Corporate governance is related with a firm’s policies to achieve its profitability goals, or in other words, is the way a firm establishes how to generate and distribute profits. The pioneering work of Jensen and Meckling (1976) determined that when separation of ownership and control takes place, agency problems arise and that the plundering of resources reduces the value of the firm. This may occur if a manager diverts resources to purposes other than profit maximization. In OECD (2004) and Francis et al (2013), the positive influence of good corporate governance on company performance, and therefore on economic growth, is also evident. Limiting rent extraction in listed firms is a desirable objective because can result in improved performance and therefore induce economic growth, Maher and Andersson (2000), OECD (2004). In this respect, Claessens and Yurtoglu (2013) concluded that better corporate governance mechanisms increase access to external financing, leading to more investment, more growth and hence more employment. So, if thestockmarket can spur growth, then one way to achieve it comes from the improvements to corporate governance of firms, IMF-World Bank (2013). This is also important considering that private pension funds are now allowed to include shares in their portfolios. This is the connection between the issues analyzed in chapters 1 and 2. In the economic literature, business groups can be seen as ‘‘paragons’’ or ‘‘parasites’’ (Khanna and Yafeh, 2007), which means that affiliated firms may yield an acceptable payout to their minority shareholders or may have a rent seeking behavior in detriment to them. This organizational behavior is related with the governance mechanisms of the firm.
It is worth to relate these results to the historical literature. For the hyperinflation period, the literature has associated the economic contraction to the stabilization measures. The evidence posted here shows that the collapse started before the inflation came to be under controlled. Second, stock-investors were optimistic until mid 1923 in relation to the future dividend growth rate. The failure in issuing gold-backed bonds was the final coordination device that made the easy-credit/negative-real-interest-rate policy to disappear from agents’ expectations. Third, expected dividend growth rate was not higher in 1927 than in pre-collapse period, or the immediate post-war period. Therefore, there is no evidence of overpricing in the sense of un- usually high expected dividend growth rates. This piece of evidence reinforces Voth (2003) in the sense of showing that the monetary au- thorities did not have hard evidence pointing in the direction of a bub- ble existence by 1927. Finally, the Reichbank intervention in May 1927 undoubtedly affected the long-run expectations of the agents, but these were already decreasing before the intervention. Thus, is difficult from this evidence to conclude that the intervention actually was the inflection event that led the way to the 30’s crisis as in Voth (2003). Actually, March 1927 seems to be the true inflection point 25 . The negative correlation between inflation and expected dividend growth deserves particular attention. In Table 4.3, I present the results from regressing the long-term expected dividend growth on inflation. Expected dividend growth rate is negatively correlated with inflation. During normal times, an increase in inflation makes agents to expect lower future real dividend growth rates. For the hyperinflation period the overall effect of inflation is statistically not different from zero. However, the dummy variable is significant and negative, implying a
We believe that it is worth mentioning in this preface the kind of model that will be used throughout the entire thesis to differentiate between the branded and the generic good. We will assume that there exists a degree of horizontal differentiation between both goods. We mentioned before that from the Health Authorities point of view, both kinds of goods are perfect substitutes, although from the consumers’ point of view, it has been shown that this is not the case. Hence, we need to differentiate the two goods. Generic goods have gone through safety tests to enter themarket, so we believe that quality issues here are not important. The idea with these drugs is that since they have the same active ingredient as the branded good, the differences between the two goods are the excipients and side effects although statistically they behave similarly. With these kind of horizontal differentiated models, we could obtain that out of equilibrium, the price of the generic could be higher than the price of the branded good. Not only we observe circumstances where the price of the former is higher (although rare), but also we could argue that the side effects, or excipients, of the generic good may be preferred by some consumers, so that there would exist a demand for such good eventhough the price was higher. Hence, we can treat the measure of differentiation between both goods as the difference in side effects and/or excipients. If both goods are very differentiated (similar), it would imply that the side effects or the excipients are very different (alike). However, the actual process of curing the sickness is identical.
These results add to the discussion onthe choice between direct and indirect subsidies in the markets for system goods. To illustrate this, recall the cases of Brazil and of the US described above. In Brazil, the in-house ethanol production was launched in 1975 due to the highly important environmental and national security concerns. As a result of this policy, by the year 1990, 90% of vehicle manufactures in Brazil used technology allowing to power vehicles by alcohol. According to the results in the present paper, this technology adoption policy is more costly for society in the presence of consumers’"stickiness" to technology, i.e. if consumers are a priori restricted to using the superior or the established technology. In this case indirect subsidies are e¢ cient because at the beginning of new automobile technology adoption consumers by choosing a car are conditioned by the availability of all related infrastructure in their urban area (charging and service stations, parking area). Onthe contrary, when the infrastructure for both technologies is installed and consumers can make their purchasing decision after the prices for all components are known, both subsidies perform equally. In the US, direct subsidies to car manufacturers were chosen. According to our results, this is the optimal solution at the beginning of superior technology adoption. However, once the infrastructure for both technologies is installed (in other words, in the absence of consumers’"stickiness" to technology), indirect subsidies to producers of clean energy technologies (biofuels, electricity generation) should also be implemented. Similarly, the importance of indirect subsidies is expected to grow in the EU. For example, recently, the deployment of a charging infrastructure all over Europe has been debated. The results of the paper are discussed in the context of optimal subsidy choice to enhance environmental performance in the markets for system goods. However, the results also provide a rationale for optimal subsidy choice in other markets with technology-related externalities, such as national security, for example.
