A multivariate statistical analysis of the characteristics of problem firms in Hong Kong

This paper presents a two-group discriminant analysis of the characteristics of problem firms in Hong Kong. The purpose of this study is to identify and describe the common financial characteristics which distinguish problem firms from nonproblem firms.Benjamin Y.K. Tai is a Professor at the Department of Accountancy, California State University, Fresno. Lawrence S.T. Tai is a Lecturer at the Department of Accounting & Finance, The Chinese University of Hong Kong.     

ITC voting behavior on sunset reviews

This paper is the first attempt to analyze ITC Commissioner voting behavior on sunset reviews of antidumping cases. Sunset determinations entail greater complexity than initial antidumping investigations because ITC commissioners must account for the impact of dumping protection as well as competitive forces on industry conditions. Empirical findings indicate that ITC voting is based on both sunset regulation and nonstatutory factors. Results reveal apparent biases against Chinese competitors and poorer nations generally, and favorable treatment toward U.S. steel producers and high-wage industries. There is also evidence of preferential treatment of industries located in states of Senate oversight committee members. JEL no. F13     

The Coal Crisis in Appalachia: Agrarian Transformation,Commodity Frontiers and the Geographies of Capital

Capital's commodity frontiers strategy has at once woven together regional differences within an expanding world‐system and remade the productive and reproductive activities of humans and the rest of nature. The development of successive commodity frontiers gave way to long waves of economic expansion that have been pivotal to accelerating accumulation and transcending capital's recurrent crises. In short, commodity frontiers are constitutive of world‐ecological moments premised on booms and crises of accumulation. In this paper, I examine the coal commodity frontier in Appalachia, to illustrate the region's history as one of succeeding frontiers in and out of the region over the long twentieth century of American capitalism. I argue that the origin of Appalachia's coal frontier was decisively made through the nineteenth‐century agricultural revolution expressed outside of the region. Appalachia's full‐fledged development was an outcome of capital's under‐reproduction strategies. The crisis of the region's frontier turned on a lack of surplus from under‐reproduction strategies, competing coal basins, economic diversification and competing energy sources. I find that the commodity frontier concept not only illuminates regional political economies and ecologies of difference, but also explains the production of nature of historical capitalism.     

Does nonagricultural labor relax farmers’ credit constraints? Evidence from longitudinal data for Vietnam

We examine the relationship between participation in nonagricultural labor activities and farming production decisions, focusing on the use of inputs. Using longitudinal data for Vietnam from 1993 to 1998, we find that households engaged in nonagricultural labor spend significantly more on seeds, services, hired labor, and livestock inputs. This is consistent with the hypothesis that nonagricultural labor income relaxes credit constraints to farming.     

Bias from Farmer Self‐Selection in Genetically Modified Crop Productivity Estimates: Evidence from Indian Data

In the continuing debate over the impact of genetically modified (GM) crops on farmers of developing countries, it is important to accurately measure magnitudes such as farm‐level yield gains from GM crop adoption. Yet most farm‐level studies in the literature do not control for farmer self‐selection, a potentially important source of bias in such estimates. We use farm‐level panel data from Indian cotton farmers to investigate the yield effect of GM insect‐resistant cotton. We explicitly take into account the fact that the choice of crop variety is an endogenous variable which might lead to bias from self‐selection. A production function is estimated using a fixed‐effects model to control for selection bias. Our results show that efficient farmers adopt Bacillus thuringiensis (Bt) cotton at a higher rate than their less efficient peers. This suggests that cross‐sectional estimates of the yield effect of Bt cotton, which do not control for self‐selection effects, are likely to be biased upwards. However, after controlling for selection bias, we still find that there is a significant positive yield effect from adoption of Bt cotton that more than offsets the additional cost of Bt seed.     

PETROZUATA: A CASE STUDY OF THE EFFECTIVE USE OF PROJECT FINANCE

Companies are increasingly using project finance to fund large-scale capital expenditures. In fact, private companies invested $96 billion in project finance deals in 1998, down from $119 billion in 1997 largely due to the Asian crisis, but up more than threefold since 1994. The decision to use project finance involves an explicit choice of organizational form as well as financial structure. With project finance, sponsoring firms create legally distinct entities to develop, manage, and finance the project. These entities borrow on a limited or non-recourse basis, which means that loan repayment depends on the project's cash flows rather than on the assets or general credit of the sponsoring organizations. Despite the non-recourse nature of project borrowing, projects are highly leveraged entities, with debt to total capitalization ratios averaging 60–70%. Petrozuata, a $2.4 billion oil field development project in Venezuela, is a recent example of the effective use of project finance for several reasons. First, the analysis shows a typical setting where project finance is likely to create value, that of a large-scale investment in Greenfield assets (in this case, wells, pipelines, and upgrader) that can function as a stand-alone economic entity and support a high leverage ratio. Given the nature of this investment, one can think of project finance as venture capital for fixed assets, except that the investments are 100 to 1000 times larger and financed primarily with debt rather than equity. Besides highlighting the types of assets appropriate for project finance, this article illustrates the sizeable transactions costs associated with structuring a deal as well as the full range of benefits accruing to project sponsors. The structure allows sponsors to capture tax benefits not otherwise available, reduces information costs for creditors and other investors, and lowers the overall cost of financial distress. The combination of high leverage, concentrated equity ownership, and direct control in project finance also addresses a wide range of incentive problems that destroy value in diversified companies. Analysis of the explicit contractual terms of the deal reveals a careful allocation of project risks in an attempt to elicit optimal behavior by each of the participants. As illustrated in the Petrozuata case, limiting completion and operating risks are important undertakings. But project finance is most valuable as an instrument for managing sovereign risks. Indeed, the ability of project finance to limit sovereign risk is the one feature that cannot be replicated under conventional corporate financing schemes.     

Foodgrain price and trade policy in the Dominican Republic

As in many developing countries, the Dominican Republic has both an overvalued official foreign exchange rate and a policy of heavy government intervention in foodgrain markets. The Institute of Price Stabilization (INESPRE) controls the marketing, pricing and imports of the staple foodgrain, rice. INESPRE's operations and the overvalued currency produced an undervaluation of domestic rice production and an upward distortion of foodgrain imports. Additionally, the increasingly unfavourable rice-fertilizer price ratio has undoubtedly suppressed yields. As part of a set of austerity measures, the newly elected President banned rice imports. Dominican foodgrain policy may be at an important crossroads and a policy assessment is very timely.     

On Option-Pricing Models in Real Estate: A Critique

This paper considers the problems peculiar to options on real estate, because of the special set of institutional factors influencing real estate markets. It is intended to serve as a reply to Johnson and Wofford [15] as well as provide an overall critique of option-pricing models in a real estate context. Our major point is that a variety of real estate decisions, such as the abandonment decision, the option to refinance, or the option to exercise a contingent real estate purchase contract, may be modeled using option-pricing techniques. However, both the theoretical and institutional aspects of real estate markets must be taken into account in both developing and applying option models in a real estate context.