what policy adjustments in the eu ets truly affected the carbon prices abstract carbon market becomes increasingly popular as a cost effective instrument to mitigate co 2 emissions however its construction is a learning by doing process and needs consistent regulatory updates in order to deliver optimal effects this paper uses the event study method to assess the impacts of different policy adjustments on the eua returns in the european union emissions trading scheme eu ets since 2005 comparing to existing studies that focus on the impact of a single policy this paper provides a complementary reference on if and to what extent policy adjustments can impact the carbon prices by classifying all regulatory update events into six categories its key findings are as follows first aggregate impacts of total 50 events studied are low while impacts of events having underlying negative impacts are higher than those having underlying positive impacts second 24 events have significant impacts on eua returns and are coherent to their theoretical impacts except one event third events having negligible impact on eua returns are those that are announced not for the first time or those having no impact on co 2 quotas supply and demand finally there are different impact patterns some events have different impacts on short end and long end carbon prices

the effects of regulatory policies on the cost of debt for electric utilities an empirical investigation this article develops a model of debt cost determination for regulated electric utilities based on an application of finance theory estimation of the model allows the hypothesis that regulatory policy directly influences the cost of debt to be tested and also enables the specific effects attributable to individual regulatory policy variables to be examined regulatory decisions are found to have statistically and economically significant effects on the cost of debt for electric utilities and the most important effects are associated with the treatment of construction work in progress for ratemaking purposes the extent of regulatory delay and whether or not interim rate relief is provided copyright 1989 by the university of chicago

the impact of regulation on the riskiness of electric utilities abstract the impact of regulation on public utility riskiness has been investigated using common stock systematic risk stock beta we show that the stock beta confounds the relevant risk arising out of regulation with the riskiness because of other factors our illustration with a sample of electric utilities underscores the importance of this distinction and contrary to the literature does not support stigler s capture theory view of regulation

market response to banks granting lines of credit abstract prior research has shown and this paper confirms that when the market becomes aware a line of credit is granted the borrower s stock has a positive and significant reaction the borrower s reaction is used to identify the exact date the market becomes aware of the granting of the line of credit this date is used as a one day window to investigate whether the bank s stock also reacts this reaction will be most obvious with large lines of credit all lines of credit larger than us 1 billion granted during the years 1993 1996 are investigated the results show as predicted a positive and significant reaction by the bank s stock

effects of the 1970 bank holding company act evidence from capital markets this study measures the effects of the 1970 amendment to the bank holding company bhc act on the profitability and risk of bhcs using capital market data differences in abnormal returns and risk among three portfolios of bank shares which differ in their regulatory status are examined in various periods preceding and following the enactment no significant differences in performance and no change in the relative risk of any pair of portfolios were observed thus the null hypothesis that the nonbank expansion provisions of the 1970 amendment had no effect on bhcs risk and profitability cannot be rejected the growth of bank holding companies and their expansion into nonbank activities following the 1970 amendment to the bank holding company bhc act of 1956 produced striking structural changes in the banking industry the nonbank expansion provisions of the statute triggered a continuing debate about the costs and benefits of these provisions black miller and posner 2 consider the amendment to be an important innovation that can increase the efficiency and hence the profitability of financial intermediaries other writers however suggest that nonbank activities of bank holding companies may increase the risk of bank failure thereby increasing the regulatory involvement silverberg 14 orgler and wolkowitz 13 and mayne 10 2 this study analyzes the effects of the 1970 amendment to the bank holding company act on the profitability and riskiness of bank holding companies capital market data are used to measure risk and return fama 6

the wealth effect and diamond risk structure of financial regulation the objective of this article was to evaluate the effect of announcements of financial regulation on risk and return in the vietnamese equity market the techniques used for the purpose of analysing risk and return include event study and non parametric tests as well as asset pricing models supplemented with interaction variables and a variety of arch like specifications such as garch tarch egarch and parch we find evidence for the wealth effect the presence of delayed response and a risk shifting behaviour in the form of diamond risk structure our results show that abnormal returns are present around the announcements of operating rules and other stock market regulations abnormal returns can also be obtained after considering legal documents such as circulars and decisions

accounting for retail land sales analysis of a mandated change abstract this study assesses the stock market s reaction to a series of events leading up to a mandated change in accounting for retail land sales evidence is found to support the conclusion that the market reacted to some of these events in a manner consistent with the effects of the accounting change on debt annagement contracts a distinctive aspect of the analysis is the efficient use of security returns data to detect market reactions and to derive empirical distributions of test statistics employed the analysis is extended by a model for grouping regression equations known as seemingly unrelated regressions however the gains from this extension are modest

measuring the effects of regulation with stock price data this article examines the usefulness of stock returns in measuring the effects of regulation when the dates on which market expectations change are not known and standard sources e g the wall street journal are used to choose announcement dates twenty major changes in regulatory constraint since 1887 are considered tests using either monthly or daily data are found to have surprisingly little ability to detect the effects of regulation the evidence shows that formal regulatory announcements are generally anticipated in cases where it is unclear when expectations change