(Papatheodorou et al., 2010; Ritchie et al.,2010; Song & Lin, 2010). Those influential factors make the tourism industry very volatile in specific periods or regions. The changes to the external environment play an important role in tourism demand not only in the tourist source regions but also in the tourist host regions. In this sense, the risk of the operations of tourism enterprises is heightened. This volatility of the tourism industry is tremendously embodied in thestockmarket. Hospitality, as the major sector of the tourism industry mainly due to its ubiquity which generates approximately one-third of overall tourist expenditure. Additionally, it is also an element determining the tourist experience (Sharpley, 2000). Under this circumstance, the hospitality industry is under the influence of the external environment. It will be investigating which determinants affect thestock performance of the hospitality industry. This study is relevant to investors who are interested in hospitality related assets.
than those set on Xetra ( γ = − 0.034 ), while there is no significant difference at the close. These results are in line with our findings regarding price discovery (Sections 3.5.A and 3.5.B). In order to distinguish whether the observed return reversals are of rather idiosyncratic or systematic nature, we re-estimate the above regressions with returns for equal-weighted portfolios and abnormal returns, where the latter are calculated as the raw returns for stock i minus the equal weighted portfolio from the corresponding trading activity tercile. The estimates (Panels B and C) reveal that the return reversals constitute purely idiosyncratic effects. We find that the reversal coefficients for the equal weighted portfolios are either slightly positive (opening auction) or statistically insignificant (closing auction), while the coefficients for the idiosyncratic reversal regressions are very similar to the result obtained when using raw returns. Nevertheless, the difference across markets for the opening auction has become more pronounced ( γ = − 0.068 and significant at the 1% level), suggesting that opening prices set on Euronext are significantly more efficient than those resulting from Xetra’s opening auction.
The second line of research analyzes nancial markets in the presence of informa- tional asymmetries between borrowers and lenders. Instead of analyzing how nancial de- velopment promotes economic growth or viceversa, the focus of this literature has been to show how informational problems in nancial markets create frictions in transferring funds from lenders to borrowers and in turns how this affects the process of capital accumulation and the level of per capita income. Examples include Azariadis and Smith (1993), Tsid- don (1992), and Bencivenga and Smith (1993). This thesis attempts to shed some lights on these problems by examining the macroeconomic implications of imperfect credit markets. In particular, the two chapters analyze nancial markets in the presence of informational asymmetries at the micro level, so that borrowers and nancial intermediaries posse dif- ferent pieces of information onthe quality of the projects what may be nanced. Under this approach, nancial intermediation is a purely endogenous outcome which arises ex- plicitly from the assumptions about the information structure. Along these two chapters we will show that nancial constraints are likely to have impact onthe decisions of individu- als and that nancial institutions, in overcoming this asymmetries of information, exert a fundamental in uence on capital allocation.
The current economic globalization process has generated a strong linkage between nancial markets worldwide. In this respect, sudden shocks in volatility in an international stockmarket could be reected across other nancial markets given the integration of the global nancial system. The analysis of periods of economic and nancial crisis and the existence of a contagion phenomenon derived from a policy decision-making is of the utmost importance for policy-makers. This paper focuses onthe examination of the nancial contagion phenomenon between the returns of the NASDAQ telecommunications index and stockmarket indices' returns of Argentina, Brazil and Mexico following two of the main economic crisis of the last three lustrums: the bust in telecommunications sector at the rst years of the 21st century and the US great recession of December 2007 - June 2009 . The boom and bust in telecommunications sector overlapped with the dot-com bubble which formed around internet companies between 1995 and 2001 . According to Couper, et al. (2003) the telecom bust was caused by the rising levels of concern among telecommunication companies about the FCC's 1996 Telecommunications Act which was designed to endorse competition in local phone services. The issue was interpreted as a lack of clarity change in the regulatory environment, dicult to interpret and with a fuzzy implementation. The result was a myriad of court demands against the FCC that inhibited the 1996 Act's ecacy. Moreover, the initial overestimation of the positive eects of the Act leads to large forecast errors in the demand for long-haul ber. Furthermore, the rapid technological progress strengthened the idea of the development of new applications which would lead to a greater demand of bandwidth. However, at the end the theoretical virtuous circle was never accomplished. Thus, a regulatory initiative that was meant to be a way to increase competititon at the local exchange carrier level ended up becoming a catastrophe: thestockmarket meltdown due to 2001`s telecom stock bust.
