aggregate earnings and gross domestic product international evidence abstractrecent studies in macro accounting suggest that changes in aggregate accounting earnings can predict quarterly gdp growth in the usa our objective in this study is to test the robustness o

product market competition and managerial slack this article analyzes the effect of product market competition on managerial incentives in contrast to hart 1983a i show that competition may actually exacerbate the incentive problem the difference in results derives from our different assumptions about managerial preferences the importance of assumptions about preferences suggests that we do not yet understand the precise mechanism through which competition affects incentives

refinancing profitability and capital structure abstract we revisit the well established puzzle that leverage is negatively correlated with measures of profitability in contrast we find that at times when firms are at or close to their optimal level of leverage the cross sectional correlation between profitability and leverage is positive at other times it is negative these results are consistent with dynamic trade off models in which infrequent capital structure rebalancing is optimal the time series of market leverage and profitability in the quarters prior to rebalancing events match the patterns predicted by these models our results are not driven by investment layouts market timing payout or mechanical mean reversion of leverage

debt in industry equilibrium this article shows 1 how entry and exit of firms in a competitive industry affect the valuation of securities and optimal capital structure and 2 how given a trade off between tax advantages and agency costs a firm will optimally adjust its leverage level after it is set up we derive simple pricing expressions for corporate debt in which the price elasticity of demand for industry output plays a crucial role when a firm optimally adjusts its leverage over time we show that total firm value comprises the value of discounted cash flows assuming fixed capital structure plus a continuum of options for marginal increases in debt article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

competition risk and managerial incentives this paper examines how the degree of competition among firms in an industry affects the optimal incentives that firms provide to their managers a central assumption is that there is free entry and exit in the industry which implies that changes in the nature of competition lead to changes in the equilibrium market structure the main result is that as the intensity of product market competition increases as a result of greater product substitutability or greater market size principals unambiguously provide stronger incentives to their agents to reduce costs at the same time more intense competition also leads to more volatile firm level profits consequently managers incentives are positively correlated with firm level risk consistent with empirical evidence a decrease in the cost of entering the market has the opposite effect on incentives but still induces a positive correlation between risk and incentives

bankruptcy costs and the theory of oligopoly this paper examines the relationship between financial decisions and output decisions in oligopolistic markets assuming a duopoly market structure in which financial decisions and output decisions follow in sequence the authors analyze how bankrupt cy costs which are incurred when the firm is unable to meet current debt obligations affect the firm s behavior in output markets with fixed bankruptcy costs firms have an incentive to increase output le vels if they take on more debt proportional bankruptcy costs lead to a u shaped relationship between output and debt foresighted owners of firms are led to take into account the strategic output effects of financial structure when considering an optimal financial structure for the firm

how does industry affect firm financial structure we examine the importance of industry to firm level financial and real decisions we find that in addition to standard industry fixed effects financial structure also depends on a firm s position within its industry in competitive industries a firm s financial leverage depends on its natural hedge its proximity to the median industry capital labor ratio the actions of other firms in the industry and its status as entrant incumbent or exiting firm financial leverage is higher and less dispersed in concentrated industries where strategic debt interactions are also stronger but a firm s natural hedge is not significant our results show that financial structure technology and risk are jointly determined within industries these findings are consistent with recent industry equilibrium models of financial structure copyright 2005 oxford university press

capital structure and product market rivalry how do we reconcile theory and evidence this paper presents empirical evidence on the interaction of capital structure decisions and product market behavior we examine when firms recapitalize and increase the proportion of debt in their capital structure the evidence in this paper shows that firms with low productivity plants in highly concentrated industries are more likely to recapitalize and increase debt financing this finding suggests that debt plays a role in highly concentrated industries where agency costs are not significantly reduced by product market competition following the empirical evidence we introduce the strategic investment effects of debt and argue that this effect in conjunction with agency costs appears to fit the data this abstract was borrowed from another version of this item

modelling industrial energy demand in saudi arabia abstract between 1986 and 2016 industrial energy consumption in saudi arabia increased by tenfold making it one of the largest end use sectors in the kingdom despite its importance there appear to be no published econometric studies on aggregate industrial energy demand in saudi arabia we model aggregate industrial energy demand in saudi arabia using harvey s 1989 structural time series model showing that it is both price and income inelastic with estimated long run elasticities of 0 34 and 0 60 respectively the estimated underlying energy demand trend suggests improvements in energy efficiency starting from 2010 applying decomposition analysis to the estimated econometric equation highlights the prominent roles of the activity effect the growth in industrial value added and the structure effect the shift towards energy intensive production in driving industrial energy demand growth moreover the decomposition shows how exogenous factors such as energy efficiency helped mitigate some of that growth delivering cumulative savings of 6 8 million tonnes of oil equivalent mtoe between 2010 and 2016 saudi arabia implemented a broad energy price reform program in 2016 which raised electricity fuel and water prices for households and industry the decomposition results reveal that holding all else constant higher industrial energy prices in 2016 reduced the sector s energy consumption by 6 9 a decrease of around 3 0 mtoe saudi policymakers could therefore build on the current policy of energy price reform and energy efficiency standards to mitigate the rate of growth of industrial energy consumption increase economic efficiency and maintain industrial sector competitiveness

