Bank Monitoring and Environmental Risk

Abstract:  Loan announcement effects for 152 Canadian companies are examined to investigate the efficiency of monitoring by banks facing lender environmental liability. Market reaction to the announcement of bank debt to 'environmental' firms is more positive and significant than for 'non-environmental' firms and, for firms in industries with a higher likelihood of experiencing spill events, is more positive and significant, reinforcing earlier results that establish a relationship between specific loan/borrower characteristics and announcement period excess returns and providing further evidence on the 'uniqueness' of bank loans by demonstrating the superior ability of banks to monitor corporate borrowers exposed to environmental liability.     

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.     

Do Incomes Policies Restrain Wage Inflation? Some Evidence From Australia,Canada, and the United States*

The purpose of this paper is to reassess the impact of incomes policies on wages in Australia, Canada and the United States. These countries differ in institutional arrangements as well as in the form and timing of incomes policies adopted. Three methods of assessing the effect of incomes policies have been used: the simulation approach, the intercept-shift dummy variable approach, and the rotation approach. The results indicate that incomes policies exhibited considerable diversity in the effectiveness among the three countries. The results also show a consistent restraining influence of labour market variables on wage inflation.     

Non‐linear Predictability of UK Stock Market Returns*

Linear predictability of stock market returns has been widely reported. However, recently developed theoretical research has suggested that due to the interaction of noise and arbitrage traders, stock returns are inherently non‐linear, whereby market dynamics differ between small and large returns. This paper examines whether an exponential smooth transition threshold model, which is capable of capturing this non‐linear behaviour, can provide a better characterization of UK stock market returns than either a linear model or an alternate non‐linear model. The results of both in‐sample and out‐of‐sample specification tests support the exponential smooth transition threshold model and hence the belief that investor behaviour does differ between large and small returns.     

Alternative Forms of Mixing Banking with Commerce: Evidence from American History

Much of the discussion about banking and commerce in America has failed to make several crucial distinctions and has not accounted for many arrangements that have promoted the mixing of these activities. We investigate the history of banking and commerce in the United States, looking both at bank control of commercial firms and commercial firms' control of banks. We trace how these controls have changed with shifting definitions of "bank" and changing methods of "control." Despite the regulations prohibiting some arrangements that promote financial control, we find evidence of extensive linkages between banking and commerce in the United States. These linkages usually build on devices that are very close substitutes to the arrangements prohibited by law. Altogether, our findings question the often made claim that traditionally banking in the United States has been separated from commerce. Furthermore, given that research on Japan and Germany has shown that the mixing of banking and commerce matters for a variety of issues, our evidence also raises some questions on similar research in the United States which makes the simplifying assumption that these industries are separated.     

Crossing spatial analyses and livestock economics to understand deforestation processes in the Brazilian Amazon: the case of São Félix do Xingú in South Pará

The Amazon is the largest tropical forest area on Earth, and has been undergoing rapid deforestation for the last four decades. In the Brazilian Amazon, large‐scale pasture for cattle ranching and soybean production are the main land uses, leading to a yearly deforestation rate of 0.5%. These conversions are mostly located in frontier areas distributed along the so‐called “arc of deforestation”. Within this large zone, various land use change processes are interacting through several modes of land valuation and organisation. From several case studies in the State of Pará (Brazil), the current project aims at analysing how landscape dynamics are related to infrastructure development, ecological conditions, zoning policies and to the evolution and the organisation of the production, consumption and marketing chains of livestock products. This paper presents the results for one test site, the region of São Félix do Xingú, South of Pará This region is the focus of land speculation, cattle expansion, and deforestation. Road construction, investments in electrical energy, financial credit for cattle, and the land reform policies have all fuelled this process. All these factors make this region one of the most dynamic agricultural frontiers in the Brazilian Amazon. The main objective of the paper is to improve our understanding of deforestation processes by crossing spatial analyses and 1ivestock economics.studies, and to characterise the role and impact of various natural and anthropic factors in the location and development of the main types of farmers, and their policy implications.     

Buildings for the Japanese information economy : Neighbourhood and resort offices

A new physical infrastructure to support activities based on communications and the transmission of information is being developed. Part of this infrastructure includes the construction of ‘intelligent’ buildings which are seen to play as important a role in improving efficiency of office workers as automation has played on the shopfloor of manufacturing industry. The location of these buildings is important. This article focuses on two types of experimental office development—neighbourhood offices and resort offices.     

Service Competitiveness – An Anglo-US Study

This article reports on the latest in a series of international comparisons of management practices and performance outcomes of industries in various countries. Here, it is the service industries in the UK and the US which come under the microscope. Among the companies surveyed, there were more world-class performers in the US than the UK, but also more low performers. The concluding part of the article is diagnostic – the authors also suggest measures which could improve performance.