Seven Ways to Deal with a Financial Crisis: Cross‐Country Experience and Policy Implications1

This article presents a taxonomy of financial restructuring strategies that have been used by national policy makers to manage financial crises in the past. The goals of financial restructuring are to preserve or, if necessary, restore the debtor‐creditor relationships on which the economy depends for efficient allocation of capital, and to do so at minimal cost. Costs include not only the direct costs to taxpayers of financial assistance, but also—and likely more important—the indirect costs to the economy that stem from misallocations of capital and incentive problems resulting from the restructuring. Countries typically apply a combination of tools, including decentralized, market‐based mechanisms as well as government‐managed programs. Market‐based strategies generally aim to strengthen the capital base of financial institutions and borrowers using some mix of debt forgiveness and capital infusions. Government‐led restructuring strategies include the establishment of entities to which non‐performing loans are transferred as well as government‐assisted sales of domestic financial institutions, often to foreign entrants. Market‐based mechanisms can provide low‐cost ways of resolving the coordination problems faced by countries in the wake of massive debtor and creditor insolvency, particularly when those mechanisms are effective in achieving the desirable objective of selectivity—that is, devoting taxpayer resources only to those borrowers and banks that, with temporary assistance, will be capable of sustaining themselves in the future. But limiting their range of application mainly to developed economies, such market‐based mechanisms also depend on an efficient judicial system, a credible supervisory framework and authority with sufficient enforcement capacity, and lack of corruption in implementation. Although government‐managed programs may not seem to depend as heavily on well‐functioning legal and regulatory institutions, such approaches—especially the transfer of assets to government‐owned asset management companies—also rely to some extent on such institutions. Asset management companies are less likely to achieve their goal of resolving the overhang of debt at reasonable cost when legal and political institutions are weak and ownership of domestic creditors and debtors is highly concentrated. Especially in such cases, complexity and failure to consider incentive problems when designing specific rules governing financial assistance can aggravate moral hazard problems, unnecessarily raising the costs of resolution. Resolution mechanisms tend to be most successful when—like across‐the‐board debt forgiveness programs implemented through redenominations of debt—they are simple in design and afford quick resolution of outstanding debts, offering little discretion to governments while providing incentives for the private sector to work down the remaining debt overhang.     

Linking HRM and Small Business Performance: An Examination of the Impact of HRM Intensity on the Productivity and Financial Performance of Small Businesses

Attempts to explore empirically the link between HRM and firm performance are numerous. Yet, research on this link remains restricted to large companies. Little is known about the extent to which the existing results extend to small businesses. The purpose of the present study is to develop and test a conceptual framework linking HRM to financial performance that fits small businesses. The central question is whether the development of an intensive HRM is profitable for smaller organizations. For the development and optimization of the conceptual framework, we rely on human capital theory and bankruptcy prediction models. Using structural equation modeling, we study the mediating effect of voluntary turnover and productivity on the relationship between HRM intensity and one year lagged financial performance. The results show both productivity and profitability enhancing effects as well as a cost increasing impact of HRM intensity.     

Exports and technology in manufacturing industry

Zusammenfassung Exporte und Technologie der Verarbeitenden Industrie. — Die Verfasser nehmen die Behandlung der Technologie in der modernen Au\enhandelstheorie kritisch unter die Lupe. Unter Anwendung einer dynamischen Perspektive liefern sie einige neue empirische Erkenntnisse über die Beziehung zwischen der technologischen Wettbewerbsf?higkeit eines Landes und seiner Exportleistung. Anhand von fünf Industriel?ndern (Deutschland, Japan, Frankreich, Schweden und den Niederlanden) wird gezeigt, da\ es in dieser Hinsicht betr?chtliche Unterschiede zwischen den L?ndern gibt. Diese Unterschiede k?nnen teilweise auf l?nderspezifische Entwicklungspfade und auf Unterschiede in der Industriestruktur zurückgeführt werden, aber nach Ansicht der Autoren k?nnten sie auch durch eine unterschiedliche nationale Technologiepolitik beeinflu\t worden sein.

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Résumé Les exportations et la technologie des industries manufacturières. Cette étude examine le traitement du facteur de technologie dans la théorie moderne du commerce international. En utilisant une perspective dynamique, les auteurs donnent quelque évidence nouvelle pour la relation entre la compétitivité technologique et la performance dans le commerce international. En considérant cinq pays industriels (R.F.A., le Japon, la France, la Suède, et les Pays Bas), il est évident qu’il y a des différences remarquables entre ces pays. On peut attribuer ces différences aux processus du développement spécifiques de ces pays et aux différences entre la structure industrielle de ces pays examinés. Mais d’après les auteurs, ces différences pourraient être influencées aussi par les différences entre la politique de la technologie de ces pays.

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Resurnen Exportaciones y tecnologia en la industria manufacturera. — Este trabajo estudia el trato del factor tecnologia en la teoria moderna del comercio. Utilizando un enfoque dinámico se presenta evidencia empirica nueva de la relation entre la competitividad technológica y la performance del comercio. Considerando los casos de cinco paises industrials (Alemania, Japon, Francia, Suecia y Holanda) se demuestra que existen notables diferencias entre los países en este aspecto. Si bien estas diferencias se pueden atribuir parcialmente a las trayectorias de desarrollo especificas de cada pais y a diferencias en la estructura industrial, se sugiere que también podrian ser influenciadas por las diferencias entre las politicas tecnológicas nacionales.

     

Complex Ownership Structures and Corporate Valuations

The bulk of corporate governance theory examines the agencyproblems that arise from two extreme ownership structures: 100%small shareholders or one large, controlling owner combinedwith small shareholders. In this paper, we question the empiricalvalidity of this dichotomy. In fact, one-third of publicly listedfirms in Europe have multiple large owners, and the market valueof firms with multiple blockholders differs from firms witha single large owner and from widely held firms. Moreover, therelationship between corporate valuations and the distributionof cash-flow rights across multiple large owners is consistentwith the predictions of recent theoretical models.     

Corporate social responsibility reporting: A comprehensive picture?

This study develops a content analysis framework that provides information on the comprehensiveness of corporate social responsibility (CSR) reporting, an important aspect of social and environmental accountability. Comprehensive reporting, as defined here, requires three types of information for each disclosed CSR item: (i) vision and goals, (ii) management approach, and (iii) performance indicators. The feasibility of the framework to assess the comprehensiveness of CSR reporting is demonstrated using the 2005 annual reports of a sample of publicly traded Belgian companies. The content analysis reveals a low level of comprehensive reporting. This finding complements those of prior studies on the completeness of CSR reporting and, therefore, feeds the debate regarding the extent to which CSR reporting can be considered a mechanism for discharging social and environmental accountability.     

IMF Bank-Restructuring Efficiency Outcomes: Evidence from East Asia

We report new findings on bank efficiency in East Asian countries for the pre- and post-IMF restructuring periods. We find that bank efficiency has improved, but only to the pre-IMF intervention level, and that restructured banks are not more efficient than their unrestructured counterparts. Different restructuring measures have different effects. Bank closures are economically justified, but mergers show short-term efficiency losses. Recapitalization and reprivatization of badly performing banks lead to efficiency improvement, but also increase government ownership. Ease of entry that has allowed for more foreign bank participation results in slightly improved performance of badly performing banks.