Examination of the Equivalent Relationship between the Two Credit Policy Decision Approaches: The Opportunity Cost and NPV Approaches

The net benefits resulting from credit policy decisions can be evaluated based on either the opportunity cost approach or the net present value (NPV) approach. It is known that the two approaches are equivalent in that they provide the same accept/reject decision. Consequently, most text books cover the opportunity cost approach which is much simpler to formulate. This paper reexamines the equivalent relationship based on the NPV models formulated under a capital budgeting framework, and shows that the equivalent relationship only holds for very restrictive conditions. Also, the discount rate for the NPV models is examined along with other models.     

国际视域下德国科学计量学影响力研究

2019年普赖斯奖获得者是德国科学计量学家LutzBornmann，至此在30位普赖斯奖获得者中，德国共有两位学者获此殊荣，反映了德国科学计量学研究在国际上的重要地位。因此，有必要对德国科学计量学发展及国际影响力进行研究。以Scientometrics期刊数据以及施引文献作为数据来源，通过使用词频分析、战略坐标图、文献计量分析、Python爬虫方法、引文分析展现德国科学计量学在国际舞台上的战略地位。结果发现，第一阶段德国科学计量学发展处于较为领先的地位，但第二阶段稍逊于第一阶段。德国在科学计量学领域的发展有较为明显的领头羊效应，即第一、第二阶段都有一家机构、一名学者一枝独秀，引领德国乃至世界科学计量学发展。     

The Good,the Bad and the Ugly: Employment Relations In New Non-Union Workplaces1

David Guest, who is Professor of Occupational Psychology at Birkbeck College, and Kim Hoque, who is Research Officer in the Centre for Economic Performance at the London School of Economics and Political Science, draw on a postal survey of nearly 350 new establishments to consider their propensity to unionise, to adopt practices associated with HRM, and to deliver a number of performance outcomes. Key findings are that not only were there examples of the ‘good’, the ‘bad’ and the ‘ugly’ so far as practice generally was concerned, but also that those establishments which used HRM practices extensively tended to report better results in terms of a number of both employee relations and performance outcomes.     

Internal Funds Allocation and the Ownership Structure: Evidence from Korean Business Groups

We examine the relationship between the controlling shareholder’s cash flow rights and the funds transfer in the internal capital market within Korean business groups (chaebols) during the period from 1998 to 2001. We find that the funds allocation in the firms where controlling shareholders have high cash flow rights is better aligned with the investment opportunities and therefore, more efficient than in the firms where they have low cash flow rights. This effect is stronger when they have controlling powers large enough to expropriate minority shareholders. However, during the financial crisis period, funds simply move toward the firms where controlling shareholders have high cash flow rights. The results evidence the tunneling behavior in the internal capital market within a chaebol that the ownership structure distorts the allocation of internal funds in such a way as to benefit the controlling shareholders.JEL Classification: G31, G30     

Determinants of stock market volatility and risk premia

Summary. We show the dynamics of diverse beliefs is the primary propagation mechanism of volatility in asset markets. Hence, we treat the characteristics of the market beliefs as a primary, primitive, explanation of market volatility. We study an economy with stock and riskless bond markets and formulate a financial equilibrium model with diverse and time varying beliefs. Agents states of belief play a key role in the market, requiring an endogenous expansion of the state space. To forecast prices agents must forecast market states of belief which are beliefs of others hence our equilibrium embodies the Keynes Beauty Contest. A market state of belief is a vector which uniquely identifies the distribution of conditional probabilities of agents. Restricting beliefs to satisfy the rationality principle of Rational Belief (see Kurz, 1994, 1997) our economy replicates well the empirical record of the (i) moments of the price/dividend ratio, risky stock return, riskless interest rate and the equity premium; (ii) Sharpe ratio and the correlation between risky returns and consumption growth; (iii) predictability of stock returns and price/dividend ratio as expressed by: (I) Variance Ratio statistic for long lags, (II) autocorrelation of these variables, and (III) mean reversion of the risky returns and the predictive power of the price/dividend ratio. Also, our model explains the presence of stochastic volatility in asset prices and returns. Two properties of beliefs drive market volatility: (i) rationalizable over confidence implying belief densities with fat tails, and (ii) rationalizable asymmetry in frequencies of bull or bear states.This research was supported by a grant of the Smith Richardson Foundation to the Stanford Institute for Economic Policy Research (SIEPR). We thank Kenneth Judd for constant advice which was crucial at several points in the development of this work. We also thank Kenneth Arrow, Min Fan, Michael Magill, Carsten Nielsen, Manuel Santos, Nicholas Yannelis, Ho-Mou Wu and Woody Brock for comments on earlier drafts. The RBE model developed in this paper and the associated programs used to compute it are available to the public on Mordecai Kurzs web page at http://www.stanford.edu/ mordecai.This revised version was published online in January 2005 with corrections to the Cover date.     

Money and inflation in Germany: A cointegration analysis

This paper analyses the relation between money and inflation in Germany in a cost-push/demand-pull model of an open small economy by means of cointegration methods. The full-information-maximum-likelihood method of Johansen as well as structural methods are applied to datasubsets and the full data set. The focus of the paper is on tests for overidentifying restrictions and for weak and strong exogeneity within these data sets. The result of the paper is that the money stock, the price level and gross national product are endogenous whereas the interest rate and the real import price are both weakly and strongly exogenous. By means of the price cointegration relation we illustrate how monetary targeting should react to imported inflation.     

Hysteresis vs. natural rate of US unemployment

This paper investigates the stochastic nature of the unemployment rate allowing for cross-section dependence from a panel of US state-level data. We first employ the PANIC method to identify the common and idiosyncratic components. Powerful recursive mean adjustment (RMA) methods are used to test for unit roots. We find significant evidence of a nonstationary common component when the data from the most recent recession are included. Even when stationarity is empirically supported, the bias-corrected half-life of the common component appears very long, casting doubt on the usefulness of the natural rate hypothesis.     

Underwriter syndication and corporate governance

The main purpose of this paper is to examine underwriters’ response to issuers’ ineffective corporate governance. Given the growing importance of corporate governance for the success of equity offerings, we examine this response using a sample of seasoned equity offerings (SEOs). Previous studies suggest various rationales behind underwriter syndication, such as risk sharing, market-making, information production, certification, and monitoring. We offer an information-asymmetry-reduction hypothesis for the persistence of underwriter syndication. We argue that less effective corporate governance decreases information credibility, which, in turn, increases information asymmetry, leading underwriters to increase syndicate size to mitigate subsequent agency problems. Consistent with this prediction, we find that the size of the underwriter syndication is inversely related to proxies that measure the effectiveness of corporate governance. Results remain robust even after controlling for other confounding factors.     

Fair Value and Risk Profile for Presale Contracts of Condominiums

Developers usually presell new condominiums, requiring purchasers to make down payments on a contract that allows them to purchase, at a fixed price, the finished condominiums on a later date. This presale contract is akin to a financial call option sold by the builder to the purchaser of the condo. In this paper, we value the presale contract from both the purchaser’s and the developer’s points of view. We examine the influence of various opt-out clauses, different interest rates and other factors on the value of presale contracts. We discuss the extent of risk sharing between the purchasers and the developers according to varying levels of down payments. We conclude that developers enjoy a reduction in risk without a corresponding reduction in expected profits by holding a presale.