Asymmetric Regulation of Identical Polluters in Oligopoly Models

Studies of optimal second-best environmental regulation of identical polluting agents have invariably ignored potentially welfare-improving asymmetric regulation by imposing equal regulatory treatment of identical firms at the outset. Yet, cost asymmetry between oligopoly firms may well give rise to private as well as social gains. A trade-off is demonstrated for the regulator, between private costs savings and additional social costs when asymmetric treatment is allowed. Asymmetry is indeed optimal for a range of plausible parameter values. Further, it is demonstrated that for a broad class of abatement cost functions, there is scope for increasing welfare while keeping both total output and total emission constant. Some motivating policy issues are discussed in light of the results, including international harmonization and global carbon dioxide reduction.     

What made Economists so Politically Influential? Governance-related Ideas and Institutional Entrepreneurship in the Economic Liberalisation of Israel and beyond

Liberal economists are known to be one of the driving forces behind economic liberalisation in various countries, but how did they become so politically influential? Constructivists generally suggest that during economic crises liberal economists persuaded decision-makers to adopt pro-market policy ideas as solutions for economic turbulence. While this answer is true, it is also only partial because it disregards the role played by governance-related ideas and institutional entrepreneurship in the political actions of liberal economists. I argue that ideas regarding decision-making mechanisms provided liberal economists with the basis for creatively exploiting pre-liberalisation institutions, such as central banks and central budget offices, through which these economists enhanced their long-term political influence. An in-depth examination of a paradigmatic case of economic liberalisation driven by liberal economists – Israel's Stabilisation Plan – exemplifies that argument. The existence of like-minded economists and similar pre-liberalisation policy-making institutions in many other countries hints that the Israeli experience is not unique.     

Creditor control rights and firm investment policy

We present novel empirical evidence that conflicts of interest between creditors and their borrowers have a significant impact on firm investment policy. We examine a large sample of private credit agreements between banks and public firms and find that 32% of the agreements contain an explicit restriction on the firm's capital expenditures. Creditors are more likely to impose a capital expenditure restriction as a borrower's credit quality deteriorates, and the use of a restriction appears at least as sensitive to borrower credit quality as other contractual terms, such as interest rates, collateral requirements, or the use of financial covenants. We find that capital expenditure restrictions cause a reduction in firm investment and that firms obtaining contracts with a new restriction experience subsequent increases in their market value and operating performance.     

Safety survey of Iran's mines and comparison to some other countries

The increasing development of mining activities in Iran makes it necessary to have a closer look at the safety issues. Analysis of different incidents and damages in mines can be helpful for the adoption of suitable approaches to prevent the incidents. In this study, safety statistics of Iran's mines in 2011 and 2012 were assessed and important incidents and injuries happening to employees for 12 different groups of minerals were evaluated and eventually compared to the situation of some other countries. According to the obtained results, the average incidence probability in Iran's mines was calculated to be 0.18 for 2011 and the incidence probability of coal, copper and iron ore mines was greater than others. The injury rate of Iran's mines was 106 and 164 out of 10,000 persons for 2011 and 2012, respectively, and the maximum values of injury rate belonged to coal, dimension stone and aggregate mines. Also, it turned out that the fatal rate per 100 tons of production had the highest values in chromite and coal mines. Besides, comparison of injury rate and the fatal rate in Iran and some countries showed that the safety situation in Iran's mines was in a fair condition.     

The economics of demonstrations: The effect of competition on demonstration and pricing strategies

Demonstrations of new software products and their equivalents in the automobile industry, i.e., test-drives, are an inherent part of sales efforts. Yet the quality of standard demonstrations has been criticized as being inadequate and, in particular, too short. Heavy competition at the dealer level has been pinpointed as the main reason for short, minimal demonstrations. An analysis of business cases from two industries—automobile and software—indicates that, while competition diminishes demonstration efforts in the automobile industry, it has the opposite effect in the software industry where heavy competition induces demonstration efforts. This paper studies demonstration policies in a monopoly and a duopoly and explores the role of competition and costs of production and demonstration on demonstration strategies in these two market settings. Comparing the set of conditions between the two market settings enables us to determine under which competition will increase (decrease) demonstration intensity.     

