Examining the issues and challenges faced by Polish trade unions in terms of loss of membership and social capital, the article also evaluates the significance of Poland's status as a country of some inward migration. It is argued that cross‐border trade union collaboration has become an even more urgent project as the economic crisis intensifies competition in the labour market and increases the potential for xenophobia.     

Effects of Industry‐ and Region‐Specific Acquisition Experience on Value Creation in Cross‐Border Acquisitions: The Moderating Role of Cultural Similarity

Based on a sample of 222 cross‐border acquisitions by US firms in the service sector, our study examines the effects of acquiring firms' prior cross‐border acquisition experience in the same industry and geographic region as the acquired firm on shareholder value creation. Using the BHAR (buy‐and‐hold abnormal returns) methodology, we find that higher levels of industry‐specific and region‐specific acquisition experience translate into greater shareholder value creation for acquiring firms in subsequent acquisitions. In addition, our results indicate that the effects of industry‐specific acquisition experience on acquisition performance are contingent on the level of cultural similarity between the acquiring and acquired firm countries, with the benefits of prior experience being greater in acquisitions undertaken in culturally similar countries. We also find that the moderating effects of cultural similarity on the relationship between industry‐specific acquisition experience and value creation are contingent on the level of prior region‐specific acquisition experience possessed by the acquiring firm.     

The Foundations of International Business: Cross‐Border Investment Activity and the Balance between Market‐Power and Efficiency Effects

The foundational international business (IB) scholarship grappled with whether multinational enterprises (MNEs) are largely efficiency‐enhancing or market‐power inducing institutions. Contemporary scholarship, however, often associates foreign direct investment (FDI) with efficiency‐enhancing properties and thus neglects the market‐power interpretation of the MNE. Such an imbalance is problematic given that the theoretical and empirical justifications behind the field's embrace of the efficiency interpretation are not fully evident. Instead, both efficiency and market‐power effects are seemingly present in cross‐border investment activity. Based on a comprehensive sample of up to 4,361 cross‐border investments materializing between 1986 and 2010, we present theoretically‐grounded hypotheses with regard to when market‐power effects will tend to dominate efficiency effects. We find that cross‐border investments undertaken by emerging‐market MNEs in both developed and emerging markets tend to involve substantial efficiency effects and minimal market‐power effects when compared with the cross‐border investments undertaken by developed‐country MNEs in both developed and emerging markets.     

Cross‐Border Merger & Acquisition Activity and Revealed Comparative Advantage in Manufacturing Industries

We estimate an important implication of oligopolistic international trade modeling for the predicted pattern of cross‐border mergers and acquisitions (M&As). Our core argument is that cross‐border M&As are, among other factors, driven by cross‐country differences in comparative advantage. We find strong evidence that acquiring firms operate in industries with a comparative advantage. We also report (less pronounced) evidence that this holds for target firms as well. We therefore add another explanation, rooted in international economics, to the industrial organization literature on M&As that emphasizes efficiency and strategic motives.     

The global impact of a sharper US‐China slowdown

• ? We forecast a moderate global slowdown through 2020, but risks are looming of a sharper downturn in China and the US. If these were to materialise, our simulations suggest global GDP growth would hit a post‐crisis low, with the level of GDP dropping by 0.6% and growth slowing by 0.4 ppt in 2019/20.
• ? Economies with strong trade linkages to China and the US – Korea, Taiwan and Mexico – would suffer most. Conversely, a weaker dollar, lower oil prices and relatively smaller trade flows with the US and China would offset the blow in Europe and for some EMs, including Turkey, Argentina and India.
• ? Since 2010, Chinese activity has been a powerful leading indicator of every major economy's exports, proving stronger than similar indicators for US or eurozone activity. This is even the case for non‐Asian economies such as Canada, Mexico, Italy, Germany, France and the UK. This may reflect deepening trading relationships and the relatively high volatility of Chinese cyclical indicators over the period.
• ? Over the past decade, global macro stability has been supported by the US and Chinese cycles moving counter to each other. But this could reverse if the ongoing Chinese policy stimulus fails to gain traction and the weakness gains momentum.

