Does Disclosure Regulation Work? Evidence from International IPO Markets*

This study examines whether IPO disclosure requirements mandated by countries’ securities laws are associated with variation in IPO underpricing in international IPO markets. Our empirical analysis uses a unique sample of 6,025 IPOs from 34 countries over the period from 1995 to 2002. We show for the first time that the stringency of disclosure requirements for IPO prospectuses is negatively associated with the extent of IPO underpricing, after controlling for various country‐ and firm‐level determinants of underpricing. Moreover, we find that the disclosure effect on IPO underpricing is moderated by the extent of a country’s capital market integration. Taken together, our findings are consistent with the view that increased disclosure regulation appears to reduce IPO underpricing and hence the cost of equity, and that institutional factors such as capital market integration play an important role in understanding the economic consequences of disclosure regulation in international IPO markets.     

Bulgaria’s hyperinflation in 1997: transition,banking fragility and foreign exchange

This article has two objectives: to study the 1997 episode of hyperinflation in Bulgaria, and to compare and contrast this analysis with the post-Keynesian theoretical approach. This approach highlights the role of three components observed simultaneously in order to understand the emergence of hyperinflation: a virulent distributive conflict; the presence of indexing mechanisms; and finally, flight from domestic currency into one or more foreign currencies. The article reveals that a transitional economy like that of Bulgaria in the 1990s may generate hyperinflation in the absence of any violent distribution conflict: the transition and the banking crisis engender inflation. The foreign exchange rate is decisive in the emergence of hyperinflationary dynamics (and therefore mistrust of domestic currency). This interpretation of hyperinflation is confirmed by an econometric analysis.     

Labor Markets and Monetary Policy

Headline employment numbers have been consistent with previous recoveries from recession. Behind the headlines, however, there are troubling data that suggest that the recovery of labor markets is weaker than what would be suggested by prior experience. In particular, labor force participation is weaker than expected, and the duration of unemployment has been longer. This paper describes the dimensions of the problems, their implications, and issues concerning whether the U.S. Federal Reserve could have done more to forestall them—particularly with respect to its Large Scale Asset Purchases program.     

Advertising by Medical Professionals—A Healthy Outlook

The opening up of the professions to advertising does not yet include the medical profession, and the author argues that this exclusion is unwarranted. Far from being against the public interest, he suggests that patients are not only capable of using more information, but that improvements in medical practice will flow from this. The experience of the legal—and other professions—following the relaxation of advertising rules is discussed together with the problems arising. The conclusion is that advertising by the medical profession is worth at least a trial and that liberty to advertise be extended to consultants and hospitals.     

Testing the martingale difference hypothesis in CO2 emission allowances

This study examines the martingale difference hypothesis (MDH) for the carbon emission allowance market within the European Union Emission Trading Scheme (EU ETS) during the Phase I and the Phase II, using both daily and weekly data over the 2005–2009 period. We analyze the MDH for spot prices negotiated on BlueNext, European Energy Exchange and Nord Pool along with futures prices negotiated on BlueNext and European Climate Exchange, using the new variance ratio tests developed by Kim (2009) and the generalized spectral test proposed by Escanciano and Velasco (2006). For the Phase I, the results show that the spot price changes of these three markets are predictable, suggesting the possibility of abnormal returns through speculation, except during the period April 2006 to October 2006, namely after the compliance break and before the ECs of stricter NAP II. Finally, we find that the CO₂ spot and futures price changes are unpredictable during the Phase II because we failed to reject the MDH based on both daily and weekly data. Thus, these markets are found to be weak-form efficient.     

Astroturfing Global Warming: It Isn’t Always Greener on the Other Side of the Fence

Astroturf organizations are fake grassroots organizations usually sponsored by large corporations to support any arguments or claims in their favor, or to challenge and deny those against them. They constitute the corporate version of grassroots social movements. Serious ethical and societal concerns underline this astroturfing practice, especially if corporations are successful in influencing public opinion by undertaking a social movement approach. This study is motivated by this particular issue and examines the effectiveness of astroturf organizations in the global warming context, wherein large corporate polluters have an incentive to set up astroturf organizations to undermine the importance of human activities in climate change. We conduct an experiment to determine whether astroturf organizations have an impact on the level of user certainty about the causes of global warming. Results show that people who used astroturf websites became more uncertain about the causes of global warming and humans’ role in the phenomenon than people who used grassroots websites. Astroturf organizations are hence successful in promoting business interests over environmental protection. In addition to the multiple business ethics issues it raises, astroturfing poses a significant threat to the legitimacy of the grassroots movement.