Predicting Bank Failures: A Comparison of On- and Off-Site Monitoring Systems

On-site examinations are regulators' primary tool for monitoring the financial condition of federally insured depository institutions. In this paper, we assess the speed with which the information content of the supervisory rating assigned during bank exams—the CAMEL rating—decays. This is an important issue because cost and regulatory burden considerations often cause CAMEL ratings to be assigned relatively infrequently. As a benchmark for information content, we use econometric forecasts of bank failures generated by applying a probit model to publicly available accounting data. When compared with all CAMEL ratings available at a given point in time, the econometric forecasts provide a more accurate indication of failure. Further analysis reveals that this overall finding reflects the tendency for a CAMEL rating's information content to deteriorate noticeably beginning in the second or third quarter after the rating initially was assigned.     

Why Do Some Households Save So Little? A Rational Explanation

This paper offers an explanation for the puzzle of low wealth holdings among a significant fraction of the elderly. Instead of invoking irrational, nonrational, or nonoptimal behavior to resolve the puzzle, it is shown that widespread low wealth holdings are consistent with a rational life-cycle model of saving with uncertain lifetime and borrowing constraint. When there is uncertainty about the length of life, it is optimal for some individuals to save little and exhaust their wealth early. The characteristics of these individuals are derived. The simulation results support that the model can account for low wealth holdings as well as early terminal wealth depletion. The analysis also rejects the common perception that uncertain lifetime reduces dissaving. Journal of Economic Literature Classification Numbers: D11, D91, E21, I12, J14.     

Tensions Arising from Imposing NPM in Australian Public Universities: A Management Perspective

This study seeks to identify the characteristics causing tensions in the move towards a corporate culture in Australian public universities. The findings reveal ongoing structural, competency and behavioral issues contributing to the tensions. Two theoretical propositions have emerged regarding the status of the change process. First, the change to a corporate culture is slow but continuing. Second, universities have accepted that public sector, collegial and corporate cultures have to co‐exist, thus adopting an adapted version of new public management (NPM). These findings provide avenues for further research to confirm both the characteristics and theoretical propositions.     

Board Structure and Intragroup Propping: Evidence from Family Business Groups in Hong Kong

Using earnings announcement events made by group member firms in Hong Kong, this study examines the governance role of boards of directors in curbing propping activities within family business groups. We find that earnings released by group member firms affect the stock prices of their nonannouncing group peers in a manner consistent with intragroup propping. More importantly, this effect is less pronounced when the announcing firms have a larger board or a board with a higher proportion of independent directors, but more pronounced when they have an executive director from their controlling families acting as board chairperson. Furthermore, the monitoring effect of boards of directors is strengthened for firms subject to new regulations increasing board power. Our results suggest that board oversight can mitigate propping activities.     

THE CONCEPT OF EFFECTIVE SUBSIDY AND ITS APPLICATION TO THE CANADIAN FLOUR MILLING INDUSTRY*

The export subsidy has been a perennial bone of contention to competing exporters of various commodities in international trade, particularly in agricultural trade. A typical example is the world trade in flour. Export subsidies on flour exports by large competitors are generally thought to be one of the main causes of the decline in the Canadian share of the world flour market. Previous studies have been confined to an analysis of nominal subsidy rates on flour; quantifications are needed to estimate the effectiveness of the subsidies in fuller terms. Therefore, it is desirable to develop an appropriate concept for treating export subsidies explicitly. The present study attempts to develop a model to estimate the effectiveness of export subsidies net of input distortion so as to arrive at “the effective rate of subsidy.” Then, the mode! so developed is applied to the U.S. and Canadian exports of flour. The results show that Canada had negative effective rates of subsidy throughout the years 1960-61 to 1969-70 while the U.S. rates remained positive during this entire period. These estimations provide quantification of the disadvantage caused for Canadian flour exports by export subsidies on flour by large competitors. A fin ?étudier explictement les primes ?exporiations ont Aeté une source continuelle de mé-sentente entre les exponateurs compétitifs des diverses marchandises au sein du marché international. Ceci est paniculièremeni vrai en ce qui a trait au marché agricole. Un exemple lypique est le marché mondial des farines. ?on croit que i'une des principals causes de la baisse de la part Canadienne dans le marché mondial des farines sont les primes ?exporiations accordées aux gros compétiteurs. Les études précédenles furenl limitées à?analyse de taux nominal de subventions sur les farines; des estimations quan-titatives sont nécessaires afin ?évaluer ?efficacile des subventions en termes plus précis. Done, it est necessaire de développer un concept approprté afin ?étudier les primes ?exporiations explicitement. La préseme étude tente de développer un modèle ?évaluation de ?efficacité des primes ?exporiations libres de loutes déformations afin ?obtenir “un taux efficace de subvention.” Ce modèle est alors appliqué aux exportalions Américaines el Canadiennes de farine. Les résultats démontrent que le Canada possèdait des “taux efficaces de subventions” négalifs pendant les années 1960-61 à 1969-70 el que les taux Américains demeurerent positifs durant la même période. Ces résultats nous donnent la dimension du désavantage causé aux exportalions Canadiennes de farine par les primes ?exporiations accordees aux gros compétiteurs.     

Income Tax, Property Tax, and Tariff in a Small Open Economy

Why do some countries enjoy high economic growth rates while some suffer in “low-growth traps”? Why are tax policies in different countries so different? Some suggest that it is exactly these differences in government policies which contribute to the difference in economic growth rates. This paper considers a small open economy which sustains its economic growth by adopting new technologies. When the value of initial wealth is “relatively small,” policies which promote growth most result in the highest welfare. In other cases, policies that discourage growth most may be welfare-maximizing.     

A SAM for Europe: Problems and Perspectives

This paper examines the conceptual and practical problems of constructing a social accounting matrix for Europe. It involves integrating the accounts of member countries within a complete system of regional accounts. The standard matrix framework first proposed by Stone is modified in two respects. First, functional and geographical transactions are distinguished between in order to simplify the accounting structure. Secondly, supraregional accounts are more formally incorporated so as to include accounts for the rest of the world and EC institutions, as well as to accommodate distribution and other transaction costs involved in moving goods, factors and assets between member countries. The general system of regional accounts can then be aggregated, consolidated or apportioned across member states but this has implications for both harmonizing accounts and classifications and considering the extent to which there is truly a ‘single European market’. Finally, the paper considers the availability of data and presents a preliminary compilation of aggregate accounts for three member countries.     

Demand for Sport

This article reviews international literature on the demandfor professional sport. The first part presents a conceptualframework for understanding the sources and determinants ofthe demand for professional sporting contests. The second partreviews empirical evidence on key determinants of attendanceat sporting events, and on other sources of demand, such asbroadcasting, sponsorship, and merchandising. The review concludesthat there is still much to be learned about demand for professionalsport, and that there are no simple lessons to be drawn fromexisting literature. But important messages do emerge from studiesof demand for attendance with regard to effects of uncertaintyof outcome, quality of contest, and quality of viewing.