Conditional returns to shareholders of bidding firms: an Australian study

This study examines the importance of the self‐selection problem when evaluating returns to bidder firms around announcement events. Takeover announcements are not random because managers decide rationally whether to bid or not, which indicates announcements are timed; consequently, in the presence of the sample selection problem, standard ordinary least square estimates are biased. Using a conditional model, the results indicate that after controlling for the self‐selection bias effect, shareholders of bidder firms make normal returns. In sum, failing to account for sample selection bias may lead to erroneous conclusions about a bidder's true economic wealth effects around an announcement event.     

Determining returns to bidding firms’ shareholders using different benchmark methods: an Australian study

This article revisits the determinants of cumulative abnormal returns (CAR) for bidder firm shareholders around takeover bid announcements and in particular, if bidder CAR estimates differ significantly between conditional and unconditional models. The results indicate that CAR estimation is significantly different between the two models. The conditional model is theoretically superior to the traditional unconditional model due to the former controlling for unobservable factors surrounding the bid announcement. This study shows that it is important to account for unobservable factors in growth (organic versus takeover) strategies to infer the true effect of the bidder's characteristics on CAR.     

The impact of floods on the adoption rate of high-yielding rice varieties in Bangladesh

This paper analyses econometrically the impact of floods on the rate of adoption of high-yielding varieties (HYVs) of rice in Bangladesh. It uses a small model combining a modified logistic adoption function with a model of the process generating expectations errors by the farmers which encompasses most other expectation hypotheses. Using pooled cross-section and time-series data at the district level, the econometric results show a significant negative impact of expected flood damage on the HYV adoption rate of ‘aman’ rice. Moreover, it is shown that the adoption of HYV ‘boro’ rice is governed by essentially the same equation.     

Saving, Investment, and Capital Mobility in LDCs

The Coakley, Kulasi, and Smith current-account solvency model ( Economic Journal , 1996, pp. 620–7) is used to investigate saving and investment in LDCs. This model implies that saving and investment cointegrate with a unit coefficient irrespective of the degree of capital mobility. Panel and conventional unit-root tests indicate that LDC current accounts are stationary. The Feldstein–Horioka cross-section regression coefficient for LDCs is lower than the corresponding OECD coefficient, indicating different policy responses in these countries rather than higher capital mobility. Finally, adjustment toward solvency is slower in LDCs, reflecting their vulnerability to external shocks and the impact of financial repression.     

Import Liberalization in a Developing Country with Import Intensive Industry: The Case of Bangladesh

This paper examines the effect of import liberalization in Bangladesh using a modestly disaggregated numerical general equilibrium model. Because intermediate goods account for a major share of imports, the removal of import restrictions has an overwhelming effect on the supply side of the economy. The domestic manufacturing sector is found to expand, particularly the manufacture of exportables. Sensitivity of the results obtained is tested by perturbing certain key parameters. Additional related results are discussed. [F 1, O 5]     

Revisiting the relationship between growth and poverty

The purpose of this article is to revisit the relationship between growth and poverty which was widely discussed during the sixties. In view of the renewed reliance on this mechanism during the eighties by the Reagan administration and a concomitant increase in the incidence of poverty, a revisit of the topic is relevant. A regression model similar to the previous studies, but expanded to capture the emerging issues during the eighties is estimated for the period 1964-1987. A simple variable coefficient model to capture the secular decline in the effectiveness of growth to reduce poverty is also estimated. It is found that over the sample period, growth and transfer payments had significant effects on poverty; but their effects have been diminished by changes in income distribution, family composition, and the decline of the manufacturing sector during the seventies and eighties. Another interesting finding is that the impact of growth on the incidence of poverty is race neutral.     

On thugs and heroes: Why warlords victimize their own civilians

Violence against civilians is the mainstay of modern warfare, and claims 84% of the war-related casualties. Looting and terror are the two main reasons why the soldiers victimize the civilians from the other side. However, examples have been found (Congo, Sierra Leone,...) where the guerilla and the incumbent army abuse the civilians from their own side. The present paper offers a potential explanation for this phenomenon, based on strategic looting. It argues that this behavior helps drawing a line between thugs and legitimate rebels. Received: July 2004, Accepted: November 2004, Accknowledgement. This paper is part of the PAC Project CIT-2-CT-2004-506084 funded by the European Commission. It has been presented at the ``Rationalist Approaches to War and Conflict' Workshop at WZB in Berlin on July 17, 2004. Helpful comments by the participants, and in particular by the discussant Karl W?rneryd, as well as by Irwin Collier, David Dejong, Michelle Garfinkel, Anke Hoeffler, Karl Moene, James Morrow, Robert Powell and Gerald Schneider, are gratefully acknowledged, without implicating. Helpful comments by two anonymous referees are also acknowledged, with the same caveat.     

Informal and Formal Credit Markets and Credit Rationing in Cote d'Ivoire

This paper endeavours to shed light on the respective rolesof the formal and the informal credit markets in developingcountries. We use survey data for manufacturing firms in Côted'Ivoire, documenting their access to informal credit markets,their investments, and their financing. We confront these datawith a simple moral-hazard model of credit rationing. Becauseof socio-cultural effects, the magnitude of moral-hazard problemsand the cost of credit can be different in the informal creditmarket. We offer a structural econometric estimation of thismodel. Our empirical results point at severe moral-hazard problemsfor all firms, and reduced cost of credit in the informal market.Our point estimate suggests that moral-hazard problems can bealleviated in the informal credit market. Policy implicationsof our results are sketched.