The effect of political volatility on capital markets in EU accession and neighborhood countries

Political instability has the potential to disrupt financial markets. But how do political institutions affect financial movements in an environment where all institutions are in flux? This paper looks at the effects of formal and informal political volatility in the new EU countries of central and eastern Europe, in the Eastern Neighborhood, and farther afield in Central Asia to answer this question. Using asymmetric GARCH modeling on monthly data, I find that informal political volatility has a significant negative effect on stock returns, while formal political institutions generate much higher financial volatility than changes in monetary policy.     

Merger Speculation in Financial Media: The Valuation of Investigative Reporting

The authors study abnormal returns and volume in the days surrounding takeover speculation by financial media. Significantly positive price and volume responses 2 days after publication are observed. While most of this effect dissipates shortly thereafter, some excess returns remain impounded into the stock price. A study of the ex post takeover probabilities suggests that a positive response is justified, as takeover probabilities for such firms subsequently increase. This evidence is consistent with the idea that financial media speculation can facilitate the release of useful private information to shareholders. However, significantly positive excess returns and volume in the few days before publication also suggests that certain shareholders may benefit disproportionately.     

Misjudging the character of the welfare state: Hayek,generality, and the knowledge problem

What are the limits of collective action? As James Buchanan famously worried, is it possible to empower the productive state without lapsing into the predatory state? This paper uses insights from F.A. Hayek to address problems of public goods and the role of the state. Hayek convincingly argued that no central planner has sufficient knowledge to run an economy. Yet Hayek also allowed for state provision of some goods beyond the prevention of coercion. The question, then, is whether Hayek’s safeguards offer a satisfactory response to Buchanan’s worry. This paper contends that Hayek violated his own conditions for permissible government activity. Nevertheless, he offers a serious research agenda for limiting state abuses.     

Technological development at the boundaries of the firm: a knowledge‐based examination in drug development

This paper examines how the knowledge‐based view (KBV) can be applied to firm boundary decisions and the performance implications of those decisions. At the center of the paper is a theoretical and empirical examination of how firms most efficiently organize for technological development. We find that distinct organization approaches are advantaged in the speed of technological development depending on the structure of technological development problems and the depth of firms' technological area experience. We make theoretical and empirical contributions to KBV research that examines knowledge development and transfer. Drug development in the pharmaceutical industry serves as our empirical setting. Copyright © 2012 John Wiley & Sons, Ltd.     

Time and process in business network research

This Special Issue of Industrial Marketing Management brings together a range of articles by authors who have undertaken the difficult task of researching time and process in business networks. Understanding interaction processes within a business relationship and network perspective requires the elaboration of time, the central construct by which humans grasp and comprehend change. As an introduction to the articles we present the concept of human time and delineate accordingly three methodological approaches available for the study of network processes. We also introduce the authors' contributions to the special issue that broadly divide into two groups: those that deal with methodological issues concerning the study of processes in business networks and those that consider the role of time and timing for studying business processes.     

Relative price and inflation variability in a simple consumer search model

There is a large empirical literature on the effect of aggregate inflation on both price-level dispersion (relative price variability, RPV) and inflation rate dispersion (relative inflation variability, RIV) across goods or locations. Early empirical work of RIV has an explicit theoretical foundation in signal-extraction models. However, recent empirical work on RPV has produced results inconsistent with signal-extraction models. In particular, while RIV is increasing in the absolute value of inflation shocks, RPV is a negative monotonic function of inflation shocks. We show that consumer search theory offers a potential explanation for these apparently contradictory observations.     

Health insurer market power and primary care consolidation

This paper analyzes how health insurance market concentration impacts the market structure of primary care physicians. In more concentrated insurance markets, physicians are found to work in larger practices and their practices are more likely to have a hospital with an ownership interest. Physicians are also less likely to report being in a competitive physician market, consistent with practice consolidation. Our results suggest that consolidation in insurance markets impacts the competitive structure of physician markets.     

Should we tax or cap political contributions? A lobbying model with policy favors and access

This paper develops a model of political contributions in which a politician can either sell policy favors, or sell access. Access allows interest groups to share hard information with the politician in support of their preferred policy. Here selling access maximizes policy utility, while selling policy favors maximizes total contributions. Imposing a binding contribution limit makes it more likely that the politician sells access, which can improve expected constituent welfare. However, a contribution limit distorts the signals associated with the contributions, which tends to result in worse policy. Alternatively, a tax on political contributions can ensure that the politician sells access without distorting his information. Therefore, from the viewpoint of a representative constituent, a tax on contributions is strictly preferred to a contribution limit or no reform. The politician, however, may prefer regulation in the form of a contribution limit, even when a tax is better for the constituent.     

INSURANCE‐INDUCED MORAL HAZARD: A DYNAMIC MODEL OF WITHIN‐YEAR MEDICAL CARE DECISION MAKING UNDER UNCERTAINTY

This study quantifies the moral hazard effect of health insurance on medical expenditure by estimating a dynamic model of within‐year medical care consumption that allows for insurance selection, endogenous health transitions, and individual uncertainty about medical care prices in an environment where insurance has nonlinear cost‐sharing features. The results suggest that moral hazard accounts for 53.1%, on average, of total annual medical expenditure when insured. This estimate is significantly different, and generally larger, than that produced by an alternative model that is representative of the annual medical care decision‐making models commonly found in the literature.