The Quality and Price of Investment Banks’ Service: Evidence from the PIPE Market

We investigate the market structure and the pricing by placement agents of private investments in public equities (PIPEs). Our findings indicate that more reputable agents are associated with larger offers and with firms possessing lower risk. Agent reputation is positively associated with lower discounts and an enhanced post-PIPE trading environment. Issuers pay a higher dollar fee for these benefits, although more reputable agents charge a lower percentage fee. The evidence suggests that it is the quality of the issuing firm, and the pricing and reputational concern of the placement agent, that drives the equilibrium in the PIPE market.     

Fiscal Episodes and Market Power

We assess the effect of fiscal episodes, as determined via alternative approaches, on GDP and on markups in a panel of 14 OECD countries. Our results with narrative action-based data show counter-cyclicality since negative fiscal shocks increase markups. Additional empirical exercises reveal that spending-based consolidation programs have a more counter-cyclical effect on the behaviour of markups over the short and medium term than tax-based ones. Moreover, in times of economic contraction the degree of counter-cyclicality of negative (positive) government spending (tax) shocks is larger than during economic expansions.     

Enhancing individual entrepreneurial orientation measurement using a metacognitive decision making-based framework

Entrepreneurship, and individuals’ predisposition toward entrepreneurial activities in particular, i.e. Individual Entrepreneurial Orientation (IEO), has been gaining increasing relevance in academia and management practice alike. Understanding IEO is a critical element not only for its promotion, but for better and more informed managerial and investor decision making as well. As such, this study proposes a new framework for understanding and measuring IEO based on the integrated use of cognitive mapping and the interactive multiple criteria decision making (TODIM) method. We present the steps for building such a framework, as well as a practical application of these steps. The results are promising: the methodology applied allowed a large number of determinants of IEO and their relationships to be mapped; and, subsequently, ranked and weighted for the creation of an IEO measurement tool. The implications of the resulting framework for theory and practice, its limitations and possibilities for further research are also discussed.     

Financial stress and sovereign debt composition

Using a panel of 13 advanced economies for the period 1980–2012, we find that periods of impaired financial intermediation mainly accrue to maturity mismatches in sovereign debt. Thus, a higher (lower) share of short-term (medium and long-term) debt leads to an increase in the financial stress index. From a policy perspective, our work suggests that debt management policies translated into longer average maturities of sovereign debt not only reduce the expected debt servicing cost, but also mitigate strains in the financial sector.     

NONPARAMETRIC MODELS OF FINANCIAL LEVERAGE DECISIONS

This paper applies nonparametric decision tree models to the analysis of financial leverage decisions. This approach presents three appealing features: (i) the relationship between leverage and explanatory variables is not predetermined but is derived from information provided by the data, (ii) the models respect the fractional nature of leverage ratios, and (iii) each covariate is allowed to influence in different ways the financial leverage decisions of firms automatically assigned to different groups. Based on a data set of Portuguese firms, decision trees are used to tackle both classification (the decision to issue debt) and regression (the decision on the amount of debt to be issued, conditional on using debt) problems. It is found that: (i) two‐part models are the most appropriate specification for explaining the overall amount of debt used by firms, (ii) there are no drastic differences between the results produced by tree and parametric models, although some divergences may arise, and (iii) tree models suggest relationships between covariates and leverage that parametric models fail to capture, especially when the sample size is small.     

Debts on debts

This paper studies the impact of mortgages on consumer debt and on debt on durable goods. Outstanding debt, representing mortgages, affects positively consumer debt, and the debt on durable goods. This hypothesis is empirically tested for the U.S. using PSID 2005 wave. Our results are striking. First, we find strong evidence supporting a positive association between mortgage loans and consumer debts, regardless of the measures used, the control variables used, and the methods used. The results remain unchanged when we address potential endogeneity and measurement error problems. Second, we find that the effects of mortgages on the debt on durable goods are in general smaller than the effects of mortgages on other types of debts. Third, our distributional analysis reveals an interesting pattern of the effects on consumer debt of mortgage over the distribution. Specifically, the effects monotonically decrease as the quantile increase, with the smallest effects being at the upper tail of the distribution. Finally, we also examine the short-run dynamics of the relation between mortgage and consumer debts. We find that there is no systematic relation between the growth rate of mortgage and the growth rates of consumer debts.     

Road traffic injuries in Mozambique

Road traffic injuries affect the economy, health and quality of life of the people of Mozambique. Current road safety programmes are inadequate and inefficient given the magnitude of the problem. Data reported on road traffic crashes in the period 1990 to 2000 from the National Institute for Road Safety, the traffic police and the Central Hospital of Maputo were reviewed. The burden of road traffic injuries in Mozambique is rising, with at least three people killed daily. The age group most affected is 25-38 (39.35%), followed by 16-24 (20.79%). The main causes of crashes include reckless driving, drunken driving, roads with potholes, inadequate signs, lack of protection for pedestrians, and inadequate traffic law enforcement. However, the data are not adequate to reveal the true magnitude of the problem. Data collected by different sources are incomplete and not coordinated with other sources and databases. In urban areas, however, better response to crashes, treatment of the injured, reporting and data collection is attributable to a greater concentration of police and medical facilities. Road traffic safety programmes in Mozambique are inadequate and inefficient, starting with the data collection system. Improvement of injury surveillance systems is needed to help make road traffic safety a national development agenda priority and for developing and implementing road safety policies. For road safety programmes to be effective, government must facilitate stakeholders’ involvement, and the clear definition of government activities, civil society activities and public-private partnerships need to be established.