Repeated Protection for Sale

This paper addresses whether the efficient equilibria characterized by Grossman and Helpman's one‐shot protection‐for‐sale game are renegotiation‐proof in an infinitely repeated setting. We propose a simple strategy profile that can support the efficient, truthful equilibrium in each period as a strongly renegotiation‐proof subgame perfect equilibrium. This result provides another plausible reason to explain why the truthful equilibrium may be focal in the game of protection‐for‐sale. In addition, when the timing of the contributions is specified explicitly, the special interest groups should minimize the upfront payment to the government before policy implementation to reduce the possibility of the collapse of such relational contracts.     

Trade, technology transfer and national efficiency in developing countries

This paper simultaneously explores the determinants of the developing countries’ production frontier and these countries’ ‘efficiency’ in using the available resources and technology. In doing so it allows for the transfer of (industrial country) technology in determining the frontier and for international trade's influence on absorptive capacity and national efficiency levels. Stochastic frontier analysis is used to model the production frontier for 57 developing countries for the period 1970-1998, to measure cross-country and temporal differences in efficiency levels and to explain the differences in efficiency levels. The results indicate significant differences in efficiency levels across countries and regions and movement over time, and an important influence of trade and trade policy in raising output both through technology improvements embodied in imported capital goods and by inducing efficiency improvements.     

The economic costs and benefits of UK defence exports

This study examines the economic costs and benefits to the UK of a 50 per cent cut in UK defence exports from the average level of 1998 and 1999. The net impact on the government budget is estimated to be an ongoing loss of between around £40 million and £100 million a year: around 0.2–0.4 per cent of the total UK defence budget. In addition, there is estimated to be a one‐off net adjustment cost, spread over five years, of between £0.9 billion and £1.4 billion. A further more speculative adjustment cost (estimated at around £1.1 billion) could result if the loss of income associated with the ‘terms‐of‐trade£ effect were also included. In terms of the wider debate about defence exports, the results of this study suggest first that the economic effects of the reduction in defence exports are relatively small and largely one‐off, and secondly that the balance of arguments about UK defence exports should be determined mainly by non‐economic factors.     

Investor Overconfidence in Experimental Asset Markets across Market States

Abstract

This study explores how individual overconfidence adjusts after receiving extreme feedback that either supports or contradicts previous decision-making when buying or selling stocks. We find that highly contradicting feedback causes overconfidence to vanish as confidence declines sharply while supportive signals cause overconfidence to increase. Further evidence suggests that strong feedback impulses are associated with higher investor disagreement, supporting prior hypotheses that investors interpret such impulses differently. We also find that methodologies that measure overconfidence in prediction tasks systematically overstate confidence scores as respondents tend to fail to internalize stated confidence intervals appropriately.     

Should We Worry about Government Debt? Thoughts on Australia's COVID-19 Response

No. While the COVID-19 crisis has required a dramatic increase in debt-financed government spending, in the current conditions the benefits from this debt are unusually high and the costs unusually low. While conditions can change, the Australian Government can right now hedge against these risks by lengthening the maturity structure of government debt, even at the cost of a modest increase in its current servicing costs.     

Derivatives usage in UK non-financial listed companies

In this paper, the authors present the results of a 1997 survey of derivative used by some 231 UK non-financial companies. The questionnaire instrument used in this research is based upon the postal survey methodology of Bodnar et al. (1995). A glossary was attached to the questionnaire survey to enable consistency in defining terminology used. A direct comparison between US and UK findings was undertaken together with an analysis of results from other published surveys conducted in the last four years. We find broadly similar trends in the use of derivatives. The results of our research show that derivatives usage to hedge financial price risk is well established amongst larger UK companies. Our findings support the size effect phenomena reported in other empirical studies. The primary objective cited in using derivatives was to manage fluctuations in accounting earnings, a focus that is inconsistent with the theoretical view of paying attention to cash flow benefits of hedging. The predominant issues of concern to UK inancial directors are the lack of evaluation of risk of proposed derivative transactions and the level of transaction costs incurred. This contrasts with the greater concerns of credit risk and market risk raised by their US counterparts in Bodnar's study. A possible explanation for these concerns could be the impact of the currency crisis happening in Asia especially for firms that are exposed to the affected currencies. It also suggests a lower level of sophistication and liquidity in UK derivatives market. The value of developing a basis for benchmarking good management practice in the use of derivatives to manage financial price risk represents an important area of research. Such a framework is of relevance to the demand and supply side of the derivatives market and to Government policy makers.     

Hybrid social media: employees’ use of a boundary‐spanning technology

Improved employee collaboration and communication can be facilitated by social technologies that extend within and beyond organisations. These social technologies have increasingly come to be represented by social media sites, which are used to extend workplace relationships across personal and professional boundaries in a hybrid role. This presents opportunities and risks as those boundaries are collapsed. Using boundary management as a theoretical lens, we evaluate the associations of relationship initiation between colleagues at different levels of organisations with employees’ strategies and their well‐being. We also investigate relationships with social media usage, age and propensity to self‐monitor and group employees using cluster analysis. We consider implications of our findings for developing more sophisticated policies, training and guidance for employees on the use of social media as a workplace tool.     

Sharing risk and ambiguity

We study the market implications of ambiguity in common models. We show that generic determinacy is a robust feature in general equilibrium models that allow a distinction between ambiguity and risk.     

The Corporatization and Commercialization of Local Body Entities: A Study of Reported Financial Performance

This research examines the financial performance of three entities over a fifteen-year period. The aim is to determine the influence of corporatization, commercialization and ownership form on the reported financial performance of the three entities. Underpinning this is the premise, derived from the literature, that financial performance and funding can be expected to change following corporatization and commercialization and will reflect the effects of the form of corporate ownership.
A comparison of four performance measures shows that the reported financial performance of the entities improved following corporatization and that their gearing changed. Although the entities were initially similar and faced the same regulatory changes, there were definite differences in the resulting financial performance and gearing between the three entities. In general, by the end of the study period the privatized company was the largest and the one with the highest gearing, the highest ROA and the highest profit margin, whereas the public (council-owned) company was the smallest and had the lowest profitability. The trust-owned company performed in between these two, but on average its performance was closer to that of the public company. The study concludes that corporatization, commercialization and ownership form influenced financial performance and the level of debt funding.     

Ratings assignments: Lessons from international banks

This paper estimates ordered logit models for bank ratings which include a country index to capture country-specific variation. The empirical findings support the hypothesis that the individual international bank ratings assigned by Fitch Ratings are underpinned by fundamental quantitative financial analyses. Also, there is strong evidence of a country effect. Our model is shown to provide accurate predictions of bank ratings for the period prior to the 2007–2008 banking crisis based upon publicly available information. However, our results also suggest that quantitative models are unlikely to predict ratings with complete accuracy. Furthermore, we find that both quantitative models and rating agencies are likely to produce highly inaccurate predictions of ratings during periods of financial instability.