The effect of geographical deregulation on bank acquisition premiums

In recent years, many state legislatures have passed laws allowing greater geographical expansion by banking organizations, including interstate acquisitions. The reduction of barriers to geographic expansion may be expected to affect signficantly the prices paid in bank acquisitions. According to the excess demand hypothesis, merger premiums should be larger because of an increase in the number of potential bidders. According to the barriers to entry hypothesis, however, premiums should decrease as the constraints on geographic expansion are relaxed. This study presents empirical results that are consistent with the excess demand theory. Bank merger premiums are significantly larger in states that permit interstate banking. Furthermore, premiums appear to increase significantly in the year following the passage of enabling legislation. Premiums are also greater in states that allow unlimited intrastate holding company acquisitions. Some evidence also exists to support the barriers to entry hypothesis.     

Economic policy in Sweden: are there lessons from the Swedish model?

This article reviews Swedish economic policy since 1960 in the light of the trade union's Rehn-Meidner model. The arguments of economists who blame the crisis of the Swedish economy in the 1970s on that model are critically reviewed. The maintenance of full employment is analysed. The policies of the Social Democratic government since 1982 are found to be significantly at variance with the Rehn-Meidner model leading to a high risk of wage-push inflation. It is suggested that the British labour movement has lessons to learn from Swedish experience and the Rehn-Meidner model in particular.     

A SIMPLIFIED APPROACH TO SHORT-TERM INTERNATIONAL DIVERSIFICATION

Using Eurocurrency deposit interest rates, currency exchange rates, and inflation rates in a mean-variance portfolio analysis, the authors develop portfolios of interest-bearing deposits in London banks denominated in various currencies. These easily constructed multicurrency portfolios are shown to provide better risk-return positions than comparable single currency holdings.     

Scale and scope economies of Australian permanent building societies in a dynamic framework

In this paper we examine the interrelationship between technological change, branching, and the multi-product cost structure of Australian Permanent Building Societies within a dynamic specification of the cost function. The results strongly support this dynamic formulation, though the speed of adjustment of costs to long-run levels is quite fast. We also find evidence of economies of scale for small societies, suggesting some potential for smaller societies to benefit from increased scale through mergers.     

THE POTENTIAL IMPACT OF ENVIRONMENTAL CROSS-COMPLIANCE ON ARABLE FARMING

It is argued that the ongoing CAP/GATT reforms provide a basis for the introduction of environmental cross-compliance (ECC). ECC enables policymakers to restrict output-related direct support payments to those farmers who comply with specified environmental guidelines aimed at reducing the external damage effects of agricultural production. This paper is an exploratory investigation of ECC and presents the results of a farm-level linear programming analysis of 15 North-West England arable farms. The environmental guidelines, which relate to permanent as opposed to rotational set-aside and to levels of fertiliser use, are widely applicable to the extent that ECC can be implemented as a voluntary policy system. They are clearly effective in achieving policy goals since all but one of the farmers investigated would comply with the full range of restrictions considered. Within this range, gross margins are reduced by up to 10 per cent while area and output of seed crops are reduced by around 22 per cent and 12 per cent respectively. Row crops area and output are more robust, each falling by just under 4 per cent.     

A NOTE ON INTEREST RATES AND THE RISK OF BANK AND SAVINGS AND LOAN STOCK

This study examines the relationship between interest rates and the risk of bank and savings and loan stocks. Implied standard deviations from call option prices are used as risk estimates of the financial institutions’ stocks. Results indicate that there is a positive relationship between the risk of depository institution equities and the general level of interest rates. In addition, an upward shift in their risk occurred in late 1982, coinciding with several events that were important to the financial industry (the Penn-Square Bank failure, the Mexican debt crisis, and the passage of the Garn-St. Germain Depository Institutions Act).