On the neutrality of debt in investment intensity

This paper examines the interaction between investment and financing decisions of a firm using a real options approach. The firm is endowed with a perpetual option to invest in a project at any time by incurring an irreversible investment cost at that instant. The amount of the irreversible investment cost is directly related to the intensity of investment that is endogenously chosen by the firm. At the investment instant, the firm can finance the project by issuing debt and equity, albeit subject to an exogenously given credit constraint that prohibits the firm’s debt-to-asset ratio from exceeding a prespecified threshold. The optimal capital structure of the firm is determined by the trade-off between interest tax-shield benefits and bankruptcy costs of debt. Irrespective of whether the exogenously given credit constraint is binding or not, we show that leverage has no impact on the firm’s optimal investment intensity, thereby rendering the neutrality of debt in investment intensity. Similar to earlier work, we show that debt is not neutral to investment timing in general, and the levered firm invests earlier than the unlevered firm in particular.     

FDI Location and the Relevance of Spatial Linkages: Evidence from Provincial and Industry FDI in China

In this study both aggregate and industry‐level foreign direct investment (FDI) data are employed to investigate the spatial dependence of FDI hosts. The analysis contributes to the existing literature by focusing on the heterogeneous spatial correlation of FDI in different industries. Using more comprehensive FDI data across multiple industries and multiple provinces in China from 1999 to 2007, the results show a significant spatial correlation among provinces. Aggregate FDI tends to be regional trade platform oriented indicating neighboring provinces become competitors for FDI. In contrast, results based on industry‐level provincial FDI show stronger support for vertical or complex vertical FDI.     

The West German gastarbeiter system of immigration

The paper analyzes the West German immigration system as operated until early 1970s. Defining the essential features of this system, the authors explain the cross-sectional industrywise utilization of foreign guestworkers during 1964/65 to 1971/72. They also extend the analysis to explaining the sourcewise (by country) composition of foreign workers during this period     

Differentiating Good Soldiers from Good Actors*

abstract In a qualitative interview study, 20 Hong Kong Chinese informants were asked to report stories about colleagues who were either ‘good soldiers’ or ‘good actors’. In stories about good soldiers, informants attributed their colleagues' organizational citizenship behaviour (OCB) primarily to prosocial or pro‐organizational motives. Informants' stories about good actors broke down into three major subcategories of citizenship‐related impression management: OCB attributed primarily to impression management motives; alleged pseudo‐OCB concomitant with minimal compliance; and alleged pseudo‐OCB concomitant with counterproductive behaviour. When distinguishing good soldiers from good actors, informants adopted two criteria for attribution: wilful behavioural inconsistency, i.e. low generality of behaviour across contexts; and alleged false pretence, i.e. discrepancy between claims or allusions and actual deeds. Our findings partially supported a prior hypothesis from attribution theory, that consistency was a criterion for attribution, but indicated that consensus, i.e. correspondence between the focal colleague's behaviour and other employees' behaviour, failed to differentiate good soldiers from good actors. Informants generally regarded OCB as socially desirable only when it was attributed primarily to prosocial/pro‐organizational motives.     

Why so only 5.5% of Black Men Marry White Women?*

Only 5.5% of black males married white females in 1990, and the family‐income premium for intermarried black males was 7%. This article estimates the impact of the mating taboo, courting opportunities, and individual endowments on the black male marriage market. Results indicate that eliminating the mating taboo would raise the intermarriage rate from 5.5 to 64%, and do away with the intermarriage premium. Improving black males' endowments or allowing black males to meet white females as frequently as they do black females would not increase intermarriage.     

Group Affiliation and Ownership Concentration as Determinants of Capital Structure Decisions: Contextualizing the Facts for an Emerging Economy

This study considers the firm’s affiliation with business groups and the ownership structure as determinants of leverage decisions in Chilean firms. The major findings show that group-affiliated firms take advantage of internal capital markets and transactions with related parties (e.g., low transference price or loans at competitive interest rates) that reduces the demand for external debt. Majority shareholders in affiliated firms behave as controllers of managers, on the one hand, and avoid the supervisory role of debt, on the other hand. In stand-alone firms, supervision led by majority shareholders is complemented by the monitoring role of debt through higher levels of leverage. We conclude that further developments in capital structure theories adjusted to the particularities of the different institutional contexts are needed.     

Structural models of corporate bond pricing with maximum likelihood estimation

This paper empirically examines the proxy, volatility-restriction (VR) and maximum likelihood (ML) approaches to implementing structural corporate bond pricing models, and documents that ML estimation is the best among the three implementation methods. Empirical studies using either the proxy approach or the VR method conclude that barrier-independent models significantly underestimate corporate bond yields. Although barrier-dependent models tend to overestimate the yield on average, they generate a sizable degree of underestimation. The present paper shows that the proxy approach is an upwardly biased estimator of the corporate assets and makes the empirical framework work systematically against structural models of corporate bond pricing. The VR approach may generate inconsistent corporate bond prices or may fail to give a positive corporate bond price for some structural models. When the Merton, LS, BD and LT models are implemented with ML estimation, we find substantial improvement in their performances. Our empirical analysis shows that the LT model is very accurate for predicting short-term bond yields, whereas the LS and BD models are good predictors for medium-term and long-term bonds. The Merton model however significantly overestimates short-term bond yields and underestimates long-term bond yields. Unlike empirical studies in the past, the Merton model implemented with ML estimation does not consistently underestimate corporate bond yields.     

中国内地银行的外汇风险

本文实证研究使用资本市场法（Capital Market Approach）和14家中资上市银行的股价数据,发现银行规模和其外汇风险之间存在正相关关系。这可能反映了国内大型中资银行更多的外汇操作和交易头寸,以及因人民币汇率变动、对客户风险发生变化所带来的大量间接影响。虽然内地银行对国际市场的参与程度仍低于香港同业,但实证研究结果显示国有商业银行和股份制商业银行的平均外汇风险高于香港银行,而且大银行的外汇风险为负数的情况非常普遍,这意味着人民币升值将降低这些银行的股票价值,从而损害银行业表现。由于股价下跌一般反映违约风险上升,因此应密切监测人民币升值情况对内地银行违约风险可能发生的影响。