On the Economics of Subprime Lending

US mortgage markets have evolved radically in recent years. An important part of the change has been the rise of the subprime market, characterized by loans with high default rates, dominance by specialized subprime lenders rather than full-service lenders, and little coverage by the secondary mortgage market. In this paper, we examine these and other stylized facts with standard tools used by financial economists to describe market structure in other contexts. We use three models to examine market structure: an option-based approach to mortgage pricing in which we argue that subprime options are different from prime options, causing different contracts and prices; and two models based on asymmetric information–one with asymmetry between borrowers and lenders, and one with the asymmetry between lenders and the secondary market. In both of the asymmetric-information models, investors set up incentives for borrowers or loan sellers to reveal information, primarily through costs of rejection.     

Dynamic price discovery

This article analyzes the dynamic process of price discovery in a competitive securities market where investors are equally informed about the fundamental determinants of an asset's end-of-period value but, because they do not know each other's wealth positions, do not know the equilibrium price of shares at the start of a current trading session. Because a large number of participants is assumed, issues concerning market impact and market manipulation are avoided. As trading progresses, participants update their expectations of an asset's equilibrium value. As they do so, price can either converge to a new level or, following a run, revert back to a previous level. This implies that, in clusters of adjacent prices, price changes are more apt to be predominantly of like sign (positive or negative) than would be the case under random walk with a bid-ask spread. Moreover, reversals, when they do occur, should be larger than continuations. An examination of 1988 transactions data for the 30 Dow Jones Industrial stocks shows that this is indeed the case. With the effect of the bid-ask spread removed, first-order autocorrelation coefficients are found to be positive.     

Mortgage Prepayment and Default Decisions: A Poisson Regression Approach

This paper uses an extensive and geographically dispersed sample of single-family fixed rate mortgages to assess the prepayment and default behavior of individual homeowners. We make use of Poisson regression to efficiently estimate the parameters of a proportional hazards model for prepayment and default decisions. Poisson regression for grouped survival data has several advantages over partial likelihood methods. First, when dealing with time-dependent covar-iates, it is considerably more efficient in terms of computations. Second, it is possible to estimate full-hazard models which include, for example, functions of time as well as multiple time scales (i.e., age of the loan and calendar time), in a much more straightforward manner than partial likelihood methods for un-grouped data. Third, Poisson regression can be used to estimate non-proportional hazards models such as additive excess risk specifications. Taken together, our data and estimation methodology allow us to obtain a better understanding of the economic factors underlying prepayment and default decisions.     

A Discriminatory Mechanism to Reduce Urban Congestion

In this article, we propose an optimal mechanism to reduce congestion when information is asymmetric. Each car driver receives a quantity of traffic rights such that his adjusted marginal benefit is equal to the marginal cost of congestion and payments are based on willingness to pay. We show that the level of congestion achieved is lower and each car user can receive more or fewer rights than under complete information. With symmetric beliefs, the payment rule results from a second‐degree price discrimination. When beliefs are asymmetric, it results simultaneously from a second‐degree price discrimination and from a third‐degree price discrimination and high willingness‐to‐pay car users are discriminated against. The revenue raised can be used to reduce distortionary taxes, thereby gaining public acceptability.     

Sectoral employment effects of trade and productivity in Europe

The impact of trade and technology in the European case is assessed. A framework is developed which incorporates employment effects of (i) export expansion (ii) import competition and (iii) labour-saving productivity improvements. In this context, evidence is found for the hypothesis that international trade induces adjustments in technology.     

