The effectiveness of bank recapitalization policies in Japan

This study examines the effectiveness of bank recapitalization policies in Japan. Based on a reading of the “business revitalization plan” submitted by banks requesting government funds, we identify four primary goals for the capital injection plan in Japan: (1) to increase the bank capital ratios; (2) to increase write-offs of non-performing loans; (3) to increase lending, in particular to small and medium enterprises, in order to avoid a “credit crunch”; (4) to encourage restructuring. Using a panel of individual bank data, we empirically estimate the effectiveness of the Japanese government policy of public fund injection in achieving the first three of these stated goals. Our empirical analysis reveals that, in general, the capital injections into the large internationally active banks were more effective than those into the smaller domestic banks in Japan. In addition, the second round capital injection, administered in 1998, was more effective than the first round, administered in 1997. The first capital injection in 1997 mostly served as a stop-gap measure to help the large international banks clear the 8% capital adequacy ratio (BIS ratio) required under the Basel Accord and did not make much contribution to the other policy objectives. The second round of capital injections in 1998 were more effective, boosting capital adequacy ratios for the domestic as well as international banks and supporting other policy objectives as well by stimulating banks to write off bad loans and increase domestic lending, in particular to small and medium enterprises.     

Firm diversification and equilibrium risk pooling: The Korean financial crisis as a natural experiment

We use the Korean Financial Crisis as a natural laboratory for examining interactions among firm diversification, equilibrium capital structure and tail probability events. When the crisis hit in 1997, several major firms, including a large number of highly leveraged conglomerates (Chaebols), experienced bankruptcies. We show how diversified Chaebols obtain higher equilibrium leverage than non-Chaebols (a “cosigner effect”). In the event of a low probability macro-economic shock, the model predicts a systematic change in relative bankruptcy risks of Chaebol firms. To examine this implication, we introduce an empirical methodology that decomposes equilibrium debt into demand, supply and Chaebol-specific factors, for use in a bankruptcy prediction model. We find that the primary cause of Chaebol firm bankruptcies was not idiosyncratic leverage, but leverage systematically related to greater equilibrium access to debt during normal times.     

Is attack the best form of defence? A competing risks analysis of acquisition activity in the UK

The primary purpose of this paper is to investigate whethercompanies can use acquisition as a strategy to reduce theirlikelihood of take-over. The determinants of making an acquisitionand being taken over are modelled for the first time withina competing risks framework using two large samples of UK manufacturingcompanies which together cover most of the post-World War IIperiod up to 1990. Our results indicate that, ceteris paribus,companies which make acquisitions can significantly reduce theirconditional probability of being taken over by around one-third,largely through the impact that acquisition has on corporatesize. In this sense, attack, through acquisition, is the bestform of defence against take-over.     

FOCUS: Can Britain's NHS managers be business-like and should they adopt the values of business?

The NHS differs from a private business in not aiming at profits and in being obliged to provide only the single product of health care. How radically does this affect the requirement to be “business-like” and adopt business values? Dr Draper is Lecturer in Biomedical Ethics at The Medical School, The University of Birmingham, Birmingham B15 2TT. She wishes to thank Tom Sorell for his comments on the first draft of this article.     

Transaction Costs and Nonlinear Adjustment Towards Equilibrium in the US Treasury Bill Market

This paper uses nonlinear error correction models to study yield movements in the US Treasury Bill Market. Nonlinear error correction arises because portfolio adjustment is an ‘on-off’ process, which occurs only when disequilibrium in the bill market is large enough to induce investors to incur the transaction costs associated with buying/selling bills. This, together with heterogeneity of transaction costs, implies that the strength of aggregate error correction depends on both the distribution of costs and the extent of disequilibrium in the market. Smooth transition models are used to describe an aggregate adjustment process which is strong when the market is distant from equilibrium, but becomes weaker as the market approaches equilibrium. Linearity tests indicate that the types of nonlinearities that would be induced by transactions costs are statistically significant, and estimated models which incororate these nonlinearities outperform their linear counterparts, both in sample and out of sample.     

Skill, deskilling and new technology in the non-manual labour process

This article discusses the concept of skill and, using material from case studies on non-manual work, suggests that the microelectronic technology may have implications for work and skills that in each case will depend on a combination of social and technological factors.     

The power of plain: Intensifying product experience with neutral aesthetic context

Product packaging aesthetics can be the first observable signal of a product??s underlying traits. Two experimental studies examine the impact of package aesthetics on consumers?? evaluations of sensory hedonic products. The studies show that when paired with inferior or superior product quality, neutral package aesthetics can serve to intensify the negativity or positivity of product experience. Results indicate that surprise and disappointment mediate the relationship between package aesthetics and product evaluation. These findings provide evidence that an aesthetic, which serves to neutralize expectation states and in turn intensifies experience through contrast, may be as important of a contextual factor to consider as aesthetics that bias perceptions via a halo effect.     

Motivations for Activity Participation as Predictors of Emerging Adults' Psychological Engagement in Leisure Activities

Psychological engagement has been identified as a critical factor in the potential benefits of emerging adults. leisure activity participation. Emerging adults. motivations for participation might be particularly important in predicting psychological engagement. In the present work, we report findings from a study of motivations for leisure participation and its associations with psychological engagement. In a sample of 183 undergraduate university students, we found that three of the five hypothesized motivators positively and significantly predicted greater psychological engagement. Specifically, greater psychological engagement was related to leisure participation motivated by a desire to learn and exercise skills and abilities, protect the self (for example, to alleviate guilt by helping others), and because of opportunities presented by others. favorable attitudes towards involvement.