Asymmetric benchmarking in bank credit rating

This study proposes an information asymmetry hypothesis to examine why bank credit ratings vary among countries even when bank financial ratios remain constant. Countries are divided among those with low and high information asymmetry. The former include high-income countries, those in North America and West Europe regions, and those with strong institutional environment quality, whereas the latter group possess the opposite characteristics. This study hypothesizes that the influences of financial ratios on ratings are enhanced in low information asymmetry countries but reduced in countries with high information asymmetry. The sample includes the long-term credit ratings issued by Standard and Poor's from 86 countries during 2002-2008. The estimated results show that the effects of financial ratios on ratings are significantly affected by information asymmetries. Countries wishing to improve the credit ratings of their banks thus should reduce information asymmetry.     

European Bank Performance Beyond Country Borders: What Really Matters?

The paper analyzes bank performance in the context of the integrated EuropeanUnion market and its member countries. First, the paper investigates the technicalefficiency of banks in each country sample using a Data Envelopment Analysis(DEA) model incorporating only banking variables. Then, a second DEA modelis defined incorporating environmental factors together with banking variables inorder to standardize the country-specific environmental conditions. Based on thesemodels, the paper systematically analyzes the efficiency position for each of theEuropean banking industry if average banks decide to operate in any other country.The results indicate that adverse (advantageous) environmental conditions are apositive (negative) factor for the home banking industry and being technicallyefficient appears to be a significant deterrence to foreign competition.     

An analysis of the black market exchange rate in a developing economy — The case of Turkey

Zusammenfassung Eine Analyse des Schwarzmarkt-Wechselkurses in Entwicklungsl?ndern — Das Beispiel der Türkei. — Die Schwarzmarkt-Wechselkurse in Entwicklungsl?ndern sind nicht unabh?ngig davon, welche Politik betrieben wird und wie sich die anderen ?konomischen Variablen (wie Einkommen, Preisniveau und Inflationserwartungen) entwickeln. In diesem Aufsatz wird mit Hilfe türkischer Daten ein einfaches Modell entwickelt und gesch?tzt, das gleichzeitig Schwarzmarkt-Wechselkurse, Preisniveau, Realeinkommen und reale Geldmenge bestimmt. Die Ergebnisse dynamischer Simulationen zeigen, daΒ sich dann, wenn Rückwirkungen aus den übrigen Teilen der Wirtschaft zugelassen werden, die Wirkungen wirtschaftspolitischer MaΒnahmen auf die Schwarzmarkt-Wechselkurse erheblich von denen unterscheiden, die man in einem Ein-Gleichungs-Modell beobachten würde, in dem alle erkl?renden Variablen als exogen angesehen werden.

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Résumé Une analyse du taux de change sur le marché noir dans une économie développante. — Les taux de change sur le marché noir dans les pays en voie de développement ne sont pas indépendants des politiques appliquées ou des autres variables économiques comme par exemple le revenu, le niveau des prix ou les expectatives d’inflation. Cet article a construit, estimé et simulé, en utilisant des données de la Turquie, un modèle simple qui simultanément détermine le taux de change sur le marché noir, le niveau des prix, le revenue réel et l’encaisse réelle. Les résultats des simulations dynamiques démontrent que, si l’on permet des rétro-actions du reste de l’économie, les effets d’un changement de politique sur le taux de change sur le marché noir sont substantiellement différents á ceux qu’on observerait avec un modèle á une seule équation dans laquelle toutes les variables explicatives sont supposément exogènes.

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Resumen Un análisis del tipo de cambio negro en una economfa en desarrollo. — Tipos de cambio de mercado negro en pai’ses en desarrollo no son independientes de las polfticas aplicadas o de otras variables econ?micas tales como el ingreso, nivel de precios o expectativas de inflation. En este articulo se ha construido, estimado y simulado, sobre la base de datos de Turquia, un modelo simple que détermina simultáneamente el tipo de cambio de mercado negro, nivel de precios, ingreso real y balances monetarios reaies. Los resultados de simulaciones dinámicas muestran que, cuando se permiten realimentaciones del resto de la economia, los efectos de un cambio de pol?tica dado sobre el tipo de cambio de mercado negro son sustancialmente diferentes de aquéllos que habrian sido observados con un modelo de ecuación única que asume que todas las variables explicativas son exógenas y no permite ninguna realimentación.

     

The Marglin-McFadden-Mishan debate on public investment criteria: Some Clarifications

This paper reviews the post 1963 debate on public investment criteria stemming largely from Marglin's work. At issue here, are the two main propositions of Marglin, namely, that the social marginal rate of time preference is the appropriate social rate of discount (SRD) for public projects, and that the social opportunity cost (SOC) of capital raised to facilitate public investment is, in general, in excess of the money cost of such investment. Both supported and challenged by different writers, this debate does not provide any clear consensus as to the current status of these propositions. The central purpose of this paper is to put the series of apparent claims and counterclaims found in the literature to an analytical test, and draw the appropriate conclusions. This we do by explicitly considering the technology, fiscal policy and savings reinvestment behavior in a simple model of maximizing the present discounted value of the marginal net consumption stream generated by the public project. We argue that given Marglin's assumptions, the criterion that the marginal social rate of time preference be the SRD is valid as has already been demonstrated by Diamond (1968) and McFadden (1972). His other conclusion that the SOC should generally exceed unit v is seen to be correct only in special cases.     