     

Trade union cross‐border alliances within MNCs: disentangling union dynamics at the local,national and international levels

This study identifies three types of workplace union strategy in the development of cross‐border relations within North American and European multinational companies: defensive isolation, risk reduction and proactive solidarity. Qualitative case studies of MNCs with operations in Canada and Mexico indicate that the nature and intensity of participation in cross‐border trade union alliances are shaped by the union dynamic at the local, national and international levels. A combination of greater workplace union power resources, notably discursive capacity, and of strong supportive approach of the national union, notably dedicated resources and space for bottom‐up initiatives, contributes to proactive solidarity strategies towards international union networks. The absence of these factors is associated with risk reduction and defensive isolation strategies.     

The Border as a Resource in the Global Urban Space: A Contribution to the Cross‐Border Metropolis Hypothesis

In a globalized urban world, cross‐border metropolises represent a spatial configuration emblematic of the interplay between the space of flows and the space of places. The multiplicity of contexts and processes at work can complicate the identification of what constitutes the singularity of the concept. In order to contribute to these reflections the present article hypothesizes that the specificity of cross‐border metropolises does not fundamentally stem from the form they take or the nature of the cross‐border integration at work, but rather from the particular role played by national borders in their formation. Opening up borders offers new opportunities for border cities and urban border regions to reinforce their positions at the heart of global economic networks, and to affirm their autonomy as cross‐border regional entities. Without minimizing the possible obstructive effects of borders, it is helpful to recognize that they might also represent a resource in the composition of cross‐border metropolitan regions.     

The impact of China’s one belt one road initiative on international trade in the ASEAN region

This study explores the potential effects of China’s ‘One Belt One Road’ (OBOR) policy on trade flows in ASEAN countries and China. We use the augmented gravity model of international trade and data on ASEAN countries and China from 2000 to 2016. The empirical results show that the coefficient of the OBOR dummy is positive and statistically significant, which implies that this policy benefits both ASEAN countries and China in terms of increased trade flows among these countries. In addition, the coefficients of other control variables, such as a common language, a common border, and distance, have the expected signs, and all are statistically significant. Thus, the OBOR policy initiative could be a promising mechanism for trade facilitation in these countries in the years to come.     

THE DISTANCE PUZZLE AND LOW‐INCOME COUNTRIES: AN UPDATE

The ‘distance effect' measuring the elasticity of trade flows to distance has been found to be rising since the early 1970s in a host of studies based on the gravity model, leading observers to call it the ‘distance puzzle'. However, this puzzle is regularly challenged by new developments in the specification of the gravity equation or in its estimations. We propose an original survey on the existing methods used to quantify the distance puzzle – basically the computation of an average distance of trade, a meta‐analysis on existing gravity papers and the implementation of recent econometric developments, all on a well‐specified gravity equation both in cross‐section and panel data. We apply all these methods to a unique large database (124 countries from 1970 to 2006). It appears that if all these new developments can change the amplitude of the increase in the trade elasticity to distance, none solve the distance puzzle. We confirm the existence of this puzzle and identify that it only applies to low‐income countries which exhibit a significant rising distance effect on their trade of around 18% between 1970 and 2006 while the distance ‘puzzle' for trade within richer countries disappears.     