determinants of capital structure evidence from a major developing economy a major shortcoming of capital structure studies on developing economies is that they generally restrict their analyses to large publicly traded manufacturing firms consequently we know little about the applicability of various capital structure theories to firms that are private small and or outside the manufacturing industry in these economies in this paper we conduct a comparative test of the trade off and pecking order theories using a comprehensive firm level dataset that covers manufacturing non manufacturing small large publicly traded and private firms in a major developing economy turkey the trade off theory provides a better description of the capital structures of all firm types than the pecking order theory moreover the trade off theory appears to be particularly suitable for understanding the financing choices of large private firms in the non manufacturing sector and when the economic environment is relatively stable by contrast pecking order theory is most useful when it comes to small publicly traded manufacturing firms especially when the economic environment is relatively unstable

financial signalling and the deep pocket argument this article provides a formal representation of telser s 1966 deep pocket argument by considering a model in which the entrant s and the incumbent s financial structures are endogenous the entrant s financial vulnerability may be explained by informational asymmetries in financial markets financiers are uncertain of the entrant s true value but they know the incumbent s true worth both firms have to finance a fixed expenditure before starting production in equilibrium the incumbent finances with equity while the high value entrant comes into the market heavily leveraged compared with the incumbent this provides an incentive for the incumbent to engage in predatory practices such as a price war to exhaust the entrant financially and cause his bankruptcy

environmental impacts of changes to healthier diets in europe food consumption causes together with mobility shelter and the use of electrical products most life cycle impacts of consumption meat and dairy are among the highest contributors to environmental impacts from food consumption a healthier diet might have less environmental impacts using the e3iot environmentally extended input output database developed in an eu study on environmental impacts of products eipro this paper estimates the difference in impacts between the european status quo and three simulated diet baskets i e a pattern according to universal dietary recommendations the same pattern with reduced meat consumption and a mediterranean pattern with reduced meat consumption production technologies protein and energy intake were kept constant though this implies just moderate dietary shifts impact reductions of up to 8 were possible in reduced meat scenarios the slightly changed food costs do not lead to significant first order rebound effects second order rebounds were estimated by applying the capri partial equilibrium model this analysis showed that european meat production sector will most likely respond by higher exports to compensate for losses on the domestic meat market higher impact reductions probably would need more drastic diet changes 2011 elsevier b v

evidence on the impact of the agency costs of debt on corporate debt policy in the last several years there has been increased theoretical emphasis on the agent principal problem as it applies to corporate finance this paper is an attempt to empirically test for the presence of the agency costs and their relation to the debt policy of corporations we find that firms with higher insider ownership have greater debt ratios than firms with lower insider ownership which may be explained by the agency costs of debt and or the agency costs of equity other regression results tend to confirm the theoretically optimal relationships put forth by myers we find that high growth firms use less debt rather than more debt high operating risk firms use more debt rather than less debt and firm size appears to be uncorrelated to the level of debt

control rights and capital structure an empirical investigation we show that incentive conflicts between firms and their creditors have a large impact on corporate debt policy net debt issuing activity experiences a sharp and persistent decline following debt covenant violations when creditors use their acceleration and termination rights to increase interest rates and reduce the availability of credit the effect of creditor actions on debt policy is strongest when the borrower s alternative sources of finance are costly in addition despite the less favorable terms offered by existing creditors borrowers rarely switch lenders following a violation a fundamental question in financial economics is how do firms choose their financial policies extant empirical research on this question has focused primarily on the presence of taxes and bankruptcy costs e g scott 1976 information asymmetry e g myers and majluf 1984 and more recently market timing behavior e g baker and wurgler 2002 however beginning with jensen and meckling 1976 a large body of theoretical research examines how incentive conflicts between managers and external investors affect corporate financial policies in particular theoretical research on financial contracting shows that in the presence of incentive conflicts optimal debt contracts will allocate certain rights to creditors after negative performance in order to help firms secure financing ex ante e g aghion and bolton 1992 and dewatripont and tirole

industry product market competition and managerial incentives abstract while some studies suggest that industry product market competition can substitute for managerial incentives other studies suggest a complementary relation the underlying assumption behind these studies is that competition can be uni dimensionally proxied for by industry concentration however recent studies suggest that competition can reflect several dimensions product substitutability market size and entry costs given the level of industry concentration using these determinants of competition this study contributes to the literature by showing that a firms provide stronger incentives when industry competition is greater b competition is multi dimensional in its relation to incentives and c industry characteristics play a major role in influencing incentives