equal employment opportunity law and firm profitability based on a sample of 260 cases reported in the wall street journal between 1964 and 1986 this study finds that the equity value of firms charged with violating equal employment opportunity eeo laws fell at the time that a suit decision or settlement was announced most dramatically the value of firms involved in class action suits fell 15 6 percent on average around the time of the suit further the average loss to shareholders exceeds the amount firms are required to spend to settle the case this may be due to the expected costs of changing employment practices or to the information about the firm s management that is revealed by the case a staggering number of statutes amendments and court decisions regulating equal opportunity in employment have been passed during the past 25 years firms found guilty of violations of equal employment opportunity laws have been required to pay millions of dollars in back pay and to alter their employment practices to comply with the laws this study measures the costs to firms resulting from government and private lawsuits and the further costs of losing those suits i address this question by examining changes in the market value of the equity of firms at the time a lawsuit is filed for a violation of an equal employment opportunity eeo law and at the time a decision of guilty or a settlement

the wealth effects of deregulation of canadian financial institutions abstract canada like other industrial countries recently introduced various financial reforms to remove the barriers separating the operations and ownership of banks from non bank financial institutions this study analyzes the wealth effects of the reforms on the banks and non bank financial institutions and the changes in their systematic risk resulting from financial deregulation over the period 1984 to 1991 the results indicate that while there was a significant cumulative gain for the insurance industry unlike a number of u s studies there was no evidence of wealth transfer among the institutions during the period of deregulation of the canadian financial system additional tests indicate that although the regulatory changes did not have a significant effect on the risk of the banks the systematic risk of the non bank financial institutions increased significantly during the period of regulatory reforms

the competitive effects of resale price maintenance the competitive effects of resale price maintenance rpm are theoretically diverse rpm can cause allocation distortions or promote productive efficiencies in the distribution process moreover extant cross sectional empirical evidence is incapable of distinguishing among the potentially disparate effects of rpm this paper conducts hypothesis tests of the alternative theories of rpm the empirical framework relates estimates of the effects of rpm for a cross section of observations to necessary conditions of the alternative models this analysis indicates that rpm is used both to foster cartels and promote efficiencies in the distribution process this result is consistent with the growing body of case study analysis that suggests that rpm is used for a variety of reasons this result also questions the current per se illegal status of rpm in the antitrust laws evidence is also provided concerning the strategic interaction between manufacturers and dealers in the distribution process and the use of financial data in analyzing propositions in industrial organization

cross country variation in household access to financial services abstract this paper presents estimates for more than 160 countries of the fraction of the adult population using formal financial intermediaries the estimates are constructed by combining information on account numbers at banks and microfinance institutions together with banking depth and gdp data with estimates from household surveys for a smaller set of countries an illustrative application of the data compares them with information on poverty there is a correlation but it is not clearly causal

regulation the opec oil supply shock and wealth effects for electric utilities a popular view among specialists in electric utility economics is that the regulatory process exacerbated the negative effects of the opec s oil price increases during the 1970s in contrast peltzman s theory of regulation suggests that regulators should buffer a firm from cost increases this paper examines these contending propositions by examining the stock returns for a sample of electric utilities during the opec oil shock of october 1973 the data are more consistent with a buffering effect than a regulatory lag

market expectations of the effects of the tax reform act of 1986 on banking organizations abstract this study investigates market expectations regarding the effect of the tax reform act of 1986 on the banking industry the evidence shows that overall the tax reform did not adversely affect the stocks of banking institutions the findings suggest that overall banking organizations were expected to largely mitigate any negative effects of the tax reform on their cash flow by rebalancing and or repricing their portfolios of assets and liabilities the most significant provision of the new act was the limitation on foreign tax credits interestingly the markets did not expect any adverse valuation effects from the recapture of loan loss reserves or the elimination of the interest deductibility for carrying tax exempt securities

safety net losses from abandoning glass steagall restrictions this paper evaluates the redistribution of gains surrounding regulatory relaxations in 1996 and 1997 and ultimate passage of the financial services modernization act fsma of 1999 gains in financial institution stocks may come from projected increases in efficiency increases in the bargaining power of financial institutions or greater access to the federal safety net for customers seeking improved access to capital markets gains in efficiency should result in increased benefits but increases in bank bargaining power could increase funding costs and or decrease capital market access customers may also lose as taxpayers who support the federal safety net this paper finds evidence of potential taxpayer losses and increased bank bargaining power especially vis a vis credit constrained customers for whom safety net subsidies are unlikely to be shifted forward the stock prices of credit constrained customers declined during fsma event windows and in event windows associated with regulatory relaxations

analysis of the effectiveness of the first european pollutant emission register eper abstract the aim of this paper is to examine the effectiveness of the first european pollution emissions register eper a regulatory instrument based on the publication of the environmental performance of firms exceeding specified pollution limits the multivariate regression model mvrm is applied to capture the disciplinary effect of the eper so we first perform an analysis to determine whether the publication of the eper has a negative effect on the market value of the listed firms secondly we consider the possibility of the publication of the eper affecting the market value of firms which could be included in the eper but are not because their emissions do not exceed the specified pollution limits finally we prepare an index to compare the environmental results of the firms and analyse whether the consequences of publishing the eper are worse for firms with high relative pollution records

