Dividend Imputation and Shareholder Wealth: The Case of New Zealand

On April 1, 1988, New Zealand stopped the double taxation of dividends by implementing a full dividend imputation program. Because many believed that the tax advantage of debt had led to more highly leveraged firms subject to greater financial risk than was socially optimal, it was hoped the removal of incentives to finance with debt would result in a more efficient allocation of capital. The empirical results suggest that the shareholder wealth gain from dividend imputation was more than offset in firms with large debt levels. Moreover, an examination of debt ratios indicates debt levels declined in the post–imputation period.     

The Robustness of the APT to Alternative Estimators

We test the robustness of the APT to two alternative estimation procedures: the Fama and MacBeth (1973) two-step methodology; and the one-step procedure due to Burmeister and McElroy (1988). We find that the APT is indeed sensitive to the chosen estimator and assumptions about the factor structure of stock returns. We believe that our findings have implications for the estimation of asset pricing models in general.     

SOME ANALYTICS OF WHY CONDITIONAL IRRs CAN CONTAIN GROWTH RATE RELATED MEASUREMENT ERROR

This paper investigates the consequences of incorrectly modelling the investment outflow/benefit inflow relationship on estimates of the internal rate of return (IRR) prepared by using cash recovery rates (CRRs). The main result of this paper is that CRR-based estimates of the IRR will contain such bias if and only if either the duration of the assumed shape of the investment outflow/benefit inflow relationship is less than the duration of the true investment outflow/benefit inflow relationship for all rates of interest or the duration of the assumed shape of the investment outflowlbenefit inflow relationship is greater than the duration of the true investment outflowlbenefit inflow relationship for all rates of interest. This result is then applied to the case where both the true and the assumed shape of the investment outflow/benefit inflow relationships have benefit inflows that change exponentially over time. It is shown that if the exponential rate of change is mis-specified the resulting CRR-based estimate of the IRR will contain systematic bias monotonically related to the rate of growth.     

Book Reviews

M. Arsjad Anwar, Thee Kian Wie, Iwan Jaya Azis, Pemikiran, Pdaksanaan, dan Perintisan Pembangunan Ekonomi[Concepts, Implementation, and Pioneering in Economic Development], Fakultas Ekonomi Universitas Indonesia and PT Gramedia Pustaka Utama, Jakarta, 1992, pp. xx + 700.

Adam Schwarz, A Nation in Waiting: Indonesia in the 1990s, Allen and Unwin, Sydney, and Westview, Boulder, 1994, pp. 370. Paper: A$24.95.

East Asia Analytical Unit, Expanding Horizons: Australia and Indonesia into the 22st Century,Department of Foreign Affairs and Trade, Canberra, 1994, pp. xviii + 346. A$34.95.

Sjahrir, Pikiran Politik[Political Ideas], LP3ES, Jakarta, 1994, pp. xiv + 191.

Sjahrir, Persoalan Ekonomi Indonesia: Moneter, Perkreditan dan Nenca Pembayaran[Problems of the Indonesian Economy: Money, Credit and the Balance of Payments], Pustaka Sinar Harapan, Jakarta, 1995, pp. xv + 205.

Sjahrir, Analisis Bursa Efek[Analysis of the Stock Exchange], PT Gramedia Pustaka Utama, Jakarta, 1995, pp. xiv + 169.

Sjahrir, Ekonomi Indonesia dalam Perspektif Bisnis[The Indonesian Economy in a Business Perspective], PT Jurnalindo Aksara Grafika, Jakarta, 1994, pp. xvi + 239.

Sjahrir, Kebijakan Negara Mengantisipasi Masa Depan[National Policy: Anticipating the Future], Yayasan Obor Indonesia, Jakarta, 1994, pp. xv + 251.

