The myths,facts, and theories of ethnic,small-scale enterprise financing

This article combines the results of three financial studies that examine capital issues affecting minority business development. The results are presented so as to explain or refute conventional wisdom regarding capital availability, cost of capital, credit market discrimination, sources of capital and differences in firm capital composition. Generally, Asian and Hispanic businesses more approximate nonminority businesses in the sources of capital, the cost of capital, total capital investment, and access to capital. Black firms, on the other hand, face credit discrimination from all sources of capital, which limits their access to capital, increases its cost, and affects firm profitability. Consequently, black firms have a smaller capital composition at startup and during operations. The only deviation from this pattern occurs where minority and nonminority financial institutions vie for black business patronage by reducing the cost of borrowing and increasing the availability of funds.     

Asymmetric-information and principal-agent problems as sources of value in FSLIC-Assisted acquisitions of insolvent thrifts

This study uses a two-factor market-model to estimate excess returns around 43 announcements of FSLIC-assisted thrift mergers and 66 announcements of unassisted thrift mergers. These estimated excess returns are then used to test hypotheses about asymetric-information and principal-agent problem in the thrift resolution process as sources of value in these mergers. The results show that acquirers in assisted transactions earned positive and statistically significant excess returns of approximately 2 percent, whereas acquirers in unassisted transactions earned excess returns that are not significantly different from zero; however, the excess returns in the assisted mergers are quantitatively small. For the 43 assisted mergers, estimated excess returns imply aggregate wealth transfers of only $13 million as compared with $2.3 billion in FSLIC assistance that were granted in these transactions. These findings suggest that the FSLIC-assisted transactions were reasonably well structured and that the assistance granted did not result in large wealth transfers to acquirers of insolvent institutions. Finally, the study provides evidence that informational asymmetries and principal-agent problems in the thrift resolution process were significant sources of excess returns for the acquirers receiving FSLIC assistance.The views reflected in this paper are those of the authors and do not necessarily represent policies of Board of Governors of the Federal Reserve System or the Federal Housing Finance Board. Helpful comments were recieved from participants in the Finance Workshop at the University of North Carolina at Chapel Hill, George Benston, Richard Brown, Jennifer Conrad, Sally Davies, Mark Flannery, Edward Kane, David Ravenscraft, and Lawrence J. White.     

After Cancun: The magic of the market

A simple model of the international economy is used to explore some possible consequences of development aid being tied to market-dominated policies. Two major consequences are greatly reduced benefits from, first, the aid and, second, from any appropriate technology that may be introduced.     

Pledger modelling: Help the Aged case study

• The recruitment of pledgers (as a proxy for potential legators) to charitable organisations plays a vital role in their continued success, and as a percentage of all fundraising income generated it can represent substantial proportions. However, of all the ‘donation asks’ made of supporters, asking for a legacy is the most difficult. Therefore, it is important that the target audience should be as well researched and highly targeted as possible.
• Help the Aged had reached the stage where decisions need to be made about its future marketing in order to protect longer-term income. The findings of this legacy targeting project were to feed into communication programmes, direct marketing, and the overall legacy marketing strategy.
• The key objective was to identify the best prospects to mail a legacy ask to, across the supporter database, with the likelihood that they are going to pledge as a result.
• It was found that whilst tailored data analysis comes at a price, the average value of a legacy justifies the cost of using sophisticated targeting tools. However, because of the pledge-to-legacy time lapse, there will always be issues with measuring any long-term return on investment (ROI). Nonetheless, pledgers have to be taken on their word for the purpose of testing (and subsequent rollouts). Pledge data should be tested and the outcomes should inform legacy marketing. However, as mentioned above, pledgers necessarily need to be taken on their word and therefore, formulating models based on the type and/or value of pledges is not recommended.

Copyright © 2005 John Wiley & Sons, Ltd.     

FDI and the Capital Intensity of "Dirty" Sectors: A Missing Piece of the Pollution Haven Puzzle

In an increasingly integrated world, falling trade barriers mean that the role environmental regulations play in shaping a country's comparative advantage is greater than ever. This has lead to fears that “dirty” industries will relocate to developing regions where environmental regulations may be less stringent. A number of reasons have been offered to explain why, despite anecdotal evidence and the predictions of theoretical studies, little empirical verification for the existence of pollution havens has been found. Little attention, however, has been paid to the capital intensity of pollution intensive sectors. We investigate the relationship between US outward FDI and factor endowments across sectors to two developing countries. We highlight the role of capital and believe it partially explains why pollution havens are not more widespread. Our approach also highlights those countries that are likeliest to become pollution havens. A multivariate analysis reveals some evidence of pollution haven consistent behavior.     

Bank stock returns and economic growth

Previous research has established (i) that a country’s financial sector influence future economic growth and (ii) that stock market index returns affect future economic growth. We extend and tie together these two strands of the growth literature by analyzing the relationship between banking industry stock returns and future economic growth. Using dynamic panel techniques to analyze panel data from 18 developed and 18 emerging markets, we find a positive and significant relationship between bank stock returns and future GDP growth that is independent of the previously documented relationship between market index returns and economic growth. We also find that much of the informational content of bank stock returns is captured by country-specific and institutional characteristics, such as bank-accounting-disclosure standards, banking crises, enforcement of insider trading law and government ownership of banks.