Bank ownership and cost efficiency: New empirical evidence from Russia

This paper investigates the cost efficiency of Russian banks with regard to their heterogeneity in terms of ownership form, capitalization and asset structure. Using bank-level quarterly data over the period 2005–2013, we perform stochastic frontier analysis (SFA) and compute cost efficiency scores at the bank and bank group levels. We deduct from gross costs the negative revaluations of foreign currency items generated by official exchange rate dynamics rather than by managerial decisions. The results indicate that the core state banks, as distinct from other state-controlled banks, were nearly as efficient as private domestic banks during and after the crisis of 2008–2009. Foreign banks appear to be the least efficient market participants in terms of costs, which might reflect their lower (and decreasing over time) penetration of the Russian banking system. We further document that the group ranking by cost efficiency is not permanent over time and depends on the observed differences in bank capitalization and asset structure. We find that foreign banks gain cost efficiency when they lend more to the economy. Core state banks, conversely, lead in terms of cost efficiency when they lend less to the economy, which can result from political interference in their lending decisions in favor of unprofitable projects Private domestic banks that maintain a lower capitalization significantly outperform foreign banks and do not differ from the core state banks in this respect.     

Substituting Distribution for Growth: The Political Logic of Intergovernmental Transfers in the Russian Federation

Given limited resources and economic realities, how do politicians distribute monetary transfers in order to retain office? Previous work has largely focused on two models – a core model of rewarding loyal supporters and a swing model of purchasing the support of easily swayed voters. Empirical results have proven mixed, however. In this article, we argue that these mixed results are due to economic factors, which condition politicians' distributive strategies. In our model, we consider that politician and voters are involved in a repeated game, where past expectations condition future strategy. Current (core) supporters who receive few benefits and perceive themselves worse off than other, less loyal, groups are likely to be less loyal themselves tomorrow. In our model, politicians avoid this by providing their supporters consumption benefits directly, in the form of transfers, or indirectly, via strong economic growth. Where economic growth is good, politicians can distribute less to core supporters, who benefit from the rising economy. Where economic growth is weak, however, politicians make transfers to their core supporters to ensure future loyalty. We test our theory using data on federal transfers from the Russian Federal government to 78 Russian Regions from 2000–2008.     

Impact of bitcoin futures on the informational efficiency of bitcoin spot market

This study examines the informational efficiency of the bitcoin spot market by evaluating the predictive power of mechanical trading rules designed to exploit price continuation. Significant return predictability is found until the introduction of bitcoin futures in December 2017. The forecasting ability of trend‐chasing trading rules declines dramatically afterwards. Although evidence suggests that the introduction of bitcoin futures has increased the informational efficiency of the bitcoin spot market, no signs of improvement in informational efficiency are found in ethereum, the second‐largest cryptocurrency—following the introduction of bitcoin futures.     

Using Real Activities to Avoid Goodwill Impairment Losses: Evidence and Effect on Future Performance

We examine whether managers postpone the recognition of goodwill impairment by manipulating cash flows and the consequences of such a strategy on future performance. According to SFAS 142, an impairment loss must be recognized if the reporting unit's total fair value to which goodwill has been allocated is less than its book value. A growing body of empirical evidence shows that managers delay the recognition of goodwill impairment in accounting books. However, past literature is silent on how managers convince various gatekeepers (e.g., auditors, financial analysts) that recognizing an impairment loss is unnecessary although it seems economically justified. SFAS 142 requires managers to forecast future cash flows to justify the decision to recognize, or not, an impairment loss. Therefore, we predict that managers manipulate upward current cash flows to support their choice to avoid reporting an impairment loss. We also test whether or not this real earnings management is detrimental to future performance. Based on a sample of US firms over the period 2003–2011, we document that firms suspected of postponing goodwill impairment losses exhibit significantly positive discretionary cash flows compared to various control groups. We also find that this real activities manipulation is detrimental to future performance.     

