Financial development and economic growth in Greece: an empirical investigation with Granger causality analysis

This paper empirically examines the causal relationship between the degree of openness of the economy, financial development and economic growth by using a multivariate autoregressive VAR model in Greece for the examined period 1960:I-2000:IV. The results of cointegration analysis suggest that there is one cointegrated vector among GDP, financial development and the degree of openness of the economy. Granger causality tests based on error correction models show that there is a causal relationship between financial development and economic growth, but also between the degree of openness of the economy and economic growth.     

Valuation Effects of Short Sale Constraints: the Case of Corporate Takeovers

We examine the relation between the degree of short sale constraints for acquiring firms' equity and post takeover stock performance. We find that negative long‐run abnormal returns appear to decline (in economic and statistical terms) as the extent and persistence of institutional block‐holder ownership increase, after accounting for the size, book‐to‐market and method of payment effects. In the spirit of Miller (1977) , such evidence implies that the degree of short sale constraints serves as an important determinant of acquiring firms' short‐run overpricing. It appears that the presence of concentrated institutional presence mitigates and in most cases eliminates, through effective arbitrage, any short‐run overpricing that may be responsible for the long‐run underperformance of acquirers, preserving in this way efficiency in the takeover markets.     

STORABLE GOOD MARKET WITH INTERTEMPORAL COST VARIATIONS

We investigate a firm's dynamic pricing policy in a storable good market where the cost of production varies over time. In anticipation of a cost increase, the firm selects its prices to affect consumer storage. Price dynamics hinge upon the curvature of demand and the magnitude of the consumer storage cost. When demand is not too convex, the consumers' reluctance to store leads the firm to reduce prices to stimulate consumer storage. This shapes the firm's cost pass-through and the price commitment effects. Our analysis provides a novel explanation for the well-documented puzzling patterns of incomplete and negative cost pass-through.     

FT coverage and UK target price run-ups

We focus on the market expectation hypothesis to explain the increase in share prices and trading volume of target firms before their merger announcements that have conventionally been attributed to either insider trading or market expectation. We use Financial Times (FT) coverage as a proxy of merger expectation and search for relevant articles for 783 UK target firms between 1998 and 2010. We identify a total of 1049 rumour articles and find that the FT market expectation proxy explains a small percentage of the target price run-ups. Results are strong during the sample period, even though the magnitude for both returns and trading volume tends to decrease within recent years. There is also a strong contemporaneous relation between abnormal returns and trading volume. Unexplained increases in target prices and trading volume may be attributed to insider trading.     

Cross-border acquisitions vs. Greenfield investment: A comparative performance analysis in Greece

This paper compares cross-border acquisition with Greenfield foreign direct investment (FDI). It investigates the impact of these two FDI modes on the long-term performance of foreign subsidiaries. By focusing on the performance of the foreign affiliate, it departs from the rich survival literature and for the first time explores the precise performance of these ventures over a longer period of time. In particular, by drawing on the theory of industrial organization (IO), we empirically examine to which extent the two different forms of market entry help to explain the development of leading positions of affiliates in the host country. Our field research is based on a wide original sample of 179 manufacturing subsidiaries of foreign transnational corporations (TNCs) located in Greece. The econometric results indicate that acquisitions exhibit specific signs of excellence in terms of market share, firm size, capital intensity and product differentiation. We ascertain that at least as far as market share and capital intensity are concerned, the superiority of the cross-border acquisitions rests on both the fact that TNCs are eager to acquire the most efficient firms in the host country, and actively engage in assisting these firms in their up-grading procedures.     

Creating a high‐skills society during recession: issues for policy makers

The present study looks at the skill formation policies adopted by policy makers in Greece in order to create a high‐skills society. It examines empirically the demand side of the skill creation process within 300 small enterprises in order to understand how far supply‐side measures have influenced the demand for well‐trained staff within small businesses. The article draws on empirical data from 650 interviews with workers and small firm owners that explored owner demand for higher level skills and training. The study questions the effectiveness of the measures put forward by policy makers in order to encourage an up‐skilling strategy in the country. The analysis reveals that this policy agenda has been supported predominantly by various skills supply‐side initiatives including investments in higher education and subsidized accredited company training. Yet the empirical evidence indicates that such initiatives have not so far influenced owner demand for higher level skills and training, suggesting a new agenda for policy intervention may be necessary. The study provides valuable lessons for policy makers across the advanced capitalist world on the development of a high‐skills society.     

Management earnings forecasts and IPO performance: evidence of a regime change

Companies undertaking initial public offerings (IPOs) in Greece were obliged to include next-year profit forecast in their prospectuses, until the regulation changed in 2001 to voluntary forecasting. Drawing evidence from IPOs issued in the period 1993–2015, this is the first study to investigate the effect of disclosure regime on management earnings forecasts and IPO long-term performance. The findings show mainly positive forecast errors (forecasts are lower than actual earnings) and higher long-term returns during the mandatory period, suggesting that the mandatory disclosure requirement causes issuers to systematically bias profit forecasts downwards as they opt for the safety of accounting conservatism. The mandatory disclosure requirement artificially improves IPO share performance. Overall, our results show that mandatory disclosure of earnings forecasts can impede capital market efficiency once it goes beyond historical financial information to involve compulsory projections of future performance.     

Local Public Corruption and Bank Lending Activity in the United States

Using a conviction-based measure, we find that local (state-level) public corruption exerts a negative effect on the lending activity of US banks. Our baseline estimations show that the difference in public corruption between, for example, Alabama, where corruption is high, and Minnesota, where corruption is low, implies that banks headquartered in the former state grant 0.55% less credit (or $3.52 million for the average bank) ceteris paribus. Using proxies for relationship lending and monitoring, we also find that these bank characteristics weaken the negative effect of public corruption on lending. These results are robust to tests that address endogeneity, to the use of perception-based measures of corruption, and after controlling for credit demand conditions. In further analysis, we show that these effects are more evident for smaller banks and banks operating in a single state. These findings provide evidence that public corruption could facilitate information asymmetry in the lending market and, thus, could hinder local development by reducing bank credit.

     

How ICT affects economic growth in the Euro area during the economic crisis

NETNOMICS: Economic Research and Electronic Networking - The financial and economic crisis in Europe highlighted issues related to the competitiveness of member states, as well as the importance of...