Capital structure,executive compensation,and investment efficiency

This paper examines how the similarity between the executive compensation leverage ratio and the firm leverage ratio affects the quality of the firm’s investment decisions. A larger leverage gap (i.e., a bigger difference between these two ratios) leads to more investment distortions. Managers with more debt-like compensation components tend to under-invest, whereas managers with larger equity-based compensation engage more in over-investment. Furthermore, investment distortion is likely to increase the equity (debt) value when compensation leverage is lower (higher) than firm leverage. These findings suggest that managers can deviate from an optimal investment policy to increase the value of their portfolio, and that a lower leverage gap can reduce agency costs.     

Cost performance of Brazilian soccer clubs: A Bayesian varying efficiency distribution model

This paper analyzes the cost efficiency of Brazilian first league soccer clubs using a Bayesian Varying Efficiency Distribution (VED) model. We confirm that the model fits the data well with all coefficients correctly signed and in line with the theoretical requirements. From the efficiency results, it was clear that the Brazilian soccer league operates at a lower performance in comparison to other international soccer leagues. Factors which contributed to this finding as well as other policy implications are provided.     

European vs. U.S. airlines: Performance comparison in a dynamic market

This study measures and compares the efficiency and productivity of European and U.S. airlines, over the period from 2001 to 2008. We measure efficiency by estimating a Bayesian distance frontier model subject to regularity constraints. Productivity estimates are also derived parametrically, based on the estimates of the distance frontier model. We estimate both a constrained (i.e. subject to regularity conditions) and an unconstrained model and we show the importance of imposing the monotonicity and curvature conditions on the distance function. The efficiency and productivity results based on the constrained model indicate that European airlines have slightly higher efficiency and productivity growth than U.S. airlines. A comparison based on the type of airlines indicates that low-cost airlines are on average more productive and efficient than full-service airlines. The decomposition of productivity growth and related market discussions are also provided.     

Re-integrating the central Asian republics into the world economy

The dissolution of the former Soviet Union (FSU) and the establishment of the Commonwealth of Independent States (CIS) out of the former Soviet Republics has seen the creation of a number of new independent countries in Central Asia. These six Republics —Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan—are, albeit to different degrees, only at the beginning of the historic process of transformation from a command to a predominantly competitive market-based economic system. This paper¹ will survey the prospects for industrial development and the challenges for enterprise restructuring, privatization and private sector development in four of the republics: Azerbaijan, Kazakhstan, Kyrgyzstan, Uzbekistan.     

Determinants of external imbalances: The role of taxes, government spending, and productivity

This paper develops and estimates a dynamic optimizing model of the current account. The model focuses on real factors that determine the evolution of saving and investment and hence the external balance. Three types of shocks are at the center of the analysis: productivity shocks, shocks to labor input, and tax policy shocks. While our approach is in line with the real business cycle models of the current account, the distinguishing feature of the work is the application of econometric methods to time series data for a small open economy so as to directly estimate the parameters governing saving and investment under rational expectations restrictions.