Do foreign institutional investors destabilize China’s A-share markets?

This paper investigates the effect of foreign institutional investors on the stability of Chinese stock markets. Previous literature views this investor group as destabilizing feedback traders. We use the abolition of ownership restrictions on A shares as a natural experiment. There is strong evidence that foreign institutions have a stabilizing effect on Chinese stock markets and contribute to market efficiency. This finding is robust across exchanges, sample periods, size quintiles and alternative model specifications. By contrast, domestic investors appear to engage in positive feedback trading. Our results have important implications for market regulation.     

Inter-market competition for NYSE-listed securities under decimals

Blume and Goldstein (J Finance 52:221–244, 1997) suggest that quote competition between trading venues may diminish following tick size reductions. We test this suggestion by studying the competitive landscape in the NYSE-listed stocks before and after decimalization. We find that NBBO (National Best Bid and Offer) participation by non-NYSE venues declines following decimalization consistent with the prediction. At the same time, the importance of quote competitiveness in attracting order flow increases. In addition, although not as active in determining and maintaining the best quotes under decimals, non-NYSE venues become more active in price discovery. Finally, decimalization leads to lower trading costs and to smaller differences in trading costs across trading venues.     

Efficiency of Microfinance Institutions: A Data Envelopment Analysis

This study examines the cost efficiency of 39 microfinance institutions across Africa, Asia and the Latin America using non-parametric data envelopment analysis. Our findings show non-governmental microfinance institutions particularly; under production approach, are the most efficient and this result is consistent with their fulfillment of dual objectives: alleviating poverty and simultaneously achieving financial sustainability. However, bank-microfinance institutions also outperform in the measure of efficiency under intermediation approach. This result reflects that banks are the financial intermediaries and have access to local capital market. It may be possible that bank-microfinance institutions may outperform the non-governmental microfinance institutions in the long run.     

BEYOND THE HYPE: INTELLECTUAL PROPERTY AND THE KNOWLEDGE SOCIETY/KNOWLEDGE ECONOMY

Abstract.  This paper explores the debates surrounding whether or not we have now moved into a new knowledge economy and/or knowledge society and if so whether this shift is as significant and as far reaching as the industrial revolution. In this possible transformation the place of information communications technologies has been crucial. Debate has occurred across both economics and sociology with differing emphases as is shown in the ranges of definitions that we review in the paper. One consistent factor is the lack of clarity and consistency between them both within and across the disciplines. In order to explore the issues that the debates raises in a more grounded way, the paper explores them in relation to intellectual property (IP) and the intellectual commons in the process of innovation, growth and economic development. The paper is developed through an analysis first of the industrial revolution and the role within this of uncertainty, technologies, complementarities and elective affinities and the way IP was protected and controlled through patents, secrecy, being first to the market and copyright. The second part of the paper examines definitions of the knowledge economy and society and the role within these of information communication technologies in order to explore whether the ways that IP is protected and controlled have changed. In the debate about the 'knowledge economy and society' the role of innovation via human capital with a greater reliance on intellectual capabilities has been emphasized. The role of IP thus remains central but is now challenged by the rise of new forms of communication, which make its protection harder and move much of the concern with respect to regulation to a global rather than national and local level.     

The Role of Debt Purchases in Takeovers: A Tale of Two Retailers

In this paper, we examine acquisitions of two financially distressed retailers—Federated's takeover of Macy's, and Zell Chilmark's takeover of Carter Hawley Hale. In both cases the raider purchased some of the target's outstanding debt to launch its takeover attempt. These debt purchases appear to have been facilitated by two salient factors—the raider's expertise in dealing with distressed firm restructuring and the ability of the raider to acquire a large blockholding of debt. Our analysis indicates that, when these factors are present, it is optimal for a raider to initiate a takeover of a distressed firm through purchasing a block of the firm's debt. Target bondholder reaction will be favorable whereas shareholder reaction may be either favorable or unfavorable.     

Observable Contracts as Commitments: Interdependent Contracts and Moral Hazard

A large literature examines the use of observable and unrenegotiable agency contracts as commitments. These analyses generally impose an ad hoc restriction that contracts cannot be contingent on one another. I relax this restriction and obtain a folk theorem. Unlike earlier folk theorems in this area, the present result applies to agency relationships that have hidden-action problems. Using an example, I also demonstrate that there are settings in which interdependent contracts support a strictly larger set of equilibrium outcomes than do independent contracts. The result highlights the critical need for careful thought about restrictions placed on the set of feasible contracts.     

Generalized quadratic revenue functions

In this paper we focus on the specification of revenue functions in their dual price space. We consider two distance functions–the Shephard output distance function and the directional output distance function–and define both in price space. The former is multiplicative in nature and satisfies homogeneity, whereas the latter is additive and satisfies the translation property. Functional equation methods yield the translog specification in the case of the Shephard distance function and a quadratic specification in the case of the directional distance function. Monte Carlo evidence suggests that the quadratic specification outperforms the translog in large samples and in true models with plenty of curvature.     

Fiscal deficits and current account deficits

Recent fiscal stimulus packages depend for their effectiveness on the assumption of non-Ricardian savings behavior. We show that, under the same assumption, higher fiscal deficits can have problematic implications if they turn out to be permanent. First, if they occur in large countries they significantly raise the world real interest rate. Second, they cause a short run current account deterioration equal to around 50% of the fiscal deficit deterioration. Third, the longer run current account deterioration equals almost 75% for a large economy such as the United States, and almost 100% for a small open economy.     

Examining the link between skill shortages,training composition and productivity levels in the construction industry: evidence from Northern Ireland1

One of the key questions in international research addresses the tensions arising from international co-ordination and local adaptation of multinational companies' (MNCs) policies and practices. The German business system encourages MNCs to have a long-term, high-investment orientation, to practise intensive management-labour cooperation and to pursue developmental human resource management (HRM). This study analyses six major German MNCs operating in both Britain and Spain and outlines their reasons for the international co-ordination of HRM. It addresses the issue of central control versus local adaptation by looking at the transfer of German HR policies and practices. The cases show that the MNCs were able to preserve substantial ‘German-ness’ abroad. However, the results of the transfer of German HRM were not always positive due to a variety of endogenous and exogenous causes. Barriers to transfer from institutionally strong to weak environments are discussed and possible internal HR approaches are suggested to counterbalance the national business system effect. Their success will depend on head office-foreign affiliate relations shaped by factors such as cross-border communication, trust and power distribution.