A simple correction of the WACC discount rate for default risk and bankruptcy costs

Standard discounted cash flow approaches suffer from a rudimental modeling of the possibility of a default, as the main characteristics such as the default probability and potential bankruptcy costs are commonly disregarded. This paper aims at providing a tractable extension of the well-known WACC approach for both default risk and bankruptcy costs. The corrected WACC discount rate reveals that default risk results in a systematically higher WACC because the tax component is scaled by the survivorship probability and an aditional component for bankruptcy costs must be added. This difference between the classical WACC discount rate and the simple modified WACC rate can be remarkable especially for firms from businesses with high bankruptcy costs and a relevant default probability.     

Simple Identification and Specification of Cointegrated Varma Models

We bring together some recent advances in the literature on vector autoregressive moving‐average models, creating a simple specification and estimation strategy for the cointegrated case. We show that in this case with fixed initial values there exists a so‐called final moving‐average representation. We prove that the specification strategy is consistent. The performance of the proposed method is investigated via a Monte Carlo study and a forecasting exercise for US interest rates. We find that our method performs well relative to alternative approaches for cointegrated series and methods which do not allow for moving‐average terms. Copyright © 2014 John Wiley & Sons, Ltd.     

Tourism,changing architectural styles,and the production of place in Itacaré, Bahia,Brazil

This article examines changing architecture in Itacaré, Brazil, as it transitions from a fishing village to an international tourist destination. Tourism, as an assemblage of practices and perspectives, recreates places in specific ways that structure social and environmental relationships. Through an examination of historical architectural styles, tourist architecture, and popular architecture in Itacaré, this article analyses the ways a tourist economy has physically and socially rebuilt the city. Socially, the changing architecture marks and creates differences between class, racial, and regional identities while also providing an idiom through which public conversations about these changing economic systems and demographics are articulated. At the same time, the expansion of the city has led to racial-, regional-, and class-based segregation. Environmentally, tourist architecture creates new relationships to nature through re-imagining Itacaré’s position in relation to other rural and urban places and a new emphasis on the aesthetic value of nature.     

Islam-based legal language and state governance: democracy,strength of the judiciary and human rights

Constitutional Political Economy - States embracing Islam-based laws are frequently seen as struggling with establishing democratic institutions, jeopardizing human rights and encouraging executive...     

Adverse Selection and Moral Hazard in Equity Partnerships: Evidence from Hollywood's Slate Financing Agreements

We use a movie industry project‐by‐project data set to analyze the principal–agent problem in slate financing arrangements. Under this specific film financing regime, which has become a significant mode of raising capital in Hollywood over the past decade, an external investor concludes a long‐term contract with a film producer and commits to cofinance a larger number of future film projects of that particular partner. In line with our theoretical conjectures, slate cofinanced movies receive poorer quality ratings and yield considerably lower return rates. Our data suggests that a substantial part of these performance differences may be attributed to adverse project selection and producer moral hazard.     

Using ROC techniques to measure the effectiveness of foreign exchange market interventions

Using as an example data on official Japanese interventions in the yen/dollar market, I show that techniques developed to analyse relative operating characteristic (ROC) curves can be useful to study the forecasting value and effectiveness of interventions.     

NOUVEL ESSOR DES FONDATIONS AU QUÉBEC ET AU CANADA: POUR UNE ANALYSE SOCIOPOLITIQUE FONDÉE SUR LE CONCEPT D'ÉCONOMIE PLURIELLE

Philanthropic foundations are the object of little research in Canada and Quebec. Our article recognizes the role of these organizations, as well as the presence of powerful new foundations, rich in assets and donations. This article consists of three parts. The first part presents a theoretical review of the American literature published from 2000 on. The second part examines data that we extracted from three main repertoires. Though informative, these repertoires tend to classify Canadian and Quebec foundations in categories that are mostly fiscal and legal and tend to break them down as public or private foundations. We therefore question the limits of studies based on such categories. In the third part of the article we propose a theoretical framework based on a sociopolitical point of view in an attempt to transcend the binary approach. Our approach borrows from the concepts of social and solidarity economy (SSE) and plural economy in order to better understand the new institutional arrangements in which foundations operate. This theoretical framework allows us to analyse foundations as actors of the SSE even though they might not reproduce automatically the principles and the values of the SSE in their behaviours. On the contrary, from the standpoint of a plural economy we may be in a better position to develop a sound sociopolitical analysis of diverse configurations and hybrid forms resulting from emulations or transactions between the principles of the social and solidarity economy (reciprocity), the private economy (competition) and the public economy (redistribution).     

‘HAVE YOU FELT ANGRY LATELY?’: A NOTE ON UNFAIR WAGE PERCEPTIONS AND THE NEGATIVE EMOTION OF ANGER

The author analyses the nexus between unfair wage perceptions of workers and the frequency of the negative emotion of anger. For this purpose, German household panel data for the years 2007, 2009, 2011 and 2013 are used. Angry feelings in the last four weeks have occurred significantly more frequently for workers who perceive their wage as unfair, whereas the own absolute hourly wage is not significantly correlated with the frequency of having felt angry. The results further indicate that workers have felt more often angry if working hours are larger; but the economic significance seems rather small compared to unfair wage perceptions.