Can banks monitor small business borrowers effectively using hard information?

We investigate whether banks rely on hard information to monitor small business borrowers and to what extent hard information is credible. Using Japanese firm-level data, we show that banks reduce the amount of lending to defaulting firms if the firms are financially distressed and suffer operating losses. In contrast, banks do not significantly reduce the amount of lending to defaulting firms with low levels of leverage and high profitability. This implies that banks mitigate type II errors if they receive default signals using the hard information of informationally opaque small businesses.     

On the relationship between the provision of waste management service and illegal dumping

The illegal dumping of waste has been a serious environmental concern of most countries in the world. This paper examines the relationship between the provision of waste treatment facilities and the frequency of illegal dumping. Our results show that a shortage of intermediate waste treatment facilities has played an important role in increasing the frequency of illegal dumping.     

Is corporate governance important for regulated firms’ shareholders?: Evidence from Japanese mergers and acquisitions

This paper compares the reaction of bidders’ stock prices to acquisition announcements by regulated non-financial firms, banks, and unregulated companies in Japan. Results suggest that regulated non-financial firms do not experience a significant stock price response at merger and acquisition (M&A) announcements, although banks’ and unregulated firms’ M&A announcements are regarded favorably by the stock market. Furthermore, the effect of stock option usage and strict boards on the stock price response is weak for regulated non-financial bidders. The results provide additional evidence that regulation results in managerial decisions’ having less influence on shareholder wealth and thereby changes the firm's optimal governance structure. In contrast, the results provide no clear evidence that, for bank bidders, there is a significantly stronger or weaker relationship between governance and the stock price response to an M&A announcement than that of unregulated firms or regulated non-financial firms. The result does not support the view that regulatory monitoring weakens the effect of ordinary governance mechanisms.     

Effects of Matching and Mismatching Messages on Purchase Avoidance Behavior following Major Disasters

Following major disasters, purchase avoidance behavior toward products that are caused by stigma often results. For example, after the Tohoku Earthquake and Fukushima Daiichi Nuclear Disaster, consumers have avoided products from Fukushima. Attempts have been made to diminish this purchase avoidance behavior, but they have been found to be ineffective. The reasons for ineffectiveness of strategies within this context were empirically examined based on matching and mismatching effects of messages. In two studies (Study 1, N = 113; Study 2, N = 364), the effects of affective messages and cognitive messages were compared, and the effectiveness of affective messages was found to be consistently weaker than that of cognitive messages. Message producers often present affective messages with the expectation of observing the matching effect. However, findings suggest that these presentation strategies will fail, and that the mismatching effect should be used instead. The best method of message presentation to reduce purchase avoidance behavior in a disaster area is discussed.     

Completing Incomplete Revealed Preference Under Limited Attention

This paper discusses how to improve the identification of the preference of a decision‐maker (DM) with limited attention proposed by Masatlioglu, Nakajima and Ozbay (2012). in “Revealed Attention”. Their identification method relies on choice reversals so the obtained revealed preference is often incomplete. We propose three approaches to address this problem. The first one is accommodating a model‐free approach, which respects the DM's choice in making a welfare analysis, as long as it does not contradict the revealed preference of Masatlioglu et al. The second approach incorporates the DM's exogenously obtained attention/inattention information into the model of Masatlioglu et al. The third approach is to take framings that influence the DM's attention into effect for the identification.     

p-Dominance and Equilibrium Selection under Perfect Foresight Dynamics

This paper studies equilibrium selection based on a class of perfect foresight dynamics and relates it to the notion of p-dominance. A continuum of rational players is repeatedly and randomly matched to play a symmetric n×n game. There are frictions: opportunities to revise actions follow independent Poisson processes. The dynamics has stationary states, each of which corresponds to a Nash equilibrium of the static game. A strict Nash equilibrium is linearly stable under the perfect foresight dynamics if, independent of the current action distribution, there exists a consistent belief that any player necessarily plays the Nash equilibrium action at every revision opportunity. It is shown that a strict Nash equilibrium is linearly stable under the perfect foresight dynamics with a small degree of friction if and only if it is the p-dominant equilibrium with p<1/2. It is also shown that if a strict Nash equilibrium is the p-dominant equilibrium with p<1/2, then it is uniquely absorbing (and globally accessible) for a small friction (but not vice versa). Set-valued stability concepts are introduced and their existence is shown. Journal of Economic Literature Classification Numbers: C72, C73.     

A GM(1,1)–Markov chain combined model with an application to predict the number of Chinese international airlines

In this paper, we propose a new dynamic analysis model which combines the first-order one-variable grey differential equation model (abbreviated as GM(1,1) model) from grey system theory and Markov chain model from stochastic process theory. We abbreviate the combined GM(1,1)–Markov chain (MC) model as MCGM(1,1) model. This combined model takes advantage of the high predictable power of GM(1,1) model and at the same time take advantage of the prediction power of Markov chain modelling on the discretized states based on the GM(1,1) modelling residual sequence. For prediction accuracy improvements, Taylor approximation is applied to MCGM(1,1) model. We call the improved version as T-MCGM(1,1) model. As an example, we use the statistical data of the number of Chinese international airlines from 1985 to 2003 for a validation of the effectiveness of the T-MCGM(1,1) model.     

Evaluation of the impact of the tourism nation promotion project on inbound tourists in Japan: a difference-in-differences approach

This study quantitatively evaluates the impact of the Tourism Nation Promotion Project on tourism demand. Data were obtained from Japan Tourism Agency’s quarterly survey from 2010Q2 to 2015Q4. Cox and zero-truncated negative binomial models and difference-in-differences approach were applied to analyze tourism demand and the project’s impact on inbound tourists’ length of stay and expenditure in Japan. Empirical results showed a positive and significant average treatment effect on length of stay and expenditure for tourists from Australia, China, Russia, and Thailand. These findings indicate that the Japanese government should use differentiated strategies considering different nationalities’ characteristics to attract foreign tourists.     

On the relationship between robustness to incomplete information and noise-independent selection in global games

This note demonstrates that a symmetric 3×3 supermodular game may fail to have any equilibrium robust to incomplete information. Since the global game solution in symmetric 3×3 supermodular games is known to be independent of the noise structure, this result implies that a noise-independent selection in global games may not be a robust equilibrium. Our proof reveals that the assumption in global games that the noise errors are independent of the state imposes a non-trivial restriction on incomplete information perturbations.     

On efficient partnership dissolution under ex post individual rationality

This paper studies ex post individually rational, efficient partnership dissolution in a setting with interdependent valuations. We derive a sufficient condition that ensures the existence of an efficient dissolution mechanism that satisfies Bayesian incentive compatibility, ex post budget balancedness, and ex post individual rationality. For equal-share partnerships, we show that our sufficient condition is satisfied for any symmetric type distribution whenever the interdependence in valuations is non-positive. This result improves former existence results, demonstrating that the stronger requirement of ex post individual rationality does not always rule out efficiency. We also show that if we allow for two-stage revelation mechanisms, in which agents report their realized payoffs from the allocation, as well as imposing penalties off the equilibrium path, efficient dissolution is always possible even when the interdependence is positive. We further discuss the possibility of efficient dissolution with ex post quitting rights.