An evaluation framework for technology transfer of new equipment in high technology industry

With the rapid advancement of technology, product life cycle is shortening continuously. In order to compete against other firms in fiercely competitive global markets, a firm has to keep developing new technology to differentiate itself from others. The acquisition of new core-technology equipment is especially important for manufacturing advanced products, and the technology know-how of the equipment must be transferred completely from equipment supplier to engineers and operators of the firm to effectively utilize the equipment. The objective of this paper is to explore the technology transfer of equipment and to establish a comprehensive framework for evaluating and selecting new equipment with critical technology transfer. Influence factors for technology transfer of new equipment are first collected by literature review and interviews with related experts in the thin-film transistor liquid-crystal display (TFT-LCD) industry in Taiwan. Fuzzy Delphi method (FDM) is applied next to select the most critical factors. Then, interpretive structural modeling (ISM) is employed to determine the interrelationship among the critical factors. A fuzzy analytic network process (FANP) model is constructed to evaluate the technology transfer performance of equipment suppliers. The results of this study should provide a base for firms in evaluating the purchase of new equipment and a reference for equipment suppliers to strengthen their technology transfer process to their buyers.     

Taxes, Regulations, and the Value of U.S. and U.K. Corporations

We derive the quantitative implications of growth theory for U.S. corporate equity plus net debt over the period 1960–2001. There were large secular movements in corporate equity values relative to GDP, with dramatic declines in the 1970's and dramatic increases starting in the 1980's and continuing throughout the 1990's. During the same period, there was little change in the capital–output ratio or earnings share of output. We ask specifically whether the theory accounts for these observations. We find that it does, with the critical factor being changes in the U.S. tax and regulatory system. We find that the theory also accounts for the even larger movements in U.K. equity values relative to GDP in this period.     

Organizational Culture and Environmental Activity Management

This study uses the mail survey approach to examine the association between four of the Organizational Culture Profile dimensions of O'Reilly et al. (1991) (teamwork, innovation, outcome orientation and attention to detail) and the adoption of environmental activity management (EAM). The findings indicate that three dimensions of organizational culture (teamwork, innovation and attention to detail) exhibit an association with specific dimensions of EAM. Specifically, teamwork is positively associated with the extent of use of environmental activity analysis, innovation is positively associated with the extent of use of both environmental activity cost analysis and environmental activity‐based costing (EABC) and attention to detail is positively associated with extent of use of EABC. The findings contribute to the contingency literature examining the factors influencing the adoption of environmental cost initiatives by providing managers with an insight into the organizational culture that is conducive to the implementation of EAM. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment     

Exports, Returns to Scale, and Total Factor Productivity: The Case of Taiwanese Manufacturing Industries

The paper examines the relevance of international scale economies and international market efficiency of trade based on the firm-level data of Taiwanese manufacturing industries. The author first constructs a simple analytical framework to measure the extent of scale economies and total factor productivity for each firm. The measurements of scale economies and total factor productivity are then used to investigate the relationships among exports, scale economies, and productivity. Significant external scale economies associated with exports and a strong positive relationship between the individual firm's productivity and its own export intensity are observed.     

Executive development in China: is there any in a Western sense?

A recurring theme in the literature on Chinese management has been the impact of culture and, in particular, the influence of values derived from Confucianism on Chinese management practices. The reforms that led to foreign direct investment (FDI), the problems of State-owned enterprises (SOEs), the social, political and economic changes and analyses of Chinese managerial styles and performance have been the major concerns. There has been less attention specifically paid to Chinese managers' characteristics and to managerial career patterns, which may be shaped by national culture and values. In contrast, in the West, there is a vast body of literature covering career theories and managerial growth, dealing variously with personal values and other factors, such as family upbringing, education, social background and employment structure, that have major impacts on managers' career pathways. This paper explores how far executive career development in modern China (PRC) corresponds to Western notions, and also tries to determine whether there are specific factors relating to Chinese executives' personal biographies and career paths. A pilot study was carried out to identify the variables that might shed light on career patterns and, if possible, to profile the Chinese manager. A number of emergent themes are described. They derive from the experience of individual interviewees who took part in the pilot research, which was conducted in Beijing and Shanghai and in which forty-nine managers in forty-two companies were interviewed. These pilot interviews revealed a complex interplay of biographical data and career themes. Of clear importance was the guanxi mechanism (direct or indirect personal relationship to solicit favours) which has no exact comparison in the West and which does not figure in Western career theories. A preliminary tentative Chinese executive career model has been developed.