How do “gatekeepers” affect credit risk?

This study investigates the relationship between auditor tenure and credit default swap (CDS) spreads of U.S. firms based on quantile regression. After allowing for common determinants of CDS spreads, auditor tenure exerts both statistically and economically significant additional impacts on the CDS market. Furthermore, there are differential effects of common CDS spread determinants and auditor tenure. While common determinants of CDS spreads (e.g., leverage, volatility, risk free rate, credit ratings, and earnings) have monotonically increasing impacts when CDS spreads (and their changes) are increasingly higher, auditor tenure primarily has the impact when CDS spreads are of low or median levels for less risky firms.     

Crowdfunding: The collaborative economy for channelling institutional and household savings

The financial disintermediation mechanism known as “loan-based-crowdfunding” has recently come under regulation in several countries. This competitive investment and finance vehicle is already well established in the US and British markets.By compiling empirical data from a reference crowdfunding platform, this article compares loan-based crowdfunding with traditional investment vehicles such as investment funds, equities or pension funds.The conclusion of the study is that saving through crowdfunding allows the optimization of a portfolio comprising both institutional and retail investors.     

The future of Russian gas exports to East Asia: Feasibility and market implications

For a long time, the Russian government has aimed to diversify gas exports to East Asian countries. This gearing of Russia towards Asia will have great consequences on world energy, the global economy, and geopolitics in the coming years. This paper analyzes the growth potential of Russia's diversification strategy and the impact this policy would have on sales to Europe. As the most likely scenario is for total gas exports to grow at a moderate rate from 2010 to 2030, any increase in sales to Asia could make difficult the raising of exports to Europe. Our thesis is that this trade-off will depend primarily on domestic consumption trends, geographic targeting of investments, and commercial and financial alliances with foreign partners. However, imports from Central Asia, declining exports to Ukraine and Belarus, and Gazprom investments in other gas-producing countries could also affect gas exports and gas distribution among different markets.     

Consumer cooperatives as an alternative form of governance: The case of the broadband industry

With a growing number of consumer cooperatives in non-agrarian industries such as energy and broadband, there is a need to better understand their emergence as a viable form of governance. In this context, the paper uses Mikami’s (2010) model on consumer cooperatives to explain their emergence as a result of their ability to generate additional equity financing through the membership market. It focuses on the motivations of consumers to financially contribute to a cooperative by examining the risks and benefits associated with the investment. Based on a survey of 759 consumers, it links their motivations for joining a cooperative to different forms of risks and benefits associated with the investment. It shows that the risks related to cost sharing and switching costs are important determinants for consumers. Other factors that affected the likelihood of joining a cooperative were expected benefits with respect to user network externalities and infrastructure gains.     

Trust,trustworthiness, and traditional Islamic education

This paper examines traditional Islamic school (i.e. madrasah) attendance as a determinant of social attitudes among secondary-schooled adolescents in rural Bangladesh. Although both recognized and traditional madrasah-enrolled adolescents show greater support for charity, we find no evidence that traditional madrasah attendance promotes “trust in others”. Attendance at recognized madrasahs, which use a state-approved curriculum, however, significantly increases social trust. The madrasah–trust connection is not explained by the role of teachers’ attitudes towards trust or professional background. Nor do we find evidence that the absence of an effect of traditional madrasah attendance on social trust is driven by their geographic locations. Given the differences between the two groups in terms of stated social preferences, our analysis warns against the practice of lumping state-recognized madrasahs and traditional madrasahs into one category.     

The All‐Pay Auction with Nonmonotonic Payoff

I model innovation contests as an all‐pay auction in which it is possible not to achieve successful innovation despite costly R&D investments, and as a result, there is no winner. In such a case, the winning payoff turns out to be nonmonotonic in own bid. I derive the sufficient conditions for the existence of pure strategy equilibria, and fully characterize the nondegenerate mixed strategy equilibrium. In the mixed strategy equilibrium, the support of the low‐value bidder is not continuous, and both the high‐value and the low‐value bidders place an atom in the (distinct) lower bound of their respective support. Under symmetric valuation, both bidders place an atom at zero. These results can explain why one does not observe very low quality innovation in real life, or why even symmetric firms may stay out of an innovation contest.     

The impacts of risk-taking behaviour and competition on technical efficiency: Evidence from the Chinese banking industry

This paper tests the impact of risk and competition on efficiency in the Chinese banking industry over the period 2003–2013. Comprehensive types of risk-taking behaviour are considered including credit risk, liquidity risk, capital risk, and insolvency risk. Competition is measured by the Lerner index. The results are cross-checked using an alternative econometric technique as well as an alternative competition indicator. The findings show that the technical and pure technical efficiencies of Chinese commercial banks are significantly and negatively affected by liquidity risk. They further show that greater competition precedes declines in technical and pure technical efficiencies of Chinese commercial banks. The results suggest that Chinese bank efficiency is significantly affected by bank diversification, banking sector development, stock market development, inflation and GDP growth rate. The findings also indicate that, compared to state-owned commercial banks, joint-stock commercial banks and city commercial banks have lower technical and pure technical efficiencies.     

FINANCE,DISTRIBUTION AND THE ECONOMIC OBJECTIVE OF FINANCIAL COOPERATIVE INSTITUTIONS

This paper proposes a model where the structure rather than the size of the financial sector explains its influence on income distribution. Because of information asymmetries, a financial sector dominated solely by profit‐maximizing financial intermediaries will increase income and wealth inequality as it gives preferential access to credit for high‐income agents, whereas a diversified inclusive financial sector with alternative models of finance, like cooperatives, will reduce the inequality gap. No full convergence in income distribution can be realized through finance only and there is still a need for redistribution policies. Accordingly, an objective function for cooperative financial institutions should define a desired pricing behaviour that can increase the income of members at a rate higher than the average growth rate of the economy.     

Economies in Transition: How Important Is Trade Openness for Growth?*

We investigate the effect of trade openness on economic growth in transition countries using a transparent statistical methodology that leads to data‐driven case studies. In particular, we employ synthetic control methods in a panel of transition economies and compare GDP growth in treated (that is, open) countries with growth in a convex combination of similar but untreated (that is, closed) countries. We find that trade liberalization tends to have a positive effect on the pattern of real GDP per capita. One of our most robust results shows that making the transition without opening up to trade considerably hampers growth.