tration in all national and imported products, and in the surveillance onthe information contained in the envelope and package. Also, the container of all fluoridated toothpastes should have a legend preventing its use in water or salt fluoridated areas. This information should include the actual F -
According to Stiglitz, if the channelling function of stock exchanges cannot be appreciated in developed countries with secondary liquid markets, little can be expected from emerging countries, which lack them. Therefore, he thinks that they do not offer a realistic alternative to other financing formulas, basically bank credits (Stiglitz, 1989). The concept of the North- American economist is very influenced by the experience of new industrial countries of Eastern Asia, where the main pillar of financing was the banking system and the big industrial conglomerates related to it. It must be pointed out, summarily, that the financial, banking and industrial crisis which took place in the late nineties does not seem to have altered significantly this positive view of Stiglitz, who maintains the arguments, difficult to be refuted, that the rhythm of growth and the extremely fast transformation of those societies would not have been possible with a different model of financing relationships. Stiglitz takes a step ahead considering that “Improvements in secondary capital markets may even have adverse effects on primary capital markets, as funds are drawn away from domestic banks” (1993, p. 349).
The patterns in the data that we reveal are surprising to many, possibly be- cause most of the debate about labour market mismatch has focused on worker mobility frictions, see e.g. Kocherlakota (2010), Frey (2009), Katz (2010), Kaplan and Schulhofer-Wohl (2010) and Sahin et al. (2014). Moreover, the evidence that restrictions to worker mobility seem to not contribute at all to mismatch is very striking and the correlation in the scatter plots looks almost ‘too good to be true.’ One might think, therefore, that there is something in our treatment of the data that spuriously generates these patterns or that we make convenient assumptions that make the results look stronger than they really are. We will try to convince the reader that this is not the case with an extensive robustness analysis, discussed in Section 2.4.4. First, however, we complete the description of the results by explor- ing how important mismatch is as a source of unemployment, and by formalizing the finding that mismatch is primarily driven by deviations of wage determination from the benchmark condition, both in terms of the average level of mismatch and for fluctuations in mismatch over time.
The intensity and speed with which the effects of monetary and fiscal policy are transmitted from one financial market to another is of paramount importance to accurately calibrate the decisions of the respon- sible authorities. Similarly, the effects caused by unexpected shocks in a given marketonthe behavior of financial asset prices in other markets requires a better understanding of the nature of the response. Howe- ver, the bulk of published studies on this subject have employed methodologies that assume a normal distribution of the yields and, for that reason, its results are questionable. Although in recent years robust non-normality methodologies have been used, there is still much work to be done. This article contributes to the study of the dependency between the indices of four Latin American stock exchanges (the CPI for Mexico, the IPSA for Chile, the IBOVESPA for Brazil, and the MERVAL for Argentina) through a Copula Analysis methodology. The main contribution of this study with respect to previous work is to obtain the level of dependence onthe queues for the pairs of indices formed by the CPI of Mexico and each of the other three Latin American indices of the sample.
Mean and standard deviation. Q_TOBIN is themarket capitalization of common stock+ book value liabilities divided by the book value of total assets; B_SIZE is the total number of directors on boards; B_INDEP is the proportion of independent directors on boards= Total number of independent on boards/ Total number of directors on boards; CEO_DUALITY is a dummy variable that takes the value 1 if the same person serves simultaneously as CEO and President of the board and 0, otherwise; FEM_DIR is the Proportion of female directors on boards= Total number of female directors on boards/Total number of directors no boards; B_COMPENSATION is the log of board compensation; B_MEETING is the number of meetings held by boards every year; SIZE is the log of total assets; LEVERAGE is debt over total assets; CAPITAL_INTENSITY is the ratio of long-term or fixed assets over total assets; OWNSHIP_CON is the average percentage of shares held by the three largest shareholders in the ten largest firms in each country; DUAL_CLASS is a dummy variable that takes the value 1 if firms have dual-class stocks (class A/B or registered/bearer shares) and 0, otherwise; OPERATING_PERFORM is the ratio between operating income and total assets; BASIC MATERIALS is a dummy variable: 1= Basic Materials; 0 = Otherwise; CONSUMER CYCLICAL is a dummy variable: 1= Consumer Cyclical; 0 = Otherwise; CONSUMER NON-CYCLICAL is a dummy variable: 1= Consumer Non-Cyclical; 0 = Otherwise; HEALTHCARE is a dummy variable: 1= Healthcare; 0 = Otherwise; INDUSTRIALS is a dummy variable: 1= Industrial; 0 = Otherwise; TECHNOLOGY is a dummy variable: 1= Technology; 0 = Otherwise; TELECOMMUNICATION SERVICES is a dummy variable: 1= Telecommunication Services; 0 = Otherwise and UTILITIES is a dummy variable: 1= Utilities; 0 = Otherwise. AFRICA is a dummy variable: 1= If the country is in Africa; 0=Otherwise; ASIA is a dummy variable: 1= If the country is in Asia; 0=Otherwise; EUROPE is a dummy variable: 1= If the country is in Europe; 0=Otherwise; LATINAMERICA is a dummy variable: 1= If the country is in Latin America; 0=Otherwise; NORTHAMERICA is a dummy variable: 1= If the country is in North America; 0=Otherwise; OCEANIA is a dummy variable: 1= If the country is in Oceania; 0=Otherwise.
