Determinants of Bank Debt in a Continental Financial System: Evidence from Spanish Companies

We test hypotheses about the structure of corporate debt ownership and the use of bank debt by firms in a civil‐law country, Spain. We focus on bank debt effects in the presence of information asymmetries and agency costs, and on efficient versus inefficient firm liquidation. We find that the relation between growth opportunities and bank financing is not as strong as the one found in common‐law countries, that there is a positive relation between firm size and the proportion of bank debt used, and that firms closer to bankruptcy and highly leveraged are more likely to use bank debt.     

Is value creation consistent with currency hedging?

This paper analyzes value creation through currency hedging in the Spanish market. The results show that the hedging with derivatives generated an average premium of 1.53% and that foreign currency debt generated 7.52%, with respect to company value approximated by Tobin's Q, while operational hedging does not affect company value. Moreover, in half of the observations corresponding to companies that hedged with derivatives, the value premium was between 0.08% and 0.99%. In the case of foreign currency debt, the range was between 1.79% and 10.37%. It demonstrates that the contribution of currency hedging to company value fluctuates considerable according to the volume of financial hedging. Thus, an empirical study of this aspect which only analyses the decision to hedge through dummy variables to define financial hedging, as empirical previous studies, can lead to biased results in terms of estimated premium amounts, because it assumes a homogenous treatment of companies regardless of hedging volumes.     

Managing financial constraints: undercapitalization and underwriting capacity in Spanish fire insurance

Reinsurance is a vital financial device for enhancing underwriting capacity, ceding risks, and mitigating financial distress. By supplying financial resources and services, reinsurance can facilitate growth and expansion in the insurance business. Focusing on the insurance sector in the emerging Spanish economy and using a novel dataset on fire insurance companies, this article examines the role of fire insurance in the national capital formation, the importance of reinsurance as a vehicle for expanding the country's domestic underwriting capacity, and how the import of capital impacted on the balance of payment, from the introduction of the first comprehensive legislation regarding insurance in 1908 to the outbreak of the Civil War in 1936. Considering the situation of undercapitalization, the singularities of the insurance market, and the changes in regulatory schemes, we find that foreign reinsurance became a key financial vehicle for increasing underwriting capacity in Spain. We also show the struggle of an emerging market to find ways to keep the balance of current accounts and raise capital when financial infrastructure was underdeveloped. The diffusion of reinsurance networks from the core of industrial western countries towards emerging economies was one of the mechanisms for financial modernization on a global scale.     

From the Holocene to the Anthropocene: A historical framework for land cover change in southwestern South America in the past 15,000 years

The main forest transitions that took place in south-central Chile from the end of the last glaciation to the present are reviewed here with the aim of identifying the main climatic and socio-economic drivers of land cover change. The first great transition, driven primarily by global warming, is the postglacial expansion of forests, with human populations from about 15,000 cal. yr. BP, restricted to coastlines and river basins and localized impact of forest fire. Charcoal evidence of fire increased in south-central Chile and in global records from about 12,000 to 6000 cal. yr. BP, which could be attributed at least partly to people. The subsequent expansion of agriculture led to much clearing of forests and the spread of weeds and other indicators of open habitats. The Spanish colonial period in America may have been followed by a transient expansion of forest cover into abandoned land, as indigenous population declined rapidly due to disease and slaughter. The 18th and 19th centuries brought about extensive loss of forests due to the massive impact of lumber extraction for mining operations both in central Chile and in western North America. Two centuries of intensive deforestation, coupled to grazing by cattle and extremely variable rainfall had long-lasting effects on forest cover in south-central Chile, which persist until today. The transition from a preindustrial to an industrial society brought about the “golden age” of timber harvest, assisted by mobile sawmills and railway transportation since the late 1800s. These advances led to the exhaustion of native commercial timber by the late 20th century in south-central Chile. In North America, harvestable stands were exhausted in New England and the Midwest around 1920. Settlement of the independent territories in the late 1800s and early 1900s implied vast burning and clearing of land and mounting soil erosion. Industrial forestry, based on government-subsidized massive plantations of short-rotation exotic trees, developed in the late 20th century, in connection with postindustrial displacement of exploitative activities from developed to third-world nations. In the last two decades, economic globalization and free trade promoted the expansion of new crops and further decline of woodlands, despite modest increases in forest cover. These patterns are repeated in many Latin American countries. To prevent further depletion of native forest resources and to provide an insurance against climate change, in the 21st century developing nations should aim at: (1) relocating subsidies from fiber farms to restoring diverse forest cover, (2) promoting ecosystem management of diverse forest and crops within landscapes, and (3) fostering diverse cultural relationships between people and their land.     

Landowner net benefit from Stone pine (Pinus pinea L.) afforestation of dry-land cereal fields in Valladolid,Spain

This analysis measures the net benefit that a landowner could obtain from changing current dry-land cereal fields into Stone pine plantations in Portillo and Viana (Valladolid, Spain). We apply cost–benefit analysis techniques to estimate the present value of Stone pine afforestation net benefit by considering an infinite series of forestry rotations. We simulate three Stone pine silviculture models at each of the two sites. In addition, we estimate landowner extended net benefits from Stone pine afforestation when we consider a hypothetical payment for the carbon sequestration service. Results show that, when government subsidies are included, Stone pine afforestation only offers positive landowner net benefit in Portillo when both medium and high-stocking silviculture models are applied. Taking into account carbon prices up to €45 tC^?1 (€12.3 tCO₂^?1), Stone pine afforestation gives landowner positive extended net benefits for the three silviculture models simulated at the Portillo and Viana sites.     

Remittances and the Dutch disease

Using data for El Salvador and Bayesian techniques, we develop and estimate a two-sector dynamic stochastic general equilibrium model to analyze the effects of remittances on emerging market economies. We find that, whether altruistically motivated or otherwise, an increase in remittance flows leads to a decline in labor supply and an increase in consumption demand that is biased toward non-tradables. The higher non-tradable prices serve as incentive for an expansion of that sector, culminating in reallocation of labor away from the tradable sector — a phenomenon known as the Dutch disease. Quantitative results also indicate that remittances improve the welfare of households because they smooth income flows and increase consumption and leisure levels. A BVAR analysis provides results that are consistent with the dynamics of the model.     

On the impossibility of representing infinite utility streams

We introduce a new Pareto-type criterion for social welfare functions over infinite utility streams that is not necessarily sensitive to increments in just a finite number of components. We show that there is no social welfare function that satisfies both this criterion and Diamond’s equity condition simultaneously. With our result, we extend the impossibility theorem of Basu and Mitra. Moreover, we show that, even under a weaker version of equity related to Zame’s intergenerational equity condition, the impossibility results are obtained as well.     

A market game approach to differential information economies

In this paper we recast a differential information economy as a strategic game in which players propose net trades and prices. Pure strategy Nash equilibria are strong and determine both consumption plans and commodity prices that coincide with the Walrasian Expectations equilibria of the underlying economy. The authors acknowledge support by research grants BEC2003-09067-C04-01 (Ministerio de Educación y Ciencia and FEDER), PGIDT04XIC30001PN (Xunta de Galicia) and SA070A05 (Junta de Castilla y León). JP Torres-Martínez is also grateful to CNPq-Brazil and University of Vigo for financial support. We are indebted to N.C. Yannelis for helpful comments and insights.