Long-run Effects on China of APEC Trade Liberalization

Plans for trade liberalization within the Asia–Pacific Economic Co-operation (APEC) Forum include the elimination of all tariffs between member states. The study in this paper uses two computable general equilibrium models to examine the effects of these plans, focusing on China. The modelling shows that liberalization increases China's capital stock and real GDP. The implication for Chinese industries depends on the extent to which liberalization exposes them to additional import competition. Industries strongly stimulated include textiles and communications equipment. Transport equipment is the most adversely affected. Chinese regional results follow from the industrial compositions of the regions, with Zhejiang the most favourably affected and Jilin the least.     

Profit Measurement and UK Accounting Standards: A Case of Increasing Disharmony in Relation to US GAAP and IASs

UK accounting practice differs from International Accounting Standards (IASs) particularly with regard to amortisation of goodwill, provision for deferred taxation and the accounting treatment of pension costs. Under the core standards programme of the IASC the IASs have emerged closer to US practice. This paper evaluates the profit of those UK companies reporting to the Securities and Exchange Commission (SEC) in 1988 and 1994, spanning a period which saw the establishment of the ASB and the implementation of the IASC's comparability project. An increasing gap was found between the reported profit under UK accounting principles and that restated under US GAAP. The difference lay most frequently in accounting for goodwill, provision for deferred tax, and the accounting treatment of pension costs, with accounting for goodwill showing a particularly significant impact in 1994. Notwithstanding the introduction of FRS 10, an overall impression of increasing disharmony could continue to cause reconciliations to be required of UK companies seeking full listing on a US stock exchange, with consequent disadvantage relative to companies in other European countries seeking international capital in the US.     

Product-market strategy and underwriting performance in the United Kingdom’s property–casualty insurance market

Drawing on a framework from the organizational economics literature, we utilize a panel data design to examine empirically the effect of motor insurance and liability insurance business on the overall underwriting performance of insurers operating in the United Kingdom’s (UK) property–casualty insurance market. We find that participation in liability insurance contributes positively to underwriting performance, whereas motor insurance is associated with inferior underwriting performance. Additionally, we find that higher reinsurance ratio is associated with better underwriting performance, but reduced profit margins. Our results show that higher leverage too is associated with better underwriting performance. We conclude that our results could have potentially important commercial and/or policy implications.     

BALANCE SHEET STRUCTURE AND THE MANAGERIAL-DISCRETION HYPOTHESIS: AN EXPLORATORY EMPIRICAL STUDY OF NEW ZEALAND LIFE INSURANCE COMPANIES

The managerial-discretion hypothesis states that in mutual insurance companies policyholders will seek to protect their interests by limiting managerial discretion in investment and financing decisions. Therefore, mutuals are predicted to introduce restrictive mechanisms (e.g., company by-laws) that promote precautionary investment, such as government securities. In stock companies, shareholders are expected to increase their wealth at the expense of policyholders' interests by investing in more speculative assets, such as equities. Differences in investment activity also affect policy valuation and reserving decisions reflected in the liability side of the insurance company balance sheet. The managerial-discretion hypothesis implies that systematic differences in the structure of balance sheets between mutual and stock insurance companies are likely to exist. To carry out an exploratory test of this aspect of the managerial-discretion hypothesis, the present study employs canonical correlation analysis on New Zealand life insurance company data for 1991. However, the empirical evidence does not appear to support the proposition that balance sheet structure varies systematically between mutual and stock companies.     

Market Structure after Horizontal Mergers: Evidence from the Banking Industry

Antitrust agencies use measures of market structure to evaluate the likely competitive effects of proposed mergers, but little is known about how measures of market structure change over time, particularly after consummation of mergers and acquisitions. This paper analyzes the changes in market structure 3 and 5 years after mergers in the US banking industry. Our analysis suggests that concentration decreases and the number of banks increases in banking markets where mergers resulted in high concentration levels. In markets where the level of concentration changed by a relatively large amount, our findings are more ambiguous, as the level of concentration decreases, but no effect is found on the number of competitors.