a differential game approach to investment in product differentiation abstract we consider a dynamic oligopoly where firms invest to increase product differentiation and an externality effect operates in the r d activity via the demand functions in the fully noncooperative setting we find that the degree of differentiation resulting from r d effort is higher the larger is the population of firms in the industry if firms cooperate in the r d activity by setting up an r d cartel aggregate investment is larger and product substitutability is lower than in the decentralised case

green and brown globalization and the environment globalization viewed as a process of economic integration that embraces governance as well as markets could lead to worldwide convergence toward higher or lower environmental quality or to environmental polarization in which the greening of the global north is accompanied by the browning of the global south the outcome will not be dictated by an inexorable logic rather it will depend on how the opportunities created by globalization alter balances of power within countries and among them copyright 2004 oxford university press

the spillover effects of md a disclosures for real investment the role of industry competition abstract we explore whether disclosures in the management discussion analysis mda it is stronger when firms operate in industries that have lower entry costs are larger and have less substitutable products we obtain similar results for investment efficiency overall our evidence suggests that md a disclosures have spillover effects for investment that can improve investment efficiency and that spillover effects are moderated by industry competition

large sample evidence on firms year over year md a modifications the securities and exchange commission sec has expressed concern about the informativeness of firms management discussion and analysis mda the price reaction to md a modification scores has also weakened suggesting a decline in md a usefulness

how stable are corporate capital structures leverage cross sections more than a few years apart differ markedly with similarities evaporating as the time between them lengthens many firms have high and low leverage at different times but few keep debt to assets ratios consistently above 0 500 capital structure stability is the exception not the rule occurs primarily at low leverage and is virtually always temporary with many firms abandoning low leverage during the post war boom industry median leverage varies widely over time target leverage models that place little or no weight on maintaining a particular ratio do a good job replicating the substantial instability of the actual leverage cross section

the demand for electricity in the gcc countries abstract cointegration techniques are used to study the effects of economic variables on electricity demand in the gcc countries a dynamic model is estimated using aggregate data for the six states spanning the period 1970 97 statistical investigations confirm the existence of unit root in all time series employed in the study which called for the use of cointegration and error correction methodologies empirical results indicate that both income and price have an impact on electricity consumption and income and price policies could be effectively facilitated in electricity demand management

an international comparison of capital structure and debt maturity choices this study examines how the institutional environment influences capital structure and debt maturity choices of firms in 39 developed and developing countries we find that a country s legal and tax system corruption and the preferences of capital suppliers explain a significant portion of the variation in leverage and debt maturity ratios specifically firms in more corrupt countries and those with weaker laws tend to use more debt especially short term debt explicit bankruptcy codes and deposit insurance are associated with higher leverage and more long term debt more debt is used in countries where there is a greater tax gain from leverage

real flexibility and financial structure an empirical analysis i examine the empirical relation between real flexibility and financial structure i test whether real flexibility increases debt capacity by lowering default risk and making assets more marketable or decreases debt capacity by facilitating risk shifting and asset substitution i measure real flexibility as the sensitivity of marginal production and investment decisions to variations in the economic environment i find that financial leverage is negatively related to production flexibility but positively related to investment flexibility this split in results suggests that although asset substitution facilitated by investment flexibility can be prevented contractually risk shifting facilitated by production flexibility is intractable copyright 2003 oxford university press

demand for gasoline in the gcc an application of pooling and testing procedures the structure of gasoline demand in the gcc countries was analysed the aim was to estimate price and income elasticities both for the short and long run it was found that gasoline demand is inelastic with respect to both price and income for both the short and long run when gcc countries were divided into two groups based on their pricing policies it was found that the group with the free market approach and higher reliance on market forces gave larger price elasticities and smaller income elasticities in both the short run and long run

the lmdi approach to decomposition analysis a practical guide in a recent study ang energy policy 32 2004 compared various index decomposition analysis methods and concluded that the logarithmic mean divisia index method is the preferred method since the literature on the method tends to be either too technical or specific for most potential users this paper provides a practical guide that includes the general formulation process summary tables for easy reference and examples

debt and the marginal tax rate abstract do taxes affect corporate debt policy this paper tests whether the incremental use of debt is positively related to simulated firm specific marginal tax rates that account for net operating losses investment tax credits and the alternative minimum tax the simulated marginal tax rates exhibit substantial variation due to the dynamics of the tax code tax regime shifts business cycle effects and the progressive nature of the statutory tax schedule using annual data from more than 10 000 firms for the years 1980 1992 i provide evidence which indicates that high tax rate firms issue more debt than their low tax rate counterparts

