Design of optimal policies: A variable structure control approach

This paper introduces methods of variable structure control (VSC) theory to economists. The VSC design is based on closed loop optimal control solutions. It is shown that VSC can yield stable solutions in the presence of parameter errors whereas conventional closed loop optimal control solutions become unstable. The methodology is applied to a simple economic model.The authors wish to thank John Burkett and Berc Rustem for constructive comments on earlier versions of the paper.     

Investment opportunity set,political connection and business policies of private enterprises in China

The main purpose of this paper is to examine the factors that determine the business policies of private enterprises in the People’s Republic of China. Little is known about these private enterprises although these are surpassing the state-owned enterprises to become the most important corporate sector in China. The phenomenal growths of these enterprises provide an interesting setting to study the effect of the investment opportunity set (IOS) on business policies. We also examine how a firm’s political connection, generally believed to be instrumental to a firm’s success in transition economies, affects its business policies. We provide evidence on the importance of these factors in shaping the private firms’ business policies in China. More specifically, our results show that growth firms pay lower dividends, have lower overdue receivables relative to sales, have higher percentage of bonus shares, and are more likely to engage in joint ventures. In addition, firms with better political connection are able to borrow more, are more likely to establish a board of directors, and are more likely to acquire SOEs. These results have policy implications with regard to private enterprises in transitional economies in general and those in China in particular.     

The role of cross-listing,foreign ownership and state ownership in dividend policy in an emerging market

In this paper, we investigate if dividend policy is influenced by ownership type. Within the dividend literature, dividends have a signaling role regarding agency costs, such that dividends may diminish insider conflicts (reduce free cash flow) or may be used to extract cash from firms (tunneling effect) – which could be predominant in emerging markets. We expect firms with foreign ownership and those that are listed in overseas markets to have different dividend policies and practices than those that are not, and firms with more state ownership and less individual ownership to be more likely to pay cash dividends and less likely to pay stock dividends. Using firms from an emerging economy (China), we examine whether these effects exist in corporate dividend policy and practice. We find that both foreign ownership and cross-listing have significant negative effects on cash dividends, consistent with the signaling effect and the notion of reduced tunneling activities for firms with the ability to raise capital from outside of China. Consistent with the tunneling effect, we find that firms with higher state ownership tend to pay higher cash dividends and lower stock dividends, while the opposite is true for public (individual) ownership. Further analysis shows that foreign ownership mediates the effect of state ownership on dividend policy. Our results have significant implications for researchers, investors, policy makers and regulators in emerging markets.     

An exploratory study of the personal value systems of city managers

Little attention has been given by researchers in organizational behavior to the study of public managers' values and how these values affect their managerial behavior. Therefore, the major objective of this study was to identify the personal value systems and value profiles of public managers, and to systematically examine and discuss the relationship between personal values and related organizational behavior including decision making. The significance of the findings for public policy is briefly discussed, and the need for future research is indicated.Sami M. Abbasi is Associate Professor of Management at Middle Tennessee State University. He has presented papers, appeared on panels, chaired sessions, and reviewed papers for both regional and national meetings of the American Institute for Decision Sciences and the Academy of Management. His research interests include strategy implementation, strategy-environment interaction, business-government relationships, and global management. Kenneth W. Hollman is Professor of Economics and Finance at Middle Tennessee State University. His publications have appeared in these journals: Journal of Small Business Management, Journal of Insurance Issues and Practices, CLU Journal, and CPCU Journal. Dr. Hollman holds the Martin Chair of Insurance.     

A comparison of the poverty impact of transfers, taxes and market income across five OECD countries

This paper compares the poverty reduction impact of income sources, taxes and transfers across five OECD countries. Since the estimation of that impact can depend on the order in which the various income sources are introduced into the analysis, it is done by using the Shapley value. Estimates of the poverty reduction impact are presented in a normalized and unnormalized fashion, in order to take into account the total as well as the per dollar impacts. The methodology is applied to data from the Luxembourg Income Study database.     

Corruption and public spending on education and health

Existing country and regional studies show that the effect of corruption on public spending on health and education is mixed. This letter reveals that the effect of corruption on health and education spending is significant and non-linear in a panel of 134 countries observed over two decades: For an overwhelming majority of countries, corruption has a positive effect on the share of public resources spent on public health and a negative effect in the case of education. The results presented are robust to several econometric challenges ignored in the literature.     

Assessing the Effect of Trade Openness on Health in the MENA Region: a Panel Data Analysis

This study examines the effect of trade openness on the health outcomes of 12 countries in the MENA (Middle East and North Africa) region: Algeria, Bahrain, Egypt, Jordan, Morocco, Kuwait, Oman, Qatar, Saudi Arabia, Tunisia, Turkey, and the UAE. By using a panel data investigation over 1970–2015, we check whether the trade of these countries with developed economies (using the proxy of G7 countries) and the rest of the world affects life expectancy and the infant mortality rate. We also assess the moderating effect of governmental corruption. Our findings show two interesting results. First, trade openness has a positive effect on health in the MENA region as it reduces the infant mortality rate and boosts life expectancy for both men and women. Second, better control over corruption and more focus on trade with developed countries would lead to more technology and information spillovers, which positively affect the health sector.     

Terrorism and Stock Market Sentiment

This paper examines the effects of terrorism on stock market sentiment by focusing on the behavior of expected probability density functions of the FTSE 100 index around terrorist attacks. We find that terrorism has a strong adverse impact on stock market sentiment. In particular, terrorist attacks are found to cause a pronounced downward shift in the expected value of the FTSE 100 index and a significant increase in stock market uncertainty. Furthermore, our results show that the expected FTSE 100 probability densities became significantly more negatively skewed and fat‐tailed in the immediate aftermath of terrorist acts.