Voters prefer more qualified mayors,but does it matter for public finances? Evidence for Germany

This paper studies the importance of politicians’ qualification, in terms of education and experience, for fiscal outcomes. The analysis is based on a large panel for 2031 German municipalities for which we have collected information on municipal budgets as well as the election results and qualification levels of mayoral candidates. We principally use a regression discontinuity design focusing on close elections to estimate causal effects. We find that mayors with prior experience in office have a tendency to reduce the level of local public debt, lower total municipal expenditures and decrease the local taxes, even though these results are only significant in some specifications. In contrast, the education level of the mayor exerts no significant effects on the overall fiscal performance of the municipality. The results are partly surprising as both education and experience are shown to matter greatly in the electoral success of mayoral candidates.     

Migrate or not? The effects of regulation SHO on options trading activities

In this study, we investigate the effects of stock short-sale constraints on options trading by exploiting two US Securities and Exchange Commission rule changes under Regulation SHO: Rule 203 (locate and close-out requirements) and Rule 202T (temporary removal of short-sale price tests). We find that stock short selling activities decrease (increase) significantly after Rule 203 (Rule 202T) implementation, supporting the validity of Rule 203 (Rule 202T) as an exogenous increase (decrease) in short-sale constraints. Options volume increases significantly after Rule 203 went into effect and the result is more pronounced among firms with lower levels of institutional ownership and smaller options bid-ask spreads. Therefore, the evidence from Rule 203 suggests that investors may use options as substitutes for stock short sales when short selling is less feasible or more costly due to the locate and delivery requirements. In contrast, we find no significant change in the options trading volume of pilot stocks during the pilot program of Rule 202T. Overall, our results indicate that the impact of short-sale constraints on options trading varies with the types of constraints affected.     

Short and long-term interactions between venture capital returns and the macroeconomy: evidence for the United States

The main purpose of this paper is to empirically model the influence of macroeconomic and financial variables on the performance of risk capital in the US. We start our investigation using a static long-run equilibrium model. In contrast to previous studies, we analyze the effect of several factors simultaneously within the framework of a vector error correction model (VECM). This allows us to study short- and long-term interactions to overcome the problem of endogeneity, and to discover causal mechanisms. The results show that the value of venture capital investments is positively related to industrial production, the exit channel Nasdaq, and the long-term interest rate. However, the value of venture capital investments is negatively related to the short-term interest rate. According to the short-term dynamics, VEC Granger causality confirms that only industrial production influences venture capital performance, while venture capital returns Granger causes Nasdaq performance.     

Value chain capability,value strategies and firm default risk

Firm stakeholders are paying more attention to the firm risks rather than merely focusing on returns. Among those risks, a firm's ability to repay its debt increasingly becomes a yardstick to evaluate a firm and predict the security level of returning its borrowings. This situation is directly related to a firm's default risk. The current article links the firm's value strategies and capabilities to firm default risk reduction. Specifically, this article conceptualizes and operationalizes a new firm capability, value chain capability, and examines how this capability and two firm value strategies, R&D and advertising, reduce the firm's default risk. Meanwhile, the authors formulate the value chain capability's moderating effects on the relationships between the two value strategies and firm default risk. The findings suggest that value chain capability and advertising help the firm reduce default risk. R&D will have the same effect only when a firm has high value chain capability.     

Book Reviews

Andrew MacIntyre (ed.), Business and Government in Industrialising Asia, Allen & Unwin, Sydney, 1994, pp. xii + 312. Paper: A$29.95.

John Bresnan, From Dominoes to Dynamos: The Transformation of Southeast Asia, Council on Foreign Relations, New York, 1994, pp. x + 115. $17.95.

Anthony Reid, Southeast Asia in the Age of Commerce 1450–1680: Volume Two, Expansion and Crisis, Yale University Press, New Haven and London, 1993, pp. xv + 390.

Binhadi, Financial Sector Deregulation, Banking Development and Monetary Policy: The Indonesian Experience (1983–1993), Indonesian Bankers' Institute, Jakarta, 1995.

Anwar Shah and Zia Qureshi, with Amaresh Bagchi, Brian Binder, and Heng-fu Zou, Intergovernmental Fiscal Relations in Indonesia: Issues and Reform Options, World Bank Discussion Papers 239, Washington DC, pp. xxxii + 279. $17.95; A$425.00; NZ$30.25.

Jacqueline Vel, The Uma-economy: Indigenous Economics and Development Work in Lawonda, Sumba (Eastern-Indonesia), Wageningen, pp. xiv + 283. $20.00 + $8 postage & handling.

Joao Mariano de Sousa Saldanha, The Political Economy of East Timor Development, translated by Theresia Slamet and P.G. Kattopo, Pustaka Sinar Harapan, Jakarta, 1994, pp. 414.

Jan-Paul Dirkse, Frans H$uUsken and Mario Rutten (eds), Development and Social Welfare: Indonesia's Experiences under the New Order, KITLV Press, Leiden, 1993, pp. 267.

W.G. Huff, The Economic Growth of Singapore: Trade and Development in the Twentieth Century, Cambridge University Press, Cambridge, 1994, pp. xxi + 472. A$60.

Saha Dhevan Meyanathan (ed.), Industrial Structures and the Development of Small and Medium Enterprise Linkages: Examples from East Asia, The World Bank (Economic Development Institute of the World Bank Seminar Series), Washington DC, 1994, pp. v + 158. Paper: $9.95.

Thee Kian Wie, Industrialisasi di Indonesia: Beberapa Kajian, LP3ES, Jakarta, pp. xxvi + 278 (including Introduction by Mari Pangestu).     

Towards A New Approach to Development Management1

Abstract: Since attaining political independence African countries have achieved significant improvements in a number of social welfare indicators. However, the record of socio-economic development in Africa is generally poor both in absolute terms and in comparison with other regions of the world. Various reasons have been given for Africa's poor development record. This paper suggests that approaches to development management so far adopted in Africa are inadequete, and it propose the conceptual elements for a new approach to development management. Résumé: Depuis leur accès à I'indépendance, un certain nombre d'indicateurs de bien-être social des pays africains se sont très nettement améliorés. Toutefois, les résultats concernant le développement socio-économique de l'Afrique est, en règle générale, médiocre en chiffres absolus et si on le compare avec d'autres régions du monde. Pour expliquer ces résultats, divers raisons ont été avancées. Ce document donne à penser que les approches adoptées jusqu'ici en Afrique, touchant la gestion du développement, sont inadaptées à la situation. L'auteur propose donc des éléments conceptuels pour une nouvelle approche de la gestion du développement