on the debt capacity of growth options we relate the value of growth options in the firm s investment opportunity set to the level of debt in the firm s capital structure underinestment costs of debt increase and free cash flow benefits fall with additional growth options thus if debt capacity is defined as the amount of debt the firm optimally adds for an incremental project then the debt capacity of growth options is negative this result implies that book leverage should fall with the addition of growth options our tests using a large sample of industrial firms confirm this prediction

capital structure and interaction among firms in output markets theory and evidence i develop a simple model that examines the relations between the extent of competitive interaction among firms in output markets their capital structures and the aggressiveness of their operating strategies a firm s optimal leverage is related to the degree to which its operating strategy affects its rivals value functions and resulting optimal output market choices this relation is positive regardless of whether the competition in output markets is in strategic substitutes or in strategic complements i test the model s prediction using two proxies for the extent of competitive interaction among firms the empirical evidence provides support for the model

modelling residential electricity demand in the gcc countries abstract this paper aims at understanding the drivers of residential electricity demand in the gulf cooperation council countries by applying the structural time series model in addition to the economic variables of gdp and real electricity prices the model accounts for population weather and a stochastic underlying energy demand trend as a proxy for efficiency and human behaviour the resulting income and price elasticities are informative for policy makers given the paucity of previous estimates for a region with particular political structures and economies subject to large shocks in particular the estimates allow for a sound assessment of the impact of energy related policies suggesting that if policy makers in the region wish to curtail future residential electricity consumption they would need to improve the efficiency of appliances and increase energy using awareness of consumers possibly by education and marketing campaigns moreover even if prices were raised the impact on curbing residential electricity growth in the region is likely to be very small given the low estimated price elasticities unless that is prices were raised so high that expenditure on electricity becomes such a large proportion of income that the price elasticities increase in absolute terms

a measure of competition based on 10 k filings in this paper we develop a measure of competition based on management s disclosures in their 10 k filing and find that firms rates of diminishing marginal returns on new and existing investment vary significantly with our measure we show that these firm level disclosures are related to existing industry level measures of disclosure e g herfindahl index but capture something distinctly new in particular we show that the measure has both across industry variation and within industry variation and each is related to the firm s future rates of diminishing marginal returns as such our measure is a useful complement to existing measures of competition we present a battery of specification tests designed to explore the boundaries of our measure and how it varies with the definition of industry and the presence of other measures of competition

the degree of spillovers and the number of rivals for maximum effective r d abstract the amount of cost reduction or effective r d that results in a symmetric sequential nash equilibrium with quadratic payoffs and differentiated goods is shown to increase with spillovers in oligopolies with a few rivals and to achieve a maximum for spillovers that are not perfect in industries with many firms similar tendencies apply for consumer surplus profits and static welfare more rivals typically lead to reduced investments output and profitability while consumer surplus and welfare increase or at least do not decrease limited entry in markets with a few rivals may enhance innovative investments profitability and consumer surplus if only product differentiation and spillovers are sufficiently high and r d costs sufficiently low too many rivals will then again lead to reductions and a decrease in static welfare

effects of physical distancing to control covid 19 on public health the economy and the environment physical distancing measures are important tools to control disease spread especially in the absence of treatments and vaccines while distancing measures can safeguard public health they also can profoundly impact the economy and may have important indirect effects on the environment the extent to which physical distancing measures should be applied therefore depends on the trade offs between their health benefits and their economic costs we develop an epidemiological economic model to examine the optimal duration and intensity of physical distancing measures aimed to control the spread of covid 19 in an application to the united states our model considers the trade off between the lives saved by physical distancing both directly from stemming the spread of the virus and indirectly from reductions in air pollution during the period of physical distancing and the short and long run economic costs that ensue from such measures we examine the effect of air pollution co benefits on the optimal physical distancing policy and conduct sensitivity analyses to gauge the influence of several key parameters and uncertain model assumptions using recent estimates of the association between airborne particulate matter and the virulence of covid 19 we find that accounting for air pollution co benefits can significantly increase the intensity and duration of the optimal physical distancing policy to conclude we broaden our discussion to consider the possibility of durable changes in peoples behavior that could alter local markets the global economy and our relationship to nature for years to come

the role of supplementary statements with management earnings forecasts we investigate managers decisions to supplement their firms management earnings forecasts we classify these supplementary disclosures as qualitative soft talk disclosures or verifiable forward looking statements we find that managers provide soft talk disclosures with similar frequency for good and bad news forecasts but are more likely to supplement good news forecasts with verifiable forward looking statements we examine the market response to these forecasts and find that bad news earnings forecasts are always informative but that good news forecasts are informative only when supplemented by verifiable forward looking statements supporting our argument that these statements bolster the credibility of good news forecasts

