A theoretical model of the relationship between value added elements and end product

This paper focuses on the development of a theoretical scheme describing the transformation of primary incomes into end consumption and savings in the Russian economy. This scheme is basically a system of interrelated tables reflecting the distribution of primary incomes across the institutional sectors and their further reallocation and use. The scheme makes allowances for the specific features of the Russian economy and existing statistics. In terms of methodology, it is coordinated with the interindustry balance in current buyer prices and, from the theoretical standpoint, describes the connection between Quadrant II and Quadrant III of the balance. Therefore, the proposed system of tables is treated in the paper as Quadrant IV of the interindustry balance. The theoretical scheme is used by the authors as a necessary basis for constructing an empirical model of the relationship between value added and end product, which will be published in the next issue of this journal.     

No Chinese Capitalism without Property Rights

The speed with which communist China has embuaced markets has surprised Western analysis and observers, But Chinese economic progress will founder in corruption and inefficiency, argues Professor Steven Cheung of the university of Hong Kong, untess she insitutes a well-defined system of private property rights to safeguord investment and stimulate trade.     

Further Evidence on PPP Adjustment Speeds: the Case of Effective Real Exchange Rates and the EMS*

Two different approaches intend to resolve the ‘puzzling’ slow convergence to purchasing power parity (PPP) reported in the literature [see Rogoff (1996) , Journal of Economic Literature, Vol. 34.] On the one hand, there are models that consider a non‐linear adjustment of real exchange rate to PPP induced by transaction costs. Such costs imply the presence of a certain transaction band where adjustment is too costly to be undertaken. On the other hand, there are models that relax the ‘classical’ PPP assumption of constant equilibrium real exchange rates. A prominent theory put together by Balassa (1964, Journal of Political Economy, Vol. 72) and Samuelson (1964 Review of Economics and Statistics, Vol. 46) , the BS effect, suggests that a non‐constant real exchange rate equilibrium is induced by different productivity growth rates between countries. This paper reconciles those two approaches by considering an exponential smooth transition‐in‐deviation non‐linear adjustment mechanism towards non‐constant equilibrium real exchange rates within the EMS (European Monetary System) and effective rates. The equilibrium is proxied, in a theoretically appealing manner, using deterministic trends and the relative price of non‐tradables to proxy for BS effects. The empirical results provide further support for the hypothesis that real exchange rates are well described by symmetric, nonlinear processes. Furthermore, the half‐life of shocks in such models is found to be dramatically shorter than that obtained in linear models.     

UNIT MANAGEMENT BUYOUTS, STOCKHOLDER WEALTH, AND SELLING FIRMS' CHARACTERISTICS

Previous research on unit management buyouts, UMBs, has shown that selling firms benefit from the selloff transaction. The current research demonstrates that when the selling firm has either poor liquidity or poor earnings, selling firm shareholders do not benefit as much. We hypothesize that the unit managers have knowledge about the selling firm's difficulties so they do not pay as large a premium for the assets. Since the unit managers technically are employed by the selling firm shareholders, their bargaining to achieve a better price is an agency cost. Finally, selloff frequency does not affect seller abnormal returns.     

Common Stock Returns in Corporate Takeover Bids: The Case of Brokerage House Acquisitions

This paper examines the common stock returns of three groups of bidders that purchased brokerage houses. Only in the cases of horizontal mergers, one brokerage house purchasing another, are there abnormal returns associated with the purchase. Neither bank holding company bidders nor non-financial bidders gain significantly when purchasing a brokerage house. Bank holding company bidders face considerable regulatory delays, and these economic disturbances may eliminate their gains. Bank holding company expansion into these non-bank activities does not appear, at the time of announcement, to either hurt or benefit them; hence, this expansion does not appear to further the loss exposure of the Federal Deposit Insurance Corporation.     

CAN INEFFICIENT TRADERS CREATE VALUE?

I examine the aggregate expected profit generated by informed traders of diverse ability in a competitive market. I assume that efficient traders get perfect information on asset values whereas inefficient traders get noisy information. In the presence of order size restrictions, I show that the aggregate expected profit generated by efficient and inefficient traders together can be higher than that generated by efficient traders alone. Thus, inefficient traders can create value in a constrained trading environment.     

The Impact of Regulation Fair Disclosure on Information Asymmetry and Trading: An Intraday Analysis

This study examines the impact of Regulation Fair Disclosure (FD) on liquidity, information asymmetry, and institutional and retail investors trading behavior. Our main findings suggest three conclusions. First, Regulation FD has been effective in improving liquidity and in decreasing the level of information asymmetry. Second, retail trading activity increases dramatically after earnings announcements but there is a significant decline in institutional trading surrounding earnings announcements, particularly in the pre‐announcement period. Last, the decline in information asymmetry around earnings announcements is closely associated with a lower participation rate in the pre‐announcement period and more active trading of retail investors after earnings releases.