Foreign issuers in the U.S. PIPE market

We document that the use of private investment in public equity (PIPE) by foreign firms listed on U.S. exchanges is growing even faster than its use by U.S. firms. On average, foreign firm PIPE stock deals represent a similar proportion of the firm's market capitalization to U.S. firm PIPEs, but suffer less of a share price discount than U.S. firm PIPE issuances, a relation that is robust to consideration of exchange, deal size, share turnover and return volatility. We document that hedge funds are only small investors in foreign firm PIPEs issued in the U.S., which tend to be purchased by pensions, government funds and corporations. PIPE, in combination with the reverse merger method of going public, provides a cost-effective means for foreign firms to raise capital in the U.S. capital market.     

WHAT DO WE KNOW ABOUT THE POLITICAL ECONOMY OF ECONOMIC POLICY REFORM?

The recent wave of democratization in developing countries andin formerly communist ones has sparked renewed interest in therelation between politics and economic adjustment. Adjustmentprograms, however well designed in a technical economic sense,are often politically difficult to launch and, once launched,to keep afloat. Success in implementing an adjustment programmay depend on a government's skill in generating political supportand holding off the opposition. This article explores the politicsof economic reform, drawing on country studies by politicalscientists and country specialists, the growing theoreticalliterature by economists, and the findings of a World Bank researchproject on the political economy of adjustment in new democracies.The article examines three broad clusters of variables: institutionalcharacteristics of the political system, aspects of the internaland external economy, and the design of the reform program.It also considers the relevance of political analysis for policymakersand for international financial institutions.      

Short‐Term Performance of U.S.‐Bound Chinese IPOs

Firms from emerging markets, including China, increasingly seek to raise capital outside of their home markets. We examine the short‐term performance of U.S.‐bound Chinese initial public offerings (IPOs) and find that these IPOs have significantly lower underpricing than a matched sample of U.S. counterparts. We also find that the magnitude of IPO underpricing for U.S.‐bound Chinese firms is positively related to revisions in offer price.     

Integration in the absence of institutions: China–North Korea cross-border exchange

Theory tells us that weak rule of law and institutions deter cross-border integration, deter investment relative to trade, and inhibit trade finance. Drawing on a survey of more than 300 Chinese enterprises that are doing or have done business in North Korea, we consider how informal institutions have addressed these problems in a setting in which rule of law and institutions are particularly weak. Given the apparent reliance on hedging strategies, the rapid growth in exchange witnessed in recent years may prove self-limiting, as the effectiveness of informal institutions erode and the risk premium rises. Institutional improvement could have significant welfare implications, affecting the volume, composition, and financial terms of cross-border exchange.     

Famine in North Korea Redux?

In the 1990s, 600,000 to 1 million North Koreans, or about 3–5 percent of the pre-crisis population perished in one of the worst famines of the 20th century.North Korea is once again poised on the brink of famine. Although the renewed provision of aid is likely to avert a disaster on the scale of the 1990s, hunger-related deaths are already occurring and a dynamic has been set in motion that will carry the crisis into the future.North Korea is a complex humanitarian emergency characterized by highly imperfect information. This paper triangulates quantity and price evidence with direct observation to assess food insecurity in North Korea and its causes. We critique the widely cited UN figures and present original data on grain quantities and prices. These data demonstrate that for the first time since the 1990s famine, the aggregate grain balance has gone into deficit. Prices have also risen steeply. The reemergence of pathologies from the famine era is documented through direct observation. Although exogenous shocks have played a role, foreign and domestic policy choices have been key.     

Governance and Growth: Lessons from the Asian Economic Crisis

The East Asian financial crisis of 1997-98 has provoked yet another round of controversy on the institutional foundations of the region's growth. This article provides some flavour of this new work by examining three factors that impinge on economic policy and performance: the role of political regime type; the structure of business-government relations; and the design of government agencies. Institutional weaknesses contributed to the onset of the Asian financial crisis.     

Price Momentum and Idiosyncratic Volatility

We find that returns to momentum investing are higher among high idiosyncratic volatility ( IVol) stocks, especially high IVol losers. Higher IVol stocks also experience quicker and larger reversals. The findings are consistent with momentum profits being attributable to underreaction to firm‐specific information and with IVol limiting arbitrage of the momentum effect. We also find a positive time‐series relation between momentum returns and aggregate IVol. Given the long‐term rise in IVol, this result helps explain the persistence of momentum profits since Jegadeesh and Titman's (1993) study.