New European Banking Governance and Crisis of Democracy: Bank Restructuring and Privatization in Slovenia

ABSTRACT

The paper makes three contributions to the understanding of the post-crisis European banking governance. First, it offers a more comprehensive approach to banking governance, beyond the Banking Union, through its concept of ‘New European Banking Governance’ (NEBG) that incorporates EU state aid rules and fiscal regulations. Second, it considers the impact of NEBG on democratic institutions and processes in EU member states, an under-researched topic in the literature on European banking governance. Finally, through its in-depth case study of Slovenia it considers the NEBG in relation to peripheral Eurozone states. It argues that the post-crisis banking governance framework of the EU not only severely constrained the Slovenian state in its policy choices but rearranged its policy-making institutions in a way that restricted and continues to restrict democratic banking policy formation.     

Continuity Under a Different Name: The Outcome of Privatisation in Serbia

Normally, privatisation is seen as beneficial. This paper considers the case of Serbia – a latecomer in the matter – where privatisation was partly a result of exogenous pressures and where the process has been deemed a failure. In Serbia, a sizeable number of privatised firms were bought by bureaucrats and politicians and all firms were subjected to a period of supervision. We argue that the design of this process allowed rent-seekers to conserve their privileges through asset-stripping, which explains the failure. In order to do so, we perform an empirical analysis of the determinants of liquidation, merger and bankruptcy of privatised firms from 2002 to 2015. We construct a novel data set from primary sources, free of the ‘survivorship bias’ and containing proxies for various types of owners, indirect signs of asset-stripping strategy and a broad range of controls. Our results indicate that firms owned by politicians faced significantly higher risks of bankruptcy, especially after the end of supervision.     

MARKET EFFICIENCY: EVIDENCE FROM A NO-BUBBLE ASSET MARKET EXPERIMENT

Abstract.  We report the results of an experiment that demonstrates that market experience is not necessary to eliminate bubbles in the type of asset markets studied in Smith et al . (1988) . We introduce a pre-market phase in which subjects experience a dividend flow themselves by literally observing and receiving dividends for 12 periods. The robust bubble–crash phenomenon never occurs in our experiment. Our results provide strong evidence that so long as a majority of the subjects have full understanding of the structure of the dividend, market efficiency can be ensured.     

Misallocation and financial market frictions: Some direct evidence from the dispersion in borrowing costs

Financial frictions distort the allocation of resources among productive units—all else equal, firms whose financing choices are affected by such frictions face higher borrowing costs than firms with ready access to capital markets. As a result, input choices may differ systematically across firms in ways that are unrelated to their productive efficiency. We propose an accounting framework that allows us to assess empirically the magnitude of the loss in aggregate resources due to such misallocation. To a second-order approximation, the framework requires only information on the dispersion in borrowing costs across firms, which we measure—for a subset of U.S. manufacturing firms—directly from the interest rate spreads on their outstanding publicly-traded debt. Given the observed dispersion in borrowing costs, our approximation method implies a relatively modest loss in efficiency due to resource misallocation—on the order of 1 to 2 percent of measured total factor productivity (TFP). In our framework, the correlation between firm size and borrowing costs has no bearing on TFP losses under the assumption that financial distortions and firm-level efficiency are jointly log-normally distributed. To take into account the effect of covariation between firm size and borrowing costs, we consider a more general framework, which dispenses with the assumption of log-normality and which implies somewhat higher estimates of the resource losses—about 3.5 percent of measured TFP. Counterfactual experiments indicate that dispersion in borrowing costs must be an order of magnitude higher than that observed in the U.S. financial data, in order for misallocation—arising from financial distortions—to account for a significant fraction of measured TFP differentials across countries.     

The relationship between capital and liquidity prudential instruments

Journal of Regulatory Economics - Basel III introduced unweighted capital standard and new regulatory liquidity standards to complement the revised risk-weighted capital requirements. This change...     

Useful measures in the field of time and dimensional rationalisation of manual training lessons

Schoolwork, especially lessons in manual skills is often associated with various ergonomics stresses. These stresses are the result not only of school obligations but also of the physical working environment and inadequate lesson planning. Much can be done in this field if certain approaches are taken into consideration at the work planning stage. Thus we can use certain analytical methods, such as the Method of Temporary Observations (Multi-Moment Method) and OWAS (a method for the evaluation of postural load during work), when positioning stressful lesson factors. This can be done in a relatively simple way in the field of time rationalisation as well as in the field of dimensional work adjustment to pupils. Research results in this paper show that by using a planned directed approach in this field, it is possible to achieve, a higher level of efficiency with normal levels of fatigue.     

REPORTING GUIDELINES FOR META-ANALYSIS IN ECONOMICS

Meta-analysis has become the conventional approach to synthesizing the results of empirical economics research. To further improve the transparency and replicability of the reported results and to raise the quality of meta-analyses, the Meta-Analysis of Economics Research Network has updated the reporting guidelines that were published by this Journal in 2013. Future meta-analyses in economics will be expected to follow these updated guidelines or give valid reasons why a meta-analysis should deviate from them.     

Profit-shifting from Czech multinational companies to European tax havens

Although tax havens have been affecting other countries for decades, only in recent years have the associated challenges been subject to intensive scrutiny in both research and policy areas. We contribute to the growing evidence of corporate tax base erosion and profit-shifting by testing multinational companies’ ownership links to individual tax havens rather than to groups of them, as is the case with most previous research. Our company-level analysis suggests that profit shifts through debt financing from the Czech Republic to Luxembourg, Switzerland and, to a lesser extent, the Netherlands. We have ascertained that tax havens are not limited to tiny islands and may actually be found among European countries. We also provide rough estimates of the impact of this profit-shifting on tax revenues as well as a policy recommendation.     

Before ‘Independence’ Arrived: Interdependence in Energy Relations between Lithuania and Russia

This paper analyses energy relations concerning natural gas between Lithuania and Russia. Contrary to the existing literature, which stresses Lithuanian energy dependence, this paper argues that there had been interdependence between the two countries even before Lithuania underwent diversification at the end of 2014. The paper develops an analytical framework that examines: (a) physical energy relations, (b) the dominance of the energy agenda in mutual relations, and (c) the influence of the European Union. The analysis shows that while Lithuania was dependent on Russian supplies of natural gas, Russia was also dependent on Lithuania as a transit country of gas to Kaliningrad, a Russian enclave. Although Russia has shown a much higher willingness to employ an energy weapon than Lithuania, its efforts to exercise pressure on Lithuania have been negatively affected by the Baltic state’s position as a transit country. The European Union has played a crucial role as its pre-accession requirements and internal energy market rules have significantly influenced the energy relationship between the two countries.