The impact of capital market competition on relationship banking: Evidence from the Japanese experience

Disagreement exists about the potential effects of changes in competition on relationship lending. Boot and Thakor (2000) predict that an increase in capital market competition should lead to a reduction in relationship lending; however, Dinç (2000) predicts that greater capital market competition should increase relationship lending. Thus far, data limitations have precluded empirical tests of these competing hypotheses. In this study, we use a unique data set drawn from the deregulation of the Japanese financial system. Our findings show that increased capital market competition is associated with reduced relationship lending. However, the effect differs according to the maturity of the loans; increased capital market competition is associated with reduced long-term, but greater short-term, relationship lending.     

Extreme downside risk and expected stock returns

We propose a measure for extreme downside risk (EDR) to investigate whether bearing such a risk is rewarded by higher expected stock returns. By constructing an EDR proxy with the left tail index in the classical generalized extreme value distribution, we document a significantly positive EDR premium in cross-section of stock returns even after controlling for market, size, value, momentum, and liquidity effects. The EDR premium is more prominent among glamor stocks and when high market returns are expected. High-EDR stocks are generally characterized by high idiosyncratic risk, large downside beta, lower coskewness and cokurtosis, and high bankruptcy risk. The EDR premium persists after these characteristics are controlled for. Although Value at Risk (VaR) plays a significant role in explaining the EDR premium, it cannot completely subsume the EDR effect.     

Long-Run Elasticities of the Demand for Money in Korea:Evidence from Cointegration Analysis

Most recent studies have employed the cointegration technique to investigate the long-run stability of the demand for money. This study considers the case of Korea. It is shown that in the long-run while Ml monetary aggregate is cointegrated with income, interest rate, and the exchange rate, M2 is not. However, results from error correction models reveal that both Ml and M2 have short-run relationship with their determinants. [E41]     

Direct regression,reverse regression,and covariance structure analysis

This paper discusses the issues in estimating the effects of marketing variables with linear models. When the variables are not directly observable, it is well known that direct regression yields biased estimates. Several researchers have recently suggested reverse regression as an alternative procedure. However, it is shown that the reverse regression approach also fails to provide unbiased estimates in general, except for some special cases. It is proposed that covariance structure analysis with an appropriate measurement model can ensure the unbiasedness of estimated effects. These issues are examined in the context of assessing market pioneer advantages. The authors thank the editor and the two anonymous reviewers for their helpful comments on the previous version of this paper.     

Investment in salvage equipment

Manufacturers are faced with three options for disposing of excess finished items: they can (1) continue to mark down the item until it sells; (2) dispose of or scrap it; or (3) salvage it in order to reclaim valuable raw materials and components. In many situations the option of a markdown is not viable, thus the choice is to either scrap or salvage. Although many manufacturers have invested in salvage equipment, they have not deduced the impact of this investment as it affects not only the risk-adjusted value of the project but also the production run size and the selling price. Hence, their decisions frequently turn out to be suboptimal. This paper develops a project-valuation model that adds a new dimension to traditional capital budgeting decisions by incorporating salvage capacity.     

A micro,econometric investigation of choice of technology

This paper reports on a micro study of the determinants of technological choice utilizing a sample of observations at the man-machine level from operating plants. The large sample size permits econometric modelling - based on engineering and process analytic principles - of the production relationships involved. It also allows statistical testing of hypotheses. Among the determinants analyzed in the context of differentiated inputs and outputs are policies affecting prices on the factor and product markets. The particular case examined is the choice between imported and locally made looms for cotton textile weaving in Korea. However, methodological concerns are given equal weight in the discussion.     

Time-Series Support for Balassa's Productivity-Bias Hypothesis: Evidence from Korea

In this paper we use the Johansen and Juselius cointegration technique and quarterly data over the period 1979–1993 to test the productivity-bias hypothesis between Korea and four of its major trading partners (Germany, Japan, the United Kingdom, and the United States). The results show that in all four cases the deviation of purchasing-power parity (PPP) from the equilibrium exchange rate has a long-run relationship with the productivity ratios, supporting the notion that as Korea becomes relatively more productive, the Korean won appreciates in real terms.