Firm Internationalization and Capital Structure in Developing Countries: The Role of Financial Development

We investigate the relationship between internationalization and the level of debt financing for more than 18,000 firm/year observations from thirty-one developing countries in the period 1991-2006. We argue that this relationship can be affected by both country-level and firm-level factors. The results show that in developing countries with relatively higher financial development, firm internationalization corresponds with a greater level of debt when firms have more growth opportunities (which also indicate a higher level of asymmetric information). This evidence suggests that relatively developed financial markets in developing countries at least partially mitigate the effect of asymmetric information and decrease the agency cost of debt for firms with higher levels of internationalization.     

The impact of bank ownership concentration on impaired loans and capital adequacy

This paper examines the impact of bank ownership concentration on two indicators of bank riskiness, namely banks’ non-performing loans and capital adequacy. Using balance sheet information for around 500 commercial banks from more than 50 countries averaged over 2005–2007, we find that concentrated ownership (proxied by different levels of shareholding) significantly reduces a bank’s non-performing loans ratio, conditional on supervisory control and shareholders protection rights. Furthermore, ownership concentration affects the capital adequacy ratio positively conditional on shareholder protection. At low levels of shareholder protection rights and supervisory control, ownership concentration reduces bank riskiness.     

Regional business cycle synchronization in Europe?

We analyse regional business cycle synchronization in the Euro Area, using gross value added in 53 NUTS 1 regions for a period of 30 years (1975–2005), detrended by Hodrick–Prescott and the Christiano–Fitzgerald filters. We conclude that, on average, synchronization has increased for the period considered with exceptions during the eighties and the beginning of the nineties. Still, the correlation of the business cycle in some regions with the benchmark remained low or even decreased. Our findings also support the hypothesis of the existence of a ‘national border’ effect.     

Een onderzoek naar de invloed van monetaire factoren op het reële groeiproces in enkele traditionele theorieën van economische groei (III)

Summary This is the third of three successive papers on the problem of to what extent monetary phenomena influence the real variables in a process of economic growth. In the first paper the conditions under which money is neutral was examined. The second was devoted to the impact of money in a neo-classical growth model. In the present paper the real neo-keynesian growth model of Harrod is taken as a starting-point. This is a special case of the neo-classical model, for the introduction of a constant rate of interest in a neoclassical production structure yields a constant capital-labor ratio as a result. According to the Harrod model, capital scarcity or capital abundance will generally prevail. Stable growth is a mere accident. Subsequently, the assumption of a constant rate of interest is relaxed. The rate is now assumed to be dependent on the national product and the money supply. This makes the model more flexible. Control of the growth rate of the money supply is then an instrument in the hands of the monetary authorities for the purpose of preventing situations of capital scarcity or abundance. In the case of capital scarcity, the growth rate of the money supply has to be raised. Paradoxically enough, the result of this will be that the rate of interest rises. In a situation of capital abundance the opposite is true. A steady and stable growth path is possible, because the monetary authorities are in a position to let the rate of interest take a value at which full employment prevails.      

Hospital service recovery

An organization's ability to correct service errors is an important factor in achieving success in today's service economy. This paper examines service recovery in hospitals in the U.S. First is a general review of service recovery theories. Next is a discussion of specific service issues related to the hospital environment. The literature on service recovery is used to make specific recommendations to hospitals for ways to improve their ability to remedy service errors when they occur. Suggestions for future research in the field of service recovery are also made.     

Does the impact of financial liberalization on income inequality depend on financial development? Some new evidence

Instead of empirically finding that higher levels of financial development reduce the positive impact of financial liberalization on inequality, as others do, we come up with the opposite result: financial development strengthens the inequality-raising impact of financial liberalization. We suggest that by, e.g., allowing financial liberalization to lead to more volatility and uncertainty, the model of Bumann and Lensink (2016 “Capital Account Liberalization and Income Inequality.“ Journal of International Money and Finance 61: 143–162.) can be extended as such that also an amplifying instead of reducing effect of financial depth on the impact of financial liberalization on income inequality can be theoretically justified.     

Lenders on the storm of wholesale funding shocks: saved by the central bank?

We provide empirical evidence on banks’ responses to shocks in the wholesale funding market, using data of 181 euro area banks over the period from August 2007 to June 2013. Responses to funding liquidity shocks for both banks’ lending volumes and loan rates, to households and corporates, are analysed in a panel VAR framework. We thereby distinguish banks by country, extent of Eurosystem borrowing, bank size and capitalization. The results show that shocks in the securities and interbank markets have significant effects on loan rates and credit supply, particularly of banks in stressed countries of the periphery. The results also suggest that central bank liquidity has mitigated this effect on lending volumes. Lending to nonfinancial corporations is more sensitive to wholesale funding shocks than lending to households. Lending volumes of large banks that are typically more dependent on wholesale funding and banks with large exposure to sovereign bonds show stronger responses to wholesale funding shocks.     

China's Outward Direct Investment in Africa

The empirical determinants of China's outward direct investment (ODI) in Africa are examined using an officially approved ODI dataset and a relatively new OECD–IMF format ODI dataset. China's ODI is found responding to the canonical economic determinants that include the market seeking motive, the risk factor, and the resources seeking motive. It is also affected by the intensity of trade ties and the presence of China's contracted projects. A host country's natural resources have an impact on China's decision on how much to invest in the country rather than on whether to invest in the country or not. China's drive for Africa's natural resources is mainly a recent phenomenon and, probably, became prominent after the “Going Global” policy adopted in 2002.