debt agency costs and industry equilibrium we show that risk characteristics of projects cash flows are endogenously determined by the investment decisions of all firms in an industry as a result in reasonable settings financial structures which create incentives to expropriate debtholders by increasing risk are shown not to reduce value in an industry equilibrium without taxes capital structure is irrelevant for individual firms despite its effect on the equityholders incentives but the maximum total amount of debt in the industry is determinate allowing for a corporate tax advantage of debt capital structure becomes relevant but firms are indifferent between distinct alternative debt levels the effect of firms financial structures on subsequent investment and output decisions has recently received considerable attention in the finance literature the central insight that equityholders control the firm s investment and production decisions and in general do not maximize the value of a levered firm has been applied to the analysis of risk shifting underinvestment and firms abilities to enter into optimal contracts with their customers existing models of firms financial structures and their effect on investment decisions are generally based on a single firm framework and do not take into account the relationship between project cash flows and the investment decisions of all firms in the industry 2 in this paper we allow the distribution of investment projects within an industry to adjust and show that this generates new insights and reverses several key results of single firm agency cost models the new predictions conform with well documented

energy price reform in saudi arabia modeling the economic and environmental impacts and understanding the demand response abstract saudi arabia has regulated domestic energy prices for decades setting them below international market levels energy subsidies in saudi arabia are generally implicit because they lead to foregone revenues for the government low energy prices also encourage rapid energy demand growth and wasteful consumption while limiting incentives to invest in energy efficiency saudi arabia recently started to reform energy prices leading to large increases in gasoline and residential electricity prices in 2018 to measure the economic and environmental impacts of energy price reform we econometrically model gasoline and residential electricity demand using harvey s 1990 structural time series model our estimated equations reveal that gasoline demand and residential electricity demand in saudi arabia are strongly price and income inelastic despite the major reforms that were recently implemented our welfare analysis also shows that the energy price reforms in 2018 in gasoline and residential electricity respectively delivered welfare gains of 8 8 and 3 8 billion sar annually 2 3 and 1 0 billion us additionally our decomposition analysis reveals that these energy price reforms were the largest contributors to the observed decreases in gasoline and residential electricity consumption in 2018

trade secrets law and corporate disclosure causal evidence on the proprietary cost hypothesis this study exploits the staggered adoption of the inevitable disclosure doctrine idd by u s state courts as an exogenous shock that generates variations in the proprietary costs of disclosure we find that firms respond to idd adoption by reducing the level of disclosure regarding their customers identities supporting the proprietary cost hypothesis our results are stronger for firms in industries with a higher degree of entry threats for firms in more volatile industries and for firms with a lower degree of external financing dependence overall this study represents one of the first efforts in identifying the causal effect of proprietary costs of disclosure on the supply of disclosure this article is protected by copyright all rights reserved

managerial incentives and product market competition are imperfectly competitive leibenstein 1966 claims that there may be a substantial amount of x inefficiency where x inefficiency measures the degree to which actual profits depart from the maximum of profits that could be obtained if all operations in the firm were carried out at minimal costs he offers empirical evidence from case studies showing that the welfare loss due to organizational slack is of an order of magnitude bigger than the welfare loss due to monopolistic price distortions on imperfectly competitive markets these results support the common presumption that increasing competition reduces organizational and in particular managerial slack however this early literature does not offer a theoretical explanation for the link between competition and managerial incentives in particular it ignores the fact that managerial incentives can be affected by the design of an incentive scheme in this paper i derive the optimal incentive scheme for a manager as a function of the competitiveness of the environment in which his firm operates the basic impact of increased competition is that it reduces the profits of a firm this has two effects in the model first if a firm has high costs then the reduction of profits may be sufficient to render the firm unprofitable so the probability that it has to be liquidated goes up this unambiguously induces the manager of the firm to work harder for a cost reduction in order to avoid liquidation and to keep his job second the reduction in profits may affect

households response to changes in electricity pricing schemes bridging microeconomic and engineering principles abstract this paper presents a computational take on households response to price changes many studies use assumptions i e price elasticities that were estimated using historical information however if a price change has not been experienced in the past the response may not be statistically predicted while other papers have explored price response behavior internally through microeconomic principles many factors affect a household s electricity use including the construction of the dwelling outdoor air temperature and efficiency of the air conditioner we have superimposed a physical model which determines hourly power loads with a utility maximization component the dwelling itself is calibrated to one in saudi arabia but we test households that have various preferences in their utility function levels of thermal insulation and income we further analyze a wide range of electricity pricing schemes some are progressive tariffs while one is defined hourly the extent to which the prices are raised in the alternative schemes has never been experienced in saudi arabia our analysis shows that households with low electricity preferences exhibit a larger short run response than would be derived from the aggregate price elasticities estimated statistically moreover improved building insulation affects the household s decision making process

