Bank Monitoring and Environmental Risk

Abstract:  Loan announcement effects for 152 Canadian companies are examined to investigate the efficiency of monitoring by banks facing lender environmental liability. Market reaction to the announcement of bank debt to 'environmental' firms is more positive and significant than for 'non-environmental' firms and, for firms in industries with a higher likelihood of experiencing spill events, is more positive and significant, reinforcing earlier results that establish a relationship between specific loan/borrower characteristics and announcement period excess returns and providing further evidence on the 'uniqueness' of bank loans by demonstrating the superior ability of banks to monitor corporate borrowers exposed to environmental liability.     

Alternative Forms of Mixing Banking with Commerce: Evidence from American History

Much of the discussion about banking and commerce in America has failed to make several crucial distinctions and has not accounted for many arrangements that have promoted the mixing of these activities. We investigate the history of banking and commerce in the United States, looking both at bank control of commercial firms and commercial firms' control of banks. We trace how these controls have changed with shifting definitions of "bank" and changing methods of "control." Despite the regulations prohibiting some arrangements that promote financial control, we find evidence of extensive linkages between banking and commerce in the United States. These linkages usually build on devices that are very close substitutes to the arrangements prohibited by law. Altogether, our findings question the often made claim that traditionally banking in the United States has been separated from commerce. Furthermore, given that research on Japan and Germany has shown that the mixing of banking and commerce matters for a variety of issues, our evidence also raises some questions on similar research in the United States which makes the simplifying assumption that these industries are separated.     

Two-Part Trade Policy under Imperfect Competition

In this paper we consider the potential gain of a government pursuing a two-part trade policy: an import license for entry, along with a per-unit tariff on imports. The model is a two-stage game of complete but imperfect information. In the first stage, the domestic government sets trade policy, while in the second stage the home and foreign producers behave as Cournot competitors. The paper demonstrates that the optimal trade policy depends upon the number of firms, the degree of heterogeneity in cost functions, and the degree of convexity in cost functions.     

The Structure of Protection in Indonesia in 1989 1

Around the mid-1980s, Indonesia's protectionist regime supported an industrial structure in which industries were mainly oriented towards producing for the domestic market. Since then, trade policies have shifted to a more outward-looking strategy, stimulating the growth and diversification of non-oil manufactured exports. This paper attempts to quantify the nominal and effective rates of protection resulting from trade policies at the end of the 1980s. After an introduction in which the 1989 trade policies are discussed, estimates of nominal and effective rates of protection are presented. It is shown that though the level of protection has declined since 1987, it still varies widely across economic sectors. Furthermore, despite the more open trade strategy, the paper's findings show that the trade regime remains biased against exports. Finally, by examining some trade policy issues, the paper presents further ways of rationalising the structure of protection in Indonesia's industrial sector.     

Regulation And The Rise In Asset-Based Mutual Fund Management Fees

In this article I explain why asset‐based fees are common for mutual fund management companies and why the average fee has increased recently. I argue that Securities and Exchange Commission fee regulations make alternative fee types illegal or unattractive. Management companies can maintain higher fees because regulations and brand‐name capital partly insulate them from competition and because investors cannot easily distinguish between performance‐oriented and marketing‐oriented fund companies. Index funds and unit investment trusts may offer competition to mutual funds in the future because they are designed to minimize management fees.     

Teams,Teamwork and Absence*

We argue that firms with interdependent worker productivity, team production, have a higher cost of absence and, as a consequence, spend additional resources on monitoring absence. As a result, firms with team production should have lower absence rates. We estimate the determinants of absence for blue‐collar workers using a sample of German manufacturing establishments. Workplace teams are used as a proxy for team production. The estimates reveal that firms with teams have lower absence rates, as do smaller establishments. The size effect, however, is unique to establishments with teams, which fits prior theoretical work that has not been previously tested.