Determinants of the Loan Loss Allowance: Some Cross‐Country Comparisons

This paper analyzes the determinants of banks' loan loss allowance for samples of U.S. banks and three non‐U.S. samples: a group of 21 countries, Canada, and Japan. The model includes fundamental (or nondiscretionary) determinants of the allowance, such as nonperforming loans, and discretionary determinants, such as income before the loan loss provision. The results suggest that the loan loss allowance is sensitive to preprovision income in almost all samples. However, the results also suggest that some variables thought to reflect fundamental factors in U.S. analysis, such as net charge‐offs, are not significant factors for non‐U.S. banks.     

Multifactor productivity growth and the Australian mining sector

A commonly used, but unadjusted, measure of Australian mining multifactor productivity (MFP) fell by about one‐third over the first decade of the mining boom, coinciding with very large increases in resource prices. Using growth accounting methods and our own adjustments, based on energy use and capital‐output lags to account for depletion effects we find (i) the Australian annual average MFP growth in mining was 2.5 per cent a year between 1985–1986 and 2009–2010 compared to ?0.65 per cent for the unadjusted measure and (ii) productivity growth was positive in the 2000s, albeit at a lower rate than in the 1990s. Our adjusted MFP growth measures at a state level and subsector level are greater than unadjusted productivity measures. In a complementary study using an econometric decomposition of mining MFP at a state level, we find no statistically significant effect of technological change on MFP growth in the sector, but positive and statistically significant effects of technical efficiency and scale over the period 1990–1991 to 2009–2010. Our results do not support specific policy interventions to increase productivity growth in the mining sector beyond appropriate incentives for resource exploration including the provision of precompetitive resource data.     

Projecting corporate brand image and behavioral response in business schools: Cognitive or affective brand attributes?

This paper considers corporate brand image, focusing on cognitive and affective brand attributes in the context of business schools. While previous research on university or institutional branding has studied these elements separately via cognitive (e.g., service or educational quality attributes) or affective criteria (personality traits of the corporate brand), this study investigates them jointly through behavioral responses (leading to positive recommendations about the corporate brand). This is important because brand equity such as positive word-of-mouth (or mouse) is derived from both attitudinal components, rather than being based on only one component. Drawing on an empirical survey of postgraduate (MBA) students from four business schools, the findings reveal that both cognitive and affective attitudinal components appear equally important in shaping corporate brand image. Further, when the mediating effect is investigated, interestingly, students' positive recommendations to schools depended largely on the affective (prestigious, adventurous, empathy and competence) rather than upon the cognitive brand attributes. This paper contributes theoretically to the corporate brand and consumer behavior literature by investigating both attitudinal components at a corporate brand level and investigates their effects on behavioral/conative response. The practical contribution of the paper and its managerial implications lie in the context of defining strategy in relation to positioning business schools in an increasingly competitive higher education market.     

Institutional development and stock price synchronicity: Evidence from China

Better developed legal and political institutions result in greater availability of reliable firm-specific information. When stock prices reflect more firm-specific information there will be less stock price synchronicity. This paper traces the experience of China, an economy undergoing dramatic institutional change in the last 20 years with rich variation in experiences across provinces. We show that stock price synchronicity is lower when there is institutional development in terms of property rights protection and rule of law. Furthermore, we investigate the influence of political pluralism on synchronicity. A more pluralistic regime reduces uncertainty and opaqueness regarding government interventions and therefore increases the value of firm-specific information that reduces synchronicity.     

Foreign exchange exposure and impact of policy switch – the case of Malaysian listed firms

This article undertakes an in-depth study of the foreign exchange exposure of Malaysian listed firms. We examine several issues related to firm-specific and overall exposure, including an evaluation of the efficacy of adopting a hard-peg on such exposure. Our sample consists of 158 listed firms and spans the 16 year period, 1990–2005. A multivariate model using four bilateral exchange rates is used to determine firm level exposure while panel data analysis using a random-effects Generalized Least Squares (GLS) model is used to determine system-wide or aggregate sample exposure. We find a total 71% of our sample firms to have significant exchange rate exposure, a rate substantially higher than that reported for most countries, especially developed ones. The US$ is by far the single most important source of exposure with 63% of sample firms exposed to it. The sign of the beta coefficient for three of the four currencies are negative, implying that our sample firms are largely net importers in these currencies. We find exposure to be time variant and dependent on the sector within which a firm operates. Interestingly, the panel data analysis which measures aggregate exposure, shows the US$ to be a significant source of exposure even with the adoption of the hard peg. The change in policy regime to a fixed peg following the crisis appears to have had no impact at either firm-level exposure or overall system-wide exposure.