Do firms underreport information on cyber-attacks? Evidence from capital markets

Firms should disclose information on material cyber-attacks. However, because managers have incentives to withhold negative information, and investors cannot discover most cyber-attacks independently, firms may underreport them. Using data on cyber-attacks that firms voluntarily disclosed, and those that were withheld and later discovered by sources outside the firm, we estimate the extent to which firms withhold information on cyber-attacks. We find withheld cyber-attacks are associated with a decline of approximately 3.6% in equity values in the month the attack is discovered, and disclosed attacks with a substantially lower decline of 0.7%. The evidence is consistent with managers not disclosing negative information below a certain threshold and withholding information on the more severe attacks. Using the market reactions to withheld and disclosed attacks, we estimate that managers disclose information on cyber-attacks when investors already suspect a high likelihood (40%) of an attack.     

Directors skill and financial reporting quality

Motivated by theoretical models in economics which show that there is matching between CEO skill and firm size, we introduce a new measure of director skill which is based on the aggregate size of firms on which the director serves as an independent director. We validate our measure by showing that it is positively associated with director experience, financial expertise, industry expertise and managerial experience. We then examine whether our average measure of skill across board members is positively associated with monitoring quality. Controlling for the endogenous relationships between board composition and financial reporting quality, we find a positive association between our board measure for skill and monitoring quality, and we show that directors have a causal impact on monitoring effort and outcomes. Furthermore, consistent with the enhanced monitoring provided by skilled directors, we document a positive association between the level of and changes in our measure and firm value.     

Marine-tourism development on a small island in Indonesia: blessing or curse?

Indonesia is a popular tourist destination. Tourism creates jobs and generates revenue but can have negative impacts on culture, society and human rights. This study of one island community in Indonesia explores the relationship between the growth of tourism and the impacts on a local community. A quantitative survey, combined with in-depth interviews, examined perceptions of residents to tourism development. Residents perceived that tourism created jobs and improved access to goods and services. However, tourism has reduced social cohesion and decreased adherence to traditional customs. Conflict between the private sector and residents over ownership and access have also caused violence.     

Emissions Pricing Policies and Business Cycles: Fixed vs. Variable Tax Regimes

As by-products, emissions follow economic fluctuations. Ignoring this fact in environmental policies can lead to unexpected emissions fluctuations and an increase in intervention costs. Using a real business cycle model, we compare two policies: a fixed tax policy where the price is constant over time and a variable tax regime where the tax rate is set at the beginning of each period. We find that while both programs result in lower emissions, a variable tax regime is preferable since first, it can ensure that the maximum welfare is always achieved, and second, it is more effective in stabilising emissions.     

Corporate climate-related voluntary disclosures: Does potential greenwash exist among Australian high emitters reports?

This study examines the issue of greenwashing among corporate high emitters subject to government scrutiny. To do so, we investigate the relationship between the actual environmental performance, measured as carbon emissions, of companies subject to the Australian National Greenhouse Energy Reporting Act 2007 (NGER) and their climate-related voluntary disclosures. To measure climate-related disclosure, we construct a climate-related disclosure index based on four prominent frameworks and score corporate report content against that Index. Using a sample of 150 companies with NGER emissions data for Years 2016 and 2017, a period that precedes the issuance of recommendations for disclosure by the Task Force on Climate-Related Financial Disclosure (TCFD), our regression results show a disappointingly low level of climate-related disclosure by most companies. We also find a negative relationship between climate-related disclosure and 1-year lagged environmental performance among companies exhibiting a year-on-year rise in carbon emissions. That is, our findings provide evidence of potential greenwashing by poor environmental performers, presumably to change negative perceptions by stakeholders, as predicted by socio-political theories. In contrast, we find no evidence of greenwashing among companies experiencing a year-on-year decrease in emissions.