Historical simulation approach to the estimation of stochastic discount factor models

We propose an approach to the estimation of the parameters of stochastic discount factor (SDF) models which is based on the idea that the next period joint distribution of the variables in a SDF and asset returns can be well approximated by their joint historical distribution. The estimates of the SDF parameters may therefore be found as the values of the parameters at which the mean of the historical distribution of the product of the SDF with an asset return equals one. Each time period, the estimates are updated using the most recent periods of data and hence can change over time. This method can be viewed as an alternative to the approaches that specify a particular functional form relating the SDF parameters to proxies for the state of the world.     

Pluralism or isolation of Civilisations? Russia's foreign policy discourse and the reception of Huntington's paradigm of the post‐cold war world

This paper studies the effects of Samuel Huntington's ‘Clash of Civilisations’ thesis on Russian foreign policy discourse. In response to Huntington's thesis, two major currents of Russia's foreign policy thinking ‐ Liberals and Nationalists ‐ are identified, both of which are critical of the thesis. The two groups offer diametrically opposed alternatives to Huntington's paradigm of the post‐Cold War world. The Liberal‐Nationalist controversy reflects Russia's debates about its own political identity and provides us with a rich and informative understanding of the process of identity formation. By identifying Russia's various reactions to the ‘Clash of Civilisations’ thesis, the paper identifies potential influences of various currents in Russian foreign policy thinking on the country's future foreign policy. It also suggests some implications for further studies of cultures/civilisations in international politics.     

Analysis of a threshold dividend strategy for a MAP risk model

We consider a class of Markovian risk models in which the insurer collects premiums at rate c₁(c₂) whenever the surplus level is below (above) a constant threshold level b. We derive the Laplace-Stieltjes transform (LST) of the distribution of the time to ruin as well as the LST (with respect to time) of the joint distribution of the time to ruin, the surplus prior to ruin, and the deficit at ruin. By interpreting that the insurer pays dividends continuously at rate c₁?c₂ whenever the surplus level is above b, we also derive the expected discounted value of total dividend payments made prior to ruin. Our results are obtained by making use of an existing connection which links an insurer's surplus process to an embedded fluid flow process.     

Computer-assisted analysis of public discourse: a case study of the precautionary principle in the US and UK press

Content analysis of newspaper publications has become a major scientific method of the analysis of public discourse. Within the framework of content analysis, we suggest a computer-assisted method to extract the most important topics of this discourse in an objective, quantifiable manner. The method combines frequency and proximity analysis of the text population, selection of the key words, text modification based on a key word dictionary, factor analysis of the modified text population, and factor interpretation. We illustrate the concept by applying the method to study the major topics discussed in the US and UK prestige press that relate to the precautionary principle. Precautionary principle is a concept of preventing environmental damage under scientific uncertainty. The analysis demonstrates the difference between the major topics of the precautionary principle discussion in the US and UK press. In the US, it revolves around an emphasis on the action on global warming, international trade on genetically modified food, environment pollution, the risks of new technologies, and cost-benefit analysis (CBA). In the UK, the major discussion topics include threats to agriculture and farmers, climate change economics, national and EU regulations, and commercial fishing. Other discussion topics, such as health and pollution, water safety regulations, meat safety and trade, and GMO regulations are shared between the countries. The US sample demonstrates more negative views towards the precautionary principle, which is presented as a threat to the US economic interests.     

Judicial Reform

A review of the evidence on judicial reform across countriesshows that those seeking to improve economic performance shouldnot focus on judicial efficiency alone but on independence aswell. It also shows that the level of resources poured intothe judicial system and the accessibility of the system havelittle impact on judicial performance. Most of the problem ofjudicial stagnation stems from inadequate incentives and overlycomplicated procedures. Incentive-oriented reforms that seekto increase accountability, competition, and choice seem tobe the most effective in tackling the problem. But incentivesalone do not correct systematic judicial failure. Chronic judicialstagnation calls for simplifying procedures and increasing theirflexibility.