debt and communications technology diffusion retrospective evidence this study has evaluated the relationship between debt in the capital structure of firms and the dynamics of broadband and digital technology adoption in the united states based on a large dataset on local exchange carriers in the united states over a contemporary historical fourteen year period from 1988 to 2001 using treatment effects modeling the impact of debt in impacting the levels of firms broadband deployment has been found to be negative and significant the primary source of debt in the sector has been in the form of arm s length corporate bonds and the assumptions of the monitoring hypothesis associated with such debt that lenders in the face of information and collective actions problems might not be able to control managers and hence invest less in highly technology intensive situations are supported by the data additionally the data set has been split into separate sets for two periods one between 1988 and 1995 for the period before the telecommunications act of 1996 came into force and the other set between 1996 and 2001 and the results have stayed consistent a test of the coefficients between the two periods has shown that the negative impact of leverage on broadband deployment has become stronger after the introduction of competition in the sector and this has suggested that the change in the institutional logics between the two periods has been of material impact in influencing lenders perceptions

how price inelastic is demand for gasoline in fuel subsidizing economies abstract in recent years governments that have historically subsidized domestic fuel consumption face an ever growing challenge in maintaining fuel subsidies and have embarked on subsidy reform this paper estimates the price and income elasticity of demand for gasoline in countries where fuel prices are government subsidized we make use of biennial panel road sector data for 32 countries over the 1998 2010 period and find demand for gasoline to be price inelastic both in the short run and long run we estimate the short run price and income elasticities at 0 05 and 0 16 and the long run price and income elasticities at 0 25 and 0 81 respectively it is our contention that concerned governments should play an active role in identifying and committing to a road map to progressively abandoning fuel subsidies they should also not be discouraged by relatively small consumption corrections in the short run a reduction in subsidies can eventually release considerable amount of resources for more crucial and potentially growth enhancing public services such as education and health

diagnostic checking of unobserved components time series models diagnostic checking of the specification of time series models is normally carried out using the innovations that is the one step ahead prediction errors in an unobserved components model other sets of residuals are available these auxiliary residuals are estimators of the disturbances associated with the unobserved components they can often yield information that is less apparent from the innovations but they suffer from the disadvantage that they are serially correlated even in a correctly specified model with known parameters this article shows how the properties of the auxiliary residuals may be obtained how they are related to each other and to the innovations and how they can be used to construct test statistics applications are presented showing how residuals can be used to detect and distinguish between outliers and structural change

the environmental impacts of the coronavirus the covid 19 coronavirus pandemic has resulted in global lockdowns sharply curtailing economic activity it is a unique experiment with substantial impacts that will form the agenda for research there are five sets of questions the short term impacts on emissions the natural environment and environmental policy including regulations and cop26 longer term consequences from the deployment of macroeconomic monetary and fiscal stimuli and investment in green deals possible further deglobalisation and its impact on climate change and nature intergenerational environmental impacts including debt and pollution burdens on future generations and possible behavioural changes to the environment both positive and negative

underlying trends and seasonality in uk energy demand a sectoral analysis this paper demonstrates the importance for energy demand modelling of allowing for trends and seasonal effects that are stochastic in form inherent underlying trends may be non linear and reflect not only technical progress which usually produces greater energy efficiency but also other factors such as changes in consumer tastes and the economic structure that may be working in the opposite direction using quarterly unadjusted data for various sectors in the uk it is shown that unless energy demand models are formulated so as to allow for stochastic trends and seasonals estimates of price and income elasticities could be seriously biased

the effect of taxes and depreciation on corporate investment and financial leverage this paper provides an analysis of the effect of corporate and personal taxes on the firm s optimal investment and financing decisions under uncertainty it extends the deangelo aad masulis capital structure model by endogenizing the firm s investment decision the authors results indicate that when investment is allowed to adjust optimally the existing predictions about the relationship between investment related and debt related tax shields must be modified in particular the authors show that increases in investment related tax shields due to changes in the corporate tax code are not necessarily associated with reductions in leverage at the individual firm level in cross sectional analysis firms with higher investment related tax shields normalized by expected earnings need not have lower debt related tax shields normalized by expected earnings unless all firms utilize the same production technology differences in production technologies across firms may thus explain why the empirical results of recent cross sectional studies have not conformed to the predictions of deangelo and masulis

do industry level analyses improve forecasts of financial performance prior research documents mean reversion in firm profitability and growth under the implicit assumption that profitability and growth of all firms revert to a common benchmark at the same rate however a large body of academic research suggests that there are systematic interindustry differences e g industry barriers to entry that differentially affect firm performance based on industry membership we evaluate the relative forecast accuracy of mean reverting models at the industry and economywide levels and find that industry specific models are generally more accurate in predicting firm growth but not profitability