The full resolution to these questions is beyond the scope of this paper. However, we are able to provide some insights by exhausting the explanatory power of labor market shocks in a standard incomplete markets heterogeneous agent model, in the spirit of Chang and Kim (2007) and Krusell et al. (2011): we introduce agents who diﬀer by gender and marital status. In our model, agents face both uninsurable income and employment risk (job-oﬀer and job-losing shocks), and chose how much to consume, save and whether to work or not, thus making labor supply discrete and endogenous. For married individuals the problem is compounded: they face more risk (both spouses are subject to shocks) but can self-insure by pooling income and enjoying public consumption inside the household. This setup has the advantage of providing a clean way of distinguishing the unemployed from all the not working, by way of computing for whom the expected value of working versus not-working is higher, conditional on currently not working (and the household’s current asset status). Given that the participation decision is important to account jointly for the lower unemployment rates of both married male and female agents, we prefer this over the classical Diamond- Mortensen-Pissarides framework, where there are only 2 labor market states (employment and unemployment) and labor supply decisions are trivial.
Based on a similar geographic identification strategy, this chapter finds that compulsory schooling laws effectively decreased fertility by about 15%. The results differ slightly depending onthe exact definition of fertility adopted but are in every case significant, with the exception of some of thestock measures in the contemporaneous analysis. These results are also robust to the inclusion of a number of individual, household, and geographical controls. Furthermore, the data provides no support for the hypothesis that the CSL and no-CSL states exhibited different trends. We then turn to consider the long run effects of CSL. In particular, we explore whether it is true that women exposed to CSL during childhood grew up to have fewer children as a consequence. Here, again, our answer is yes. By looking at the fertility of cohorts just above and below the age to be treated, we show that women in CSL states had smaller families. The long run effects of the CSL seem a bit lower, about 0.1 children less or a 5% decline in fertility. While comparing these results with the direct effects is difficult, there seems to be some evidence that the effects of enforcing a CSL should be seen sooner rather than later and that the main channel operates through the decline in contemporaneous child labor. Furthermore, we further test the “exogeneity” of a border by examining the fertilities of women in a city that unexpectedly changed legislation as a consequence of a change of border. Here again, women living onthe Massachusetts side of the border were expected to have about 0.3 fewer children as a consequence of the legislation. 26
The trading model is a computer program that simulates trading of technical systems, including price channels, momentum oscillators, trailing stop systems and combination systems. For these trading rules, they applied the trading systems to a diversified portfolio composed of corn, cocoa, copper, live cattle, limber, pork bellies, soy beans, silver, sugar, US Treasury Bills, British pound, and Deutsch mark in the range between 1978-1984. The trading parameters were adapted and adjusted every three years and generated returns out of sample. They used a two-tailed test onthe gross returns, they also included transactions costs and thus a one-tailed test for net returns, a t-test used to test these hypothesis, (Kolmogorov-Smirnov) KS test for monthly returns for normality, autocorrelation coefficients to determine if monthly returns are positively correlated and its significance levels.
This article examined how investors thought about the investment implications of the 2006 Mexican presidential campaign. Despite the strong differences in the policy preferences of the two main contenders over the nation’s neo-liberal economic policy approach, investors did not respond to campaign policy promises along partisan lines. Statistical analysis of public opinion polls and theMexicanstockmarket showed that rising support for the left-leaning Andrés Manuel López Obrador (PRD) and themarket-friendly Felipe Calderón Hinojosa (PAN) both led to reductions in stockmarket volatility and did not affect market returns. However, investors responded negatively to electoral uncertainty. That electoral uncertainty lowered asset returns but did not affect the level of market volatility indicates that investors were more worried about the risks to the post-election investment climate associated with not having clear winner than about policy swings from a left-leaning president. A close election race raises the possibility that the results would be at best contested and at worst overturned, with both scenarios implying that the outcome would be delayed. Delays in the conclusion of political events, especially where outcomes are uncertain, aggravate market risks for investors.