Anticipating independence,no premonition of partition. The lessons of bank branch expansion on the Indian subcontinent, 1939 to 1946

We examine investment in bank branches on the Indian subcontinent in 1939 and 1946. In 1947, the states of India and Pakistan were created from the erstwhile colony of British India. Partition was destabilizing to both economies. We use branch expansion as a proxy for entrepreneur's pre‐partition predictions of the future of these regions. Our results indicate there were no premonitions of economic dislocation. Banks tended to deepen their presence in regions which were already developed. But controlling for the level of 1931 development, branch placement was highest in exactly those regions, Bengal and the Punjab, which were to experience the greatest negative consequences from political division. After 1947, multiple banks failed; most failing banks were registered in the Punjab or Bengal region. In United India, businessmen saw as much promise in regions which were to become Pakistan as in regions which were to become India. After partition, the Pakistan regions were immediately more economically fragile. This event provides a general lesson. Economic integration had intensified over the years of British rule. The abrupt stop to integration harmed especially the smaller, less diversified region. Politicians should be wary of politically dividing regions which have evolved to function as integrated economic units.     

Liquidity commonality in commodities

We examine liquidity commonality in commodity futures markets. Using data from 16 agricultural, energy, industrial metal, precious metal, and livestock commodities, we show there is a strong systematic liquidity factor in commodities. Liquidity commonality was present in 1997–2003 when commodity prices were relatively stable and during the recent boom. There is some support for both “supply-side” and “demand-side” explanations for this commonality. We find no evidence of a consistent link between stock and commodity liquidity in general. Energy commodities appear to provide a better hedge against equity market liquidity risk than the other commodity families.     

ETF arbitrage: Intraday evidence

We use two extremely liquid S&P 500 ETFs to analyze the prevailing trading conditions when mispricing allowing arbitrage opportunities is created. While these ETFs are not perfect substitutes, our correlation and error correction results suggest investors view them as close substitutes. Spreads increase just before arbitrage opportunities, consistent with a decrease in liquidity. Order imbalance increases as markets become more one-sided and spread changes become more volatile which suggests an increase in liquidity risk. The price deviations are followed by a tendency to quickly correct back towards parity.     

What We Should Know About House Reconstruction Costs?

The Journal of Real Estate Finance and Economics - This paper presents two important analyses, which have been derived from a rich dataset supplied by an important Property & Casualty...     

Corporate governance and risk-taking: Evidence from Japanese firms

This paper examines the influence of corporate governance on the risk taking of Japanese firms. We show that family control and ownership concentration are associated with higher idiosyncratic risk, whereas bank control has the opposite effect. Considering the link between idiosyncratic risk and firm performance, the results provide an economic rationale for the higher (lower) performance of family-controlled firms (bank-controlled firms). The results also explain the higher performance of firms with concentrated ownership by relating their governance structures to the risk-taking strategies that generate greater competitive advantages. Finally, we show that the impact of governance structures on risk taking is stronger after controlling for endogeneity.     

The effect of foreign segment location on the geographical diversification discount

We study how the countries in which foreign segments are located affect the value of globally-diversified firms. We use the Heritage Foundation/Wall Street Journal Index of Economic Freedom and the World Bank's Financial Development and Structure database to characterize the locations of the foreign segments. We find that U.S. globally-diversified firms with foreign segments in countries with more entrepreneurs (i.e., Business Freedom) and a better investment environment (i.e., Investment Freedom) are associated with higher excess values. Our findings suggest that globally-diversified firms can add value by carefully selecting locations for their foreign segments in countries that rate highly on key indices of economic freedom. Our analysis of the World Bank's Financial Development and Structure factors shows that investors do not value highly U.S. globally-diversified firms with foreign segments in overseas locations that share the same “financial” characteristics as their home country. We attribute that to a lack of heterogeneity between parent- and foreign segment-country characteristics, thus nullifying the diversification benefits for the parent company's shareholders.     

The Plausibility of Agriculture-Led Development

Within the context of a simple dynamic general equilibrium framework, the model proposed in this paper formally characterizes the path in which a successful transformation in agriculture as a result of an improvement in agricultural technology can conceivably help some developing countries raise rural income, which in turn boosts effective demand for domestically produced, labor-intensive manufactured goods. Consequently, the price of nontraded manufactures goes up, leading to higher production in this sector, and subsequently higher wages. In the longer run, higher wage levels would result in larger aggregate savings, which in turn finances the economy's industrialization.     

Exploring Electronic Word-of-Mouth (eWOM) in The Consumer Purchase Decision-Making Process: The Case of Online Holidays – Evidence from United Kingdom (UK) Consumers

This study explores the role of electronic word-of-mouth (eWOM) in the consumer decision-making process when purchasing a holiday. Using an ethnographic approach, it explores the role of eWOM on consumers’ attitudes toward online reviews (eReviews) and their subsequent behavior. Across the consumer decision-making processes – information search, evaluation, and purchase – the study develops a conceptual framework with three eWOM dimensions: (1) motivation, (2) source, and (3) content. Findings explore the variations of eWOM’s influence across the decision-making stages with implications for theory and practice. The study further highlights implications for segmentation practices in the tourism industry.     

Are two brands better than one? Investigating the effects of co-branding in advertising on audience memory

Co-branded advertising, where advertisements feature two partnered brands from different categories, should ideally benefit both brands. We test this assertion by studying the effect of featuring a second brand in advertisements on ad and brand name memorability, and the role of category context on which brand is recalled. Our test covers online display advertisements for consumer-packaged brands paired with charity and retailer brands in three markets (USA, UK, and Australia). Independent sample comparisons across 54 brand pairs show that advertising two brands has a neutral effect on ad memorability and negative effect on brand memorability. Furthermore, the advertisement’s category context determines which of the brands is recalled. Our findings support a competitive interference theory of dual-brand processing, whereby the two brands compete for attention resources. The results have implications for the return on investment from advertising expenditure, which will vary substantively depending on whether the costs of advertising are shared or borne by one brand in the pair.