Major liquidity drain may fuel bond market vulnerabilities

• ? It is plausible that cross‐border bond purchases will average
  • ? It is plausible that cross‐border bond purchases will average $0.5trn in 2018 and 2019, a dramatic fall from $1.2trn in 2017, driven mainly by reductions in European and US purchases. This will exacerbate upward pressure on bond yields over and above those associated with traditional macroeconomic drivers. The US bond market (and the dollar) are particularly vulnerable .
  • ? This article is part of a long‐term research project, whose intricate analysis of global fixed income flows has revealed strong implications for global bond valuations that could be inconsistent with consensus expectations for the global economy.
  • ? The termination of net purchases under the ECB's asset purchase programme (APP) will have important implications for global bond markets, which may be larger than those associated with the end of the Fed's QE programme. The unwind will prompt a reversal in European investors' aggressive rotation of portfolios from domestic to foreign fixed income securities and other asset classes. This could reduce cross‐border purchases by European investors by €200bn per year.
  • ? US investors are also expected to buy fewer foreign bonds as they are likely to have to absorb an increase in the supply of domestic bonds because of (i) a larger fiscal deficit; (ii) the Fed's portfolio unwinding; (iii) corporate sector liquidation of holdings abroad; and (iv) greater financial sector issuance tied to household re‐leveraging.
  • ? Emerging markets' (EM) purchases of foreign bonds are expected to continue to be subdued in the short‐term after recent steep declines. Our baseline view is that, on the back of the return of capital flows into emerging markets, EM purchases of advanced market securities will bounce back but not by enough to offset the retrenchment of American and European investors. However, the risks to the downside are considerable given shifting global policy developments.
       

Weak and Strong Cross‐Sectional Dependence: A Panel Data Analysis of International Technology Diffusion

This paper provides an econometric examination of technological knowledge spillovers among countries by focusing on the issue of error cross‐sectional dependence, particularly on the different ways—weak and strong—that this dependence may affect model specification and estimation. A preliminary analysis based on estimation of the exponent of cross‐sectional dependence provides a clear result in favor of strong cross‐sectional dependence. This result has relevant implications in terms of econometric modeling and suggests that a factor structure is preferable to a spatial error model. The common correlated effects approach is then used because it remains valid in a variety of situations that are likely to occur, such as the presence of both forms of dependence or the existence of nonstationary factors. According to the estimation results, richer countries benefit more from domestic R&D and geographic spillovers than poorer countries, while smaller countries benefit more from spillovers originating from trade. The results also suggest that when the problem of (possibly many) correlated unobserved factors is addressed the quantity of education no longer has a significant effect. Finally, a comparison of the results with those obtained from a spatial model provides interesting insights into the bias that may arise when we allow only for weak dependence, despite the presence of strong dependence in the data. Copyright © 2016 John Wiley & Sons, Ltd.     

Has the border narrowed?

In the late 1980s Canada’s provinces traded 20 times more with one another than with US states of comparable size and distance. In other words, the Canada-US border exerted a strong effect on the pattern of Canada’s continental trade patterns. However the formation of the Canada-US Free Trade Area could have reduced the impact of the border on bilateral trade. Surprisingly, estimates from a gravity model of aggregate Canadian trade reveal no evidence of a significant, sustained fall in the border effect between 1988 and 1996.     

Contracting Costs and Information Asymmetry Reduction in Cross‐Border M&A

This paper explores the contracting costs of conducting mergers and acquisitions (M&A), creates a theoretical model of the information asymmetry involved, and shows how buying firms employ several mechanisms to reduce such asymmetry. Extending prior literature, the paper examines these costs in both domestic and cross‐border settings using a sample of over 3000 M&A deals. I consider both the fees paid and the time required in the bargaining phase to be contracting costs, and model them simultaneously to help explicate their endogenous relationship. The results show that buyers in cross‐border deals are more likely to employ mechanisms to affect information asymmetry, while the employment of these mechanisms affects contracting costs. The results help to explain why cross‐border M&A are more costly yet more quickly executed. Finally, modelling the use and effects of the mechanisms is sufficient to explain the contracting cost differences between domestic and cross‐border M&A.     

Forms of cross‐border mobility and social capital in multinational enterprises

This paper discusses how different forms of cross‐border employee mobility all contribute to establishing social ties across different units of multinational enterprises (MNEs). Despite the growing recognition of the significance of employees' cross‐unit social ties in MNEs for both individuals and the organisation, the mechanisms for creating such ties remain underspecified. We contribute to closing this gap by identifying the role that an array of forms of international mobility can play in promoting employees' (cross‐unit) social ties inside MNEs. We draw upon empirical accounts of the job‐related international mobility experiences of 72 high‐skilled employees in three leading MNEs in the mobile telecommunications sector. Guided by a framework that utilizes some of the key concepts of the debate on social ties and social capital, we discuss traditional expatriation, short‐term assignments, localised transfers and business travel in terms of the structure and strength of the cross‐unit ties they engender, as well as their accessibility. We find (1) that it is not only traditional long‐term assignments in the form of expatriation that enable individuals to create cross‐unit social ties; and, (2) that different forms of international mobility promote cross‐unit social ties in variable ways and to different extents.     

