Some evidence on the gains from international diversification for Canadian investors

It is easily demonstrated ex post that international portfolio diversification results in increased returns and reduced risk. However, to determine the value of international diversification as an effective portfolio management strategy, it is necessary to form portfolios based on information available at the time of their composition, and then evaluate the performance of the portfolio in the following months. This is the main focus of our study, which adds several innovations to past research. First, we use daily rates of return on 23 national indices to evaluate the value of international diversification for a Canadian investor. Second, we evaluate the predictive value of the historical variance-covariance matrix vis-à-vis alternative models. Third, we use the Bayes-Stein correction to reduce errors in the historical return vector. Finally, we use a quadratic programming model in order to introduce the effects of constraints on the optimisation process. The results, obtained over the 1986–1989 period, are not in favour of international diversification. Returns on diversified portfolios were often lower than returns on the low-risk Canada market during the low-performance portfolio test periods. In other cases, higher returns on diversified portfolios could not be justified by their higher volatility. It is possible that these results may be partially due to the effects of the market crash in October 1987. Nevertheless, our study brings up many directions for future research. Is international diversification in fact profitable? Is portfolio optimisation appropriate in an international context? Finally, what is the best way to estimate the expected return vector in various markets?     

Audit firm size, public ownership, and firms' discretionary accruals management

In this study, we developed and tested three hypotheses concerning earnings management in Belgium (i.e., a continental European environment). The three hypotheses are about: (1) income smoothing, (2) Bix Six auditors, and (3) public ownership. The study is motivated by the finding by Becker, DeFond, Jiambalvo, & Subramanyam [Contemp. Account. Res. 15 (1998) 1] and Francis, Maydew, & Sparks [Audit. J. Pract. Theory 18 (1999) 17] that Big Six audit firms act as a constraint on both income-increasing and income-decreasing earnings management. The finding raises questions as to the determinants of earnings management in other institutional settings such as that of Belgium. Accordingly, we study publicly available financial statements of a matched sample of publicly and privately held Belgian firms. Following Francis et al. [Audit. J. Pract. Theory 18 (1999) 17], DeFond and Subramanyam [J. Account. Econ. 25 (1998) 35], and Becker et al. [Contemp. Account. Res. 15 (1998) 1], we use discretionary accruals as a measure of earnings management. We find that Belgian companies—both private and public—engage in income smoothing and manage earnings opportunistically to meet the benchmark target of prior-year earnings. The evidence is also supportive of the other two hypotheses, but only when companies have earnings that are above target and have incentives to smooth earnings downwards. The fact that our results on the impact of Big Six auditors and ownership type are different for above and below target firms in Belgium, and differ with findings on U.S. samples, can be explained by the Belgian institutional environment.     

Spatial Management of Invasive Species: Pathways and Policy Options

In addressing the problem of invasive species, decision makers have a variety of options, each targeting different aspects as it evolves over time and space. We develop a 2-region bioeconomic model that includes several transmission pathways that spread the invader. Within each region, inspections, removal efforts, and sustainable land management practices, including habitat restoration and less damaging production activities, are available to the regulator. We investigate the implications of different transmission pathways and second-best policies on the control patterns and invasive populations. Second-best settings where certain controls are not available to the regulator result in large distortions on the optimal use of the land. Overall, we find that non-linear interactions between regions, pathways, and controls are significant determinants of the optimal management of invasive species.     

Corporate Social Responsibility: One Size Does Not Fit All. Collecting Evidence from Europe

This article serves as an introduction to the collection of papers in this monographic issue on “What the European tradition can teach about Corporate Social Responsibility” and presents the rationale and the main hypotheses of the project. We maintain that corporate social responsibility (CSR) is an ethical concept, that the demands for socially responsible actions have been around since before the Industrial Revolution and that companies have responded to them, especially in Europe, and that the content of CSR has evolved over time, depending on historical, cultural, political, and socio-economic drivers and particular conditions in different countries and also at different points in time. Therefore, there is not – and probably cannot be – a unique, precise definition of CSR: one global standard for CSR is unlikely.     

Utility Indifference Hedging with Exponential Additive Processes

We determine the exponential utility indifference price and hedging strategy for contingent claims written on returns given by exponential additive processes. We proceed by linking the pricing measure to a certain second-order semi-linear Integro-PDE. As main application, we study the problem of hedging with basis risk.     

Land Cover in a Managed Forest Ecosystem: Mexican Shade Coffee

Managed forest ecosystems like shade coffee supply valuable ecological services. Yet little is known about the drivers and characteristics of clearing in such systems. We present a spatial econometric analysis of land cover in a shade coffee region in southern Mexico. We find that plots close to large cities are less likely to be cleared all other things being equal—the opposite of the pattern usually observed in natural forests. In addition, we find that membership in coffee-marketing cooperatives, farm size, and certain soil types are associated with tree cover, while proximity to small town centers is associated with clearing.     

Can the Internet improve agricultural production? Evidence from Viet Nam

This paper aims to contribute to the growing literature on the potential benefits of the Internet on rural livelihoods. We estimate the relationship between Internet access and agricultural production in rural Viet Nam using a panel dataset from 2008–2012. This is a time span during which Internet access increased substantially and government‐run and private online outlets providing information about agriculture started to operate. Our findings suggest that Internet access is associated with a 6.8% higher volume of total agricultural output. We find that this result is manifested through more efficient use of fertilizer. Our findings are stronger for younger households. The less developed northern provinces have benefited the most from the arrival of the Internet. The results are weaker in the case of rice, which is related to strong government involvement in rice production and prices.