Sjahrir, Formasi Mikro-Makro Ekonomi Indonesia[Indonesia's Macro and Micro Economy], Penerbit Universitas Indonesia, Jakarta, 1995, pp. xii + 313

F.B.A. Bouman and Otto Hospes, Financial Landscapes Reconstructed: The Fine Art of Mapping Development,Westview, Boulder, 1994, pp. xi + 416. US$45.00

Robert Cribb (ed.), The Late Colonial State in Indonesia: Political and Economic foundations of the Netherlands Indies 1880–1942,Verhandelmgen van het Koninklijk Instituut voor Taal-, Land- en Volkenkunde 163, KITLV Press, Leiden, 1994, pp. xiii + 295.

Shinya Sugiyama and Milagros C. Guerrero (eds), International Commercial Rivalry in Southeast Asia in the Inierwar Period,Yale Southeast Asia Studies Monograph 39, Yale Center for International and Area Studies, New Haven, 1994, pp. ix + 222.

W.L. Korthals Altes, Changing Economy in Indonesia. Volume 15: Prices (Non-Rice) 1814–1940,Royal Tropical Institute, Amsterdam, 1994, pp. 175. Paper: Dfl. 48.00.     

Gender differences in recollections of economic socialization,financial self-efficacy,and financial literacy

The OECD/INFE international surveys of adult financial literacy (OECD/INFE 2016, 2020) show gender differences in financial literacy in developed countries in Europe. In this study, we examine whether these differences can be explained by gender differences in parental economic socialization using the Dutch 2018 DHS household survey. We investigate whether respondents' recollection of economic socialization when young predict their adult economic behavior and self-assessed financial knowledge. The results from ordinal logit and logistic regressions and for nonlinear equations decompositions reveal gender differences in the recollection of economic socialization and in how socialization practices are related to economic behavior and self-assessed financial knowledge. Men have to a greater degree than women been socialized in terms of having paid work outside the home, while women more often than men report that their parents controlled their spending. Moreover, we find gender differences in how men and women benefitted from the same socialization practices.     

Model-free portfolio theory: A rough path approach

Based on a rough path foundation, we develop a model-free approach to stochastic portfolio theory (SPT). Our approach allows to handle significantly more general portfolios compared to previous model-free approaches based on Föllmer integration. Without the assumption of any underlying probabilistic model, we prove a pathwise formula for the relative wealth process, which reduces in the special case of functionally generated portfolios to a pathwise version of the so-called master formula of classical SPT. We show that the appropriately scaled asymptotic growth rate of a far reaching generalization of Cover's universal portfolio based on controlled paths coincides with that of the best retrospectively chosen portfolio within this class. We provide several novel results concerning rough integration, and highlight the advantages of the rough path approach by showing that (nonfunctionally generated) log-optimal portfolios in an ergodic Itô diffusion setting have the same asymptotic growth rate as Cover's universal portfolio and the best retrospectively chosen one.     

BANK INTEREST MARGINS AND BUSINESS START-UP COLLATERAL: TESTING FOR CONVEXITY

The paper investigates the relationship between bank interest rate margins and collateral for loans issued to new ventures. The analysis finds a convex U‐shaped relationship. The results indicate that while provision of collateral initially reduces bank exposure to risk (through security, more optimal levels of capital and lower moral hazard among entrepreneurs) that beyond a point, the positive risk‐wealth association gives rise to greater risk taking propensity among entrepreneurs and ultimately higher interest rates. This indicates that a lender's pricing policy may even somewhat help to level the competitive playing field between ventures launched by higher and moderately wealthy entrepreneurs.     

Science,Technology and the Quest for Sustainable Development

The quest for sustainable development is seen in this article as an intrinsic part of the reconstitution of environmentally-oriented science and technology policy that has been taking place over the past 15 years in most European countries. Rather than dealing with environmental problems after they have occurred, the trend is increasingly to base environmental research and development on so-called preventive principles and to seek to integrate environmental concern into all other areas of science and technology development. There is also a widespread effort to foster new ways to involve the 'public' in the making of science and technology policy. The article is based on results from the project, Public Engagement and Science and Technology Policy Options (PESTO), for which the author served as coordinator.     

Allocative efficiency measurement with endogenous prices

In the nonparametric measurement of allocative efficiency, output prices are fixed. If prices are endogenous, the overall output in the market determines the allocative efficient point. We develop an alternative semi-nonparametric model that allows prices to be endogenously determined.