Efficiency in the international insurance industry: A cross-country comparison

The purpose of this paper is to provide new empirical evidence on frontier efficiency measurement in the international insurance industry, a topic of great interest in the academic literature during the last several years. A broad efficiency comparison of 6462 insurers from 36 countries is conducted. Different methodologies, countries, organizational forms, and company sizes are compared, considering life and non-life insurers. We find a steady technical and cost efficiency growth in international insurance markets from 2002 to 2006, with large differences across countries. Denmark and Japan have the highest average efficiency, whereas the Philippines is the least efficient. Regarding organizational form, the results are not consistent with the expense preference hypothesis, which claims that mutuals should be less efficient than stocks due to higher agency costs. Only minor variations are found when comparing different frontier efficiency methodologies (data envelopment analysis, stochastic frontier analysis).     

The performance of hedge funds and mutual funds in emerging markets

Use of short selling and derivatives is limited in most emerging markets because such instruments are not as readily available as they are in developed capital markets. These limitations raise questions about the value added provided by hedge funds, especially compared to traditional mutual funds active in these markets. We use five existing performance measurement models plus a new asset-style factor model to identify the return sources and the alpha generated by both types of funds. We analyze subperiods, different market environments, and structural breaks. Our results indicate that some hedge funds generate significant positive alpha, whereas most mutual funds do not outperform traditional benchmarks. We find that hedge funds are more active in shifting their asset allocation. The higher degree of freedom that hedge funds enjoy in their investment style might thus be one explanation for the differences in performance.     

Agency theory: A falsificationist perspective

The purpose of this paper is to examine the empirical testability of agency theory from a falsificationist perspective. Following a brief discussion of economic methodology, the paper examines three main classes of agency models with a view to identifying the scope for empirical testing. With regard to the basic single period agency model, the paper argues that empirical researchers should direct their attention to generating and testing the comparative static implications of the model. For agency models with post-decision information, it is argued that the scope for empirical testing is likely to be severely limited by the researcher's inability to validate the truth value of the auxiliary hypotheses needed to generate empirically interesting implications. In addition, it is argued that considerable care needs to be exercised when interpreting the results of tests of “if and only if” propositions. These difficulties of interpretation are illustrated by reference to two recent attempts to test Holmstrom's theory of relative performance evaluation. Finally, it is argued that agency models involving pre-decision information are practically devoid of empirical content.     

Profit oriented and decision time market segmentation

The authors report a refinement of their Survey Implemented Market Segmentation (SIMS) algorithm that adds decisiontime implementation by retailers. The analysis incorporates more completely the complexity of practical market segmentation policy alternatives. Two retailing executives aided in classifying variables that characterize potential market segments in terms of their temporal implementability. The result is an ability to formulate a segmentation policy applicable to long-range, medium-range, or short-range planning horizons.     

Valuation effects of rollout publicly traded partnerships in the oil and gas industry

In trying to explain the often painful process of corporate restructuring, fingers are frequently pointed at inefficient management. This gives short shrift, however, to an important result of breaking up large, integrated corporations and selling them in smaller pieces: it makes the capital market more nearly complete, and there are strong theoretical arguments that this enhances value. We report the results of a natural experiment that occurred in the oil and gas industry, in which eleven integrated corporations formed publicly traded partnerships to hold their domestic production properties, yet (with few exceptions) retained most of the partnership units under corporate ownership. This behavior avoids any significant change in corporate governance, and is inconsistent with the tax motive popularly attributed as the reason for forming these partnerships; yet we find that significant positive abnormal returns accrued to stockholders when the formations were announced. The results we observe, therefore, support the theory that additional value can be realized by expanding the set of opportunities available to the investment community.     

The consequences to managers for financial misrepresentation

We track the fortunes of all 2,206 individuals identified as responsible parties for all 788 Securities and Exchange Commission (SEC) and Department of Justice (DOJ) enforcement actions for financial misrepresentation from January 1, 1978 through September 30, 2006. Fully 93% lose their jobs by the end of the regulatory enforcement period. Most are explicitly fired. The likelihood of ouster increases with the cost of the misconduct to shareholders and the quality of the firm's governance. Culpable managers also bear substantial financial losses through restrictions on their future employment, their shareholdings in the firm, and SEC fines. A sizeable minority (28%) face criminal charges and penalties, including jail sentences that average 4.3 years. These results indicate that the individual perpetrators of financial misconduct face significant disciplinary action.     

Derechos de los trabajadores migrantes. Aspectos económicos,políticos y éticos

Las políticas de inmigración laboral de los países de altos ingresos establecen una relación inversa entre el grado de apertura y algunos de los derechos concedidos a los migrantes admitidos. Esta observación empírica es la base del libro The price of rights: Regulating international labor migration, que el autor de este artículo escribió en 2013. Aquí resume sus principales conclusiones, argumentos e implicaciones políticas, y responde a una reseña publicada por la Revista Internacional del Trabajo en 2015. Concluye exhortando a un debate más abierto sobre los vínculos entre derechos, migración laboral y desarrollo entre las organizaciones nacionales e internacionales interesadas en estas cuestiones.