the limitations of industry concentration measures constructed with compustat data implications for finance research industry concentration measures calculated with compustat data which cover only the public firms in an industry are poor proxies for actual industry concentration these measures have correlations of only 13 with the corresponding u s census measures which are based on all public and private firms in an industry also only when u s census measures are used is there evidence consistent with theoretical predictions that moreconcentrated industries which should be more oligopolistic are populated by larger and fewer firms with higher price cost margins further the significant relations of compustatbased industry concentration measures with the dependent variables of several important prior studies are not obtained when u s census measures are used one of the reasons for this occurrence is that compustat based measures proxy for industry decline overall our results indicate that product markets research that uses compustat based industry concentration measures may lead to incorrect conclusions jel g10 g30 l10 a growing number of studies that consider the effects of product markets on financial economics related phenomena use industry concentration measures calculated with compustat data which cover only the public firms in an industry these studies examine issues related to asset pricing hou and robinson 2006 informed trading tookes 2008 idiosyncratic stock return volatility gaspar and massa 2006 mergers and acquisitions song and walkling 2000 fee and thomas 2004 shahrur 2005 corporate governance defond and park 1999 engel hayes andwang2003 rennie2006 karuna2007 capitalstructure lang and stulz 1992 kaleand shahrur 2007 corporate disclosurepolicy

risks and financing decisions in the energy sector an empirical investigation using firm level data using a sample of 102 uk energy firms over the period 1981 2009 this paper empirically examines the effects of uncertainty on firms leverage decisions the results indicate that both firms specific and macroeconomic uncertainty have negative sizeable and statistically significant impacts on the uk energy sector firms target leverage the results also indicate that the profitability of energy firms plays an important role in uncertainty leverage relationship by changing the total effect of uncertainty on leverage while more profitable firms appear to reduce their leverage by a relatively large amount in response to increased macroeconomic uncertainty they are less likely to be affected by firm specific uncertainty these results suggest that stability in macroeconomic conditions and business activity is important to the stability of the capital structure of firms in the energy sector which would in turn be conducive to stability in their investments and production

industrial electricity demand for turkey a structural time series analysis abstract this research investigates the relationship between turkish industrial electricity consumption industrial value added and electricity prices in order to forecast future turkish industrial electricity demand to achieve this an industrial electricity demand function for turkey is estimated by applying the structural time series technique to annual data over the period 1960 to 2008 in addition to identifying the size and significance of the price and industrial value added output elasticities this technique also uncovers the electricity underlying energy demand trend uedt for the turkish industrial sector and is as far as is known the first attempt to do this the results suggest that output and real electricity prices and a uedt all have an important role to play in driving turkish industrial electricity demand consequently they should all be incorporated when modelling turkish industrial electricity demand and the estimated uedt should arguably be considered in future energy policy decisions concerning the turkish electricity industry the output and price elasticities are estimated to be 0 15 and 0 16 respectively with an increasing but at a decreasing rate uedt and based on the estimated equation and different forecast assumptions it is predicted that turkish industrial electricity demand will be somewhere between 97 and 148 twh by 2020

survival versus consumption we develop an indirect method to estimate utility and willingness to pay wtp for reductions in the risk of death at various ages using a life cycle model of consumption we assume that an individual sets his consumption level each year so as to maximize his expected lifetime utility alternative assumptions about opportunities for borrowing and annuities characterize two polar types of societies in our robinson crusoe case an individual must be entirely self sufficient and annuities are not available in our perfect markets case an individual can borrow against future earnings and purchase actuarially fair annuities we show that under these assumptions wtp is the sum of livelihood discounted expected future earnings and consumer surplus to illustrate our methods we derive wtp for an average financially independent american man under plausible assumptions the model is calibrated to 1978 earnings e g 18 000 per year for men aged 45 54 with at least some income in the robinson crusoe case wtp increases from 500 000 at age 20 to a peak of 1 250 000 at age 40 and declines to 630 000 at age 60 in the perfect markets case age variations are less pronounced wtp is 1 050 000 at age 20 peaks at 1 070 000 at age 25 and declines to 600 000 at age 60 these results suggest that individuals value risks to their lives at several times the pro rata share of their future earnings

do rivals enhance your credit conditions abstract in a model where firms rely on bank financing to build capacity put up specialized productive assets as collateral and then compete a la cournot we introduce a probability of default we investigate how the number of competitors affects the equilibrium amount of bank credit and derive conditions under which an inverted u shaped relationship occurs on the one hand more competitors enhance the resale value of collateralized productive assets on the other hand more competitors shrink firms profits and the resulting income that can be pledged to banks we then extend the analysis to firms outside the cournot industry that are willing to buy productive assets in liquidation and show that the equilibrium bank credit becomes monotonically decreasing in the number of competitors

labor protection and leverage this paper exploits inter temporal variations in employment protection across countries and finds that rigidities in labor markets are an important determinant of firms capital structure decisions over the 1985 2007 period we find that reforms increasing employment protection are associated with a 187 basis point reduction in leverage we interpret this finding to suggest that employment protection increases operating leverage crowding out financial leverage this result is robust across measures of employment protection and leverage and does not appear to be due to pre treatment differences between treated and control firms omitted variables unobserved changes in regional economic conditions and reverse causality heterogeneous treatment effects are consistent with our economic intuition we find that the negative effect is more pronounced in firms that are subject to frequent hiring and firing

