The Politics of Sovereign Credit Spreads

Using a large sample of 35 developing countries for the period 1993–2009, we provide strong and robust evidence that the political institutions in place play a significant role in explaining sovereign spreads. In particular, we find that unconstrained presidential systems increase spreads, while political stability and higher competition for political contest decrease spreads. In addition, political cohesion (political fragmentation) depresses (increases) spreads. Instead, the latter are insignificantly related to political orientation.     

From state to private ownership: Issues from strategic industries

This paper investigates the effects of privatization for a panel of 189 firms from strategic industries headquartered in 39 countries, and privatized between 1984 and 2002. Strategic firms can hardly be compared to manufacturing or competitive industries as they are generally under state monopoly, and involve specific issues such as regulation, political and institutional constraints. We examine the change in ownership and postprivatization means of control by the government, and assess whether positive changes in performance obtain in these particular industries that include firms from the financial, mining, steel, telecommunications, transportation, utilities, and oil sectors. We document that governments continue to exert influence on former state-owned firms after three years by retaining golden shares and/or appointing politicians to key positions in the firm. Our multivariate results reveal a negative effect of state ownership on profitability and operating efficiency, which the presence of a sound institutional and political environment moderates.     

Privatization and globalization: An empirical analysis

This paper examines the link between globalization-measured by foreign direct investment (FDI) and foreign portfolio investment (FPI) – and privatization of state-owned enterprises, in a multi-country sample that focuses on developing countries. We hypothesize that privatization has an effect on FDI/FPI as the process of fostering private sector participation is often accompanied by liberalization reforms, and by allocations of substantial shares of newly privatized firms to foreign investors. Similarly, we expect FDI/FPI to foster privatization efforts as new capital inflows, technology and managerial skills that accompany FDI/FPI make the environment more prone to competition, providing governments with incentives to privatize inefficient firms that need to be turned around. This relation is assessed in two ways, first in a dynamic panel using a generalized method of moments approach, and second through panel causality tests. We find a bi-directional positive relation between privatization proceeds and globalization, particularly in the case of FDI.     

The Investment in Housing As a Forward Market Transaction: Implications for Tenure Choice and Portfolio Selection

A model of tenure choice is presented which treats the benefits and costs of homeownership from a theory of finance perspective. The incremental benefits from homeownership over renting housing services are from two sources: protection against rental price risk (a forward transaction in the housing market) and from a possible capital gain from the eventual sale of a house (substitutes for portfolio investment). The cost of these benefits is higher initial outlay on housing, which reduces the funds available for portfolio investments. The comparative statics of this model is presented. It is shown that rental risk and portfolio risk add to the value of homeownership. Since homeownership is a partial substitute for portfolio investment, it is shown that the lower the covariance between portfolio returns and future home prices the more valuable is homeownership. In the presence of differential borrowing opportunities it is shown that the leverage available to housing significantly increases the value of homeownership.     

Intermodal containerized shipping in foreign trade and regional accessibility advantages

Intermodalism has become one of the most significant transformations of freight transportation in the United States over the past two decades. The coupling of shipping modes has enabled shippers to more fully realize the respective time and costs advantages of respective modes. The opportunity to take advantage of intermodalism when shipping manufactured goods overseas may provide an essential competitive edge to a company or to an entire region engaged in world commerce. The change in the freight accessibility map of the United States to foreign markets that can be ascribed to intermodal infrastructures and operations has so far not been studied. With the help of a geographic information system, this paper analyzes this transformation in the United States by mapping integral place accessibility measures of five-digit zip code areas with respect to gateways for export of manufactured goods, especially containerized freight. The performance of the intermodal freight network is evaluated by comparing accessibility measures based on the highway network and on the intermodal network, respectively, for all North American container ports, as well as for subgroups of container ports on the Eastern Seaboard, the Western Seaboard, and the Gulf Coast of North America. The paper discusses regional winners and losers in the new national freight transportation system.     

Central Banking in the Crisis: Conceptual Convergence and Open Questions on Unconventional Monetary Policy

The advanced economies — financial crisis that began in 2007 was triggered by factors that could not have been easily foreseen but also by factors that had been familiar since the Great Depression but were ignored or forgotten. However, once the crisis was apparent, central banks of the major advanced economies — the European Central Bank, the U.S. Federal Reserve System, the Bank of England, and the Bank of Japan reacted quickly and with a remarkable convergence of policy with respect to defining price stability, communication, enhanced banking surveillance, the role of money and monetary aggregates, unconventional liquidity supply, and forward guidance. These elements of convergence are discussed with respect to their strength and possible dangers in stabilizing the global financial system.     

Does cross-listing in the US foster mergers and acquisitions and increase target shareholder wealth?

We examine the role of cross-listing in alleviating domestic market constraints and facilitating mergers and acquisitions. Our results show that cross-listing allows shareholders of target firms to extract higher takeover premiums relative to their non-cross-listed peers. Moreover, shareholders of Sarbanes–Oxley-compliant targets seem to benefit from a higher premium. We also find that cross-listed firms are more likely to be acquisition targets, consistent with the belief that cross-listing increases firms’ attractiveness and visibility on the market for corporate control. Our results are robust to various specifications and to the self-selection bias arising from the decision to cross-list.