Are the Discounts in Seasoned Equity Offers Due to Inelastic Demand?

This paper investigates the large and diverse discounts in UK open offers and placings. Large discounts are a substantial cost to shareholders who do not buy new shares. The existing literature mainly examines US firm‐commitment offers and private placements. The institutional setting differs in the UK, in ways that make the theory of inelastic demand for shares more important as an explanation for discounts than in the US. The paper finds that inelastic demand, or illiquidity of the issuer's shares, and financial distress, are key determinants of the discount. We expect these results to apply to other stock markets.     

Ecotourism impacts in the Nicoya Peninsula,Costa Rica

Ecotourism promotes responsible travel to natural areas, environmental conservation and the well‐being of local communities. Eco‐lodges are an important component of ecotourism ventures but an infrequently researched component of this field. Considering their influence on the natural environment (design and operation) and local communities (employment practices and purchases), the success of ecotourism depends, in part, on the performance of eco‐lodges. This project studies the effects of the Punta Islita (PI) eco‐lodge on the Nicoya Peninsula, Costa Rica. An interdisciplinary nested‐scale analysis, combining guest and household interviews with multi‐temporal remote sensing analysis of forest cover change of the lodge and surrounding areas, is used to evaluate the environmental, economic and social impacts of ecotourism in the region. Our results show significant positive contributions of the PI eco‐lodge on forest cover, environmental conservation, and local economic incomes within the surrounding communities. For local livelihoods, the PI eco‐lodge was seen as having positive social, cultural and economic impacts for nearly all societal variables for both employees and their neighbours. The PI eco‐lodge was also perceived as reducing alcoholism, drug addiction and prostitution, where conventional tourism on the Peninsula was shown to increase these ‘societal ills’. Land value and product pricing were the few variables believed to have increased as a result of tourism on the Peninsula. For conservation, the PI eco‐lodge property had the highest rates of reforestation within the Nicoya Peninsula and remains the scale most reforested in both forest cover change and total forest cover. In fact, at the landscape scale, we find that the Pacific coast of the Nicoya, where the bulk of ecotourism occurs, has undergone reforestation, whereas forest interiors have been deforested. Historically, reforestation occurred as cattle ranching credit programs were halted by the government and households in the area left to find better job opportunities. The PI eco‐lodge, as a source of good employment, resulted in worker migration back to the surrounding area, resulting, in some cases, in increased deforestation. Overall, we feel that the PI eco‐lodge serves as an example of successful ecotourism. However, increasing development in the region, in particular by standard hotel operations and large condo developments, seeks to capitalise on the region's natural beauty and may reverse land cover trends if they are not accompanied by adequate forest conservation strategies and stresses the importance of monitoring and assessing the impacts of accommodations tied to nature‐based tourism operations. Copyright © 2010 John Wiley & Sons, Ltd.     

News and the cross-section of expected corporate bond returns

We study the cross-section of expected corporate bond returns using an inter-temporal CAPM (ICAPM) with three-factors: innovations in future excess bond returns, future real interest rates and future expected inflation. Our test assets are a broad range of corporate bond market index portfolios. We find that two factors – innovations about future inflation and innovations about future real interest rates – explain the cross-section of expected corporate bond returns in our sample. Our model provides an alternative to the ad hoc risk factor models used, for example, in evaluating the performance of bond mutual funds.     

Board Effectiveness and Short Termism

We examine whether more effective boards in terms of size, experience, shareholding and independence, as discussed in the 2010 UK Corporate Governance Code, limit excessive short‐term risk taking or short‐termism. We use a state‐of‐the‐art asset pricing model that enables the disentangling of short‐term risk (related to short‐term returns) and long‐term risk (related to long‐term returns), and use the former as a proxy for short‐termism, where the short‐term component not only represents the time horizon for which we are interested but also the risk that is not related to fundamentals. We examine 916 firms in the UK over a possible horizon of 18 years, January 1992–December 2010, and find that more effective boards are associated with lower levels of short‐term risk and this result is robust to various types of short‐term risk (overall, downside) and specifications.     

Why Doesn't Regional Integration Improve Income Convergence in Africa?*

Abstract: This paper investigates why regional integration does not improve income convergence in Africa, despite the common goal of more open and freer trade. Based on empirical analysis using African countries data, the paper presents the evidence that there has been little progress in income convergence in Africa. The paper shows that despite the importance of regional integration there has been limited progress and prospects of the African integration process are not as promising as would be expected for such an important pillar in Africa's development agenda.     

Growth,productivity and diversification in Africa

The purpose of this article is to investigate the relationship among economic growth, productivity and diversification. Our results have shown that deepening diversification leads to improvements in total factor productivity among other determinants in African economies. The significance of the link between diversification and economic growth in the case of African economies cannot be gainsaid. It means that African countries can scale up their economies’ growth by raising their total factor productivity through pursuing policies that enhance diversification.     

Does cooperation among women enhance or impede firm performance?

Based on the notion that women cooperate more with women than with men, we investigate whether women managers work more effectively when monitored by women directors. We find that when a firm has women as its top managers, its accounting profitability increases with the proportion of women on the board of directors. However, the improvement in profitability is associated with earnings management. We show that women are likely to be appointed to precarious leadership positions, which puts pressure on them to ameliorate the weak earnings performance. Finally, consistent with the interaction between women resulting in an unfavourable response from investors, we document a negative stock market reaction to the appointment of female top managers in the presence of women on the board.     

Test power properties of within-firm estimators of ownership and board-related explanatory variables with low time variation

Review of Quantitative Finance and Accounting - After decades of fast growth, the Chinese housing market has become twice as large as the US housing market. In this paper, we examine the effect of...