gasoline demand the case of saudi arabia this paper specifies a partial adjustment model to estimate the demand for gasoline in saudi arabia for the period 1970 1985 it is found that the demand for gasoline is inelastic with respect to price in the short and long run as compared to other countries the kingdom s gasoline demand elasticities more closely resemble those of industrial countries

pricing exit and location decisions of firms evidence on the role of debt and operating efficiency abstract we compare pricing and exit decisions of discounters across the business cycle cities containing high debt and or low efficiency firms display higher prices during non recession years during recessions prices increase in cities with less efficient incumbents but decrease in cities with a mix of high and low debt firms high debt firms are more likely to exit cities with lower prices and high debt exiting firms are more likely to be efficient apparently low debt firms strategically lower prices during recessions to force exit of efficient financially constrained rivals weaker competitors face another cost new entrants locate closer

investment efficiency and product market competition does more competition lead to more information production and greater investment efficiency this question is largely unexplored in the finance literature this article provides both a model and a series of extensive empirical tests the model features a 2 stage bayesian game in differentiated products market competition we find that competition causes firms to acquire less information and investments to become more inefficient relative to a first best case with the same market structure empirically the panel regression analysis provides strong support for the theory and shows that investment is more efficient in concentrated industries

lmdi decomposition approach a guide for implementation since it was first used by researchers to analyze industrial electricity consumption in the early 1980s index decomposition analysis ida has been widely adopted in energy and emission studies lately its use as the analytical component of accounting frameworks for tracking economy wide energy efficiency trends has attracted considerable attention and interest among policy makers the last comprehensive literature review of ida was reported in 2000 which is some years back after giving an update and presenting the key trends in the last 15 years this study focuses on the implementation issues of the logarithmic mean divisia index lmdi decomposition methods in view of their dominance in ida in recent years eight lmdi models are presented and their origin decomposition formulae and strengths and weaknesses are summarized guidelines on the choice among these models are provided to assist users in implementation

oil consumption subsidy removal in opec and other non oecd countries oil market impacts and welfare effects abstract this paper studies the oil market effects of phasing out oil consumption subsidies in the transport sector welfare effects in different countries are also examined the paper further investigates potential feedback mechanisms of oil subsidy removal via lower oil prices in the global oil market which may stimulate oil consumption in other regions an intertemporal numerical model of the international oil market is applied where opec core producers have market power the major subsidisers of oil are opec countries and the effects of subsidy removal here are quite pronounced consumption of oil in the transport sector of opec countries declines significantly as a result the global oil price falls slightly and other regions increase their oil consumption to some degree although opec consumers are worse off by the subsidy removal total welfare in opec increases due to higher profits from oil production

demand for oil products in the gcc countries abstract the purpose of this study is to estimate the price and income elasticities of oil products demand in the gcc countries annual data spanning the period 1970 1991 were fitted to a partial adjustment model to obtain the estimates the main finding of the study is that both price and income are relatively inelastic in the short run and there has been a great variation in these elasticities among fuels and cross country

investment and competition this paper examines how industry structure affects corporate investment patterns real options theory shows that deferring irreversible investment in the face of uncertainty is valuable theory also shows that the value of waiting to invest falls if investment opportunities are contestable consistent with these theories we find that firms in monopolistic industries exhibit lower investment q sensitivity and are slower to invest than firms in competitive industries however we find that investment q sensitivity and investment speed are highest in oligopolistic industries suggesting that the value of investing strategically can outweigh the value of waiting indeed oligopolistic industries experience less entry and more exit than other industries

efficient industrial energy use the first step in transitioning saudi arabia s energy mix abstract in saudi arabia industrial fuel prices are administered below international prices and firms make decisions based on low energy prices increasing domestic energy demand this analysis explores alternative policies designed to induce a transition to a more efficient energy system by immediately deregulating industrial fuel prices gradually deregulating fuel prices and introducing investment credits or feed in tariffs it uses a dynamic multi sector mixed complementarity model continuing existing policies results in a power system still fueled completely by hydrocarbons the alternative policies result in a transition to a more efficient energy system where nuclear and renewable technologies become cost effective and produce 70 of the electricity in 2032 introducing the alternative policies can reduce the consumption of oil and natural gas by up to 2 million barrels of oil equivalent per day in 2032 with cumulative savings between 6 3 and 9 6 billion barrels of oil equivalent the energy system sees a net economic gain up to half a trillion 2014 usd from increased oil exports even with investments in nuclear and renewables the results are robust to alternative assumptions regarding the value of oil saved and the growth in end use energy demand