Structural FECM: Cointegration in large‐scale structural FAVAR models

Starting from the dynamic factor model for nonstationary data we derive the factor‐augmented error correction model (FECM) and its moving‐average representation. The latter is used for the identification of structural shocks and their propagation mechanisms. We show how to implement classical identification schemes based on long‐run restrictions in the case of large panels. The importance of the error correction mechanism for impulse response analysis is analyzed by means of both empirical examples and simulation experiments. Our results show that the bias in estimated impulse responses in a factor‐augmented vector autoregressive (FAVAR) model is positively related to the strength of the error correction mechanism and the cross‐section dimension of the panel. We observe empirically in a large panel of US data that these features have a substantial effect on the responses of several variables to the identified permanent real (productivity) and monetary policy shocks.     

Spatial Price Adjustment with and without Trade*

We investigate the possibility that price transmission between spatially distinct markets might vary during periods with and without physical trade flows. We test for differences between trade and non‐trade regimes by using generalized reduced rank regression (GRRR) techniques suggested by Hansen (2003) . We apply these techniques to semi‐weekly price and trade flow data for tomato markets in Zimbabwe and find that intermarket price adjustment occurs in both trade and non‐trade periods. Indeed, the adjustments are generally larger and more rapid in periods without physical trade flows. This finding underscores the importance of information flow for market performance.     

Commodity Price Volatility and the Sources of Growth

This paper studies the impact of the growth and volatility of commodity terms of trade (CToT) on economic growth, total factor productivity, physical capital accumulation and human capital acquisition. We use the standard system generalized methods of moments (GMM) approach as well as the dynamic common correlated effects pooled mean group (CCEPMG) methodology for estimation to account for cross‐country heterogeneity, cross‐sectional dependence and feedback effects. Using both annual data for 1970–2007 and 5‐year non‐overlapping observations, we find that while CToT growth enhances real output per capita, CToT volatility exerts a negative impact on economic growth operating mainly through lower accumulation of physical and human capital. Productivity, however, is not affected by either the growth or the volatility of CToT. Our results also indicate that the negative growth effects of CToT volatility offset the positive impact of commodity booms. Therefore, we argue that volatility, rather than abundance per se, drives the ‘resource curse’ paradox. Copyright © 2014 John Wiley & Sons, Ltd.     

A structural model of US aggregate job flows

This paper contributes to the analysis of jobs flows dynamics through the explicit modelling of job creations and job destructions. We propose a simple matching model extended for endogenous separation and tractable heterogeneity. The parameters of the model are estimated using a simulation‐based estimation method. We then test the ability of trade externalities, generated by the matching process, to (i) propagate reallocation and aggregate disturbances in the whole labor market and (ii) generate the observed distribution of aggregate job flows. The results clearly indicate that the model is able to match the dynamics of US aggregate job flows. Copyright © 2002 John Wiley & Sons, Ltd.     

The J-Curve at industry level: Evidence from Sweden–US trade

Previous research that investigated the impact of real depreciation of kronor on Swedish trade balance used trade data either between Sweden and the rest of the world or between Sweden and each of her trading partners. Not much support was provided for a significant effect, especially in the case of Swedish–US trade. In this paper we consider the trade flows between Sweden and the US one more time and try to disaggregate the data by industry. We consider the trade balance of each of the 87 industries that trade between the two countries and investigate the short-run and the long-run effects of real depreciation of kronor on each industry's trade balance. While we find short-run significant effects in the majority of the industries, the short-run effects last into the long-run favorable effects only in 23 of 87 industries.