the effect of carbon tax on per capita co2 emissions new huadu business school 09zd050 national social science foundation of china 09zd050 08ajy022 research foundation of ministry of education of china 10jzd0018 fundamental research funds for the central universities 2010221051

effects of carbon taxes on different industries by fuzzy goal programming a case study of the petrochemical related industries taiwan abstract implementation of a carbon tax is one of the major ways to mitigate co2 emission however blanket taxes applied to all industries in a country might not always be fair or successful in co2 reduction this study aims to evaluate the effects of carbon taxes on different industries and meanwhile to find an optimal carbon tax scenario for taiwan s petrochemical industry a fuzzy goal programming approach integrated with gray prediction and input output theory is used to construct a model for simulating the co2 reduction capacities and economic impacts of three different tax scenarios results indicate that the up stream industries show improved co2 reduction while the down stream industries fail to achieve their reduction targets moreover under the same reduction target i e return the co2 emission amount to year 2000 level by 2020 scenario swe induces less impact than fin and eu on industrial gdp this work provides a valuable approach for researches on model construction and co2 reduction since it applies the gray envelop prediction to determine the boundary values of the fuzzy goal programming model and furthermore it can take the economic interaction among industries into consideration

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

climate policy instruments and industry effects and potential responses in the swedish context efficient policy instruments for reducing the emission of greenhouse gases are essential for the realization of a successful climate policy general economic policy instruments have the potential for providing efficient emission reduction as they equalise marginal costs for emission reduction between different actors they also provide incentives for a great variety of responses such as energy efficiency improvements fuel substitution and reduced consumption of carbon intensive products however as a result of the fact that it has so far been impossible to implement policy instruments on a global scale these instruments are often adapted in such a way that some of their potential advantages are eliminated in this paper the possibility of different policy instruments to contribute to reductions in industrial co2 emissions while preserving the competitiveness of industry is evaluated theoretically the consequences of increasing the cost of co2 emission in various industrial sectors are also discussed attention is directed towards carbon taxes emission trading and regulation co2 taxes without tax reductions and emission trading with allocation through auctioning have theoretical advantages in a global climate regime but may lead to significant disadvantages if implemented in a single or a small groups of countries emission trading with free intensity based allocation would in this case have a major advantage in combining incentives for emission reductions through efficiency improvements and fuel substitution with little impact on production levels less

regulator selection methods and electricity prices proponents of regulator change argue that elected utility commissions would perform better than appointed commissions but an unresolved issue is whether the method of regulator selection influences rate levels and rate structures this analysis presumes that regulators are more than mediators between producers and consumers i e that they act in their self interest to maximize their preference functions the authors hypothesize that directly elected regulators reflecting relatively higher voter input to regulatory decisionmaking permit lower electricity prices and that elected regulators will reflect strong opposition to rate increases economic analysis of the relevance of regulatory arrangement finds that this hypothesis is not valid although the direction in the movement of relative rates through time is consistent with their expectations 23 references 7 tables

the impact of fraudulent false information on equity values there are two types of stock price manipulation examined in the theoretical literature 1 insider trading which involves private information that is true and 2 the public spreading of fraudulent false information while there is a large empirical literature on insider trading this is the first empirical article to examine the impact of false fraudulent public information on stock prices and trading volume we find that such false information even after being denied by a credible source such as the sec generates both abnormal returns and abnormal trading volume we also find that the effects of the false information on security returns and volume can be persistent for at least 2 weeks in addition we show that perpetrators of false news attacks can make potentially large profits from such market manipulations

do carbon taxes work analysis of government policies and enterprise strategies in equilibrium abstract to achieve the goal of carbon emission reduction a number of countries have implemented carbon tax policies and carbon pricing has become an important tool this paper discusses the interactions between a government and an enterprise for implementing carbon taxes over time or by level of tax considering greenhouse gas emission we examine the impacts of various carbon tax policies on enterprises investments in new technology their reductions in production quantity and governments tax remittances a case study of the strategic responses of three firms in taiwan s electronics cement and steel industries to two carbon emission policies promulgated by government shows that appropriate levels of tax can induce an enterprise to alter its production processes to achieve emission reduction as part of a long term business strategy

voter power and electricity prices overall the results show that the method of regulator selection does not seem to have a consistent statistically significant effect on electricity rates consequently the primary hypothesis of this research is not validated although the direction in the movement of relative rates through time is consistent with our expectations we expected the magnitude of shifts in the importance of method of regulator selection to be much more important than the research results indicate this expectation was based on the external pressures which have emerged since 1970 to which elected regulators would seem to be more sensitive than appointed regulators the empirical analysis indicates that the response to these external pressures was insufficient to cause elected regulators to set electricity rates statistically lower than those set by appointed regulators

finance and income inequality what do the data tell us although there are distinct conjectures about the relationship between finance and income inequality little empirical research compares their explanatory power we examine the relationship between finance and income inequality for 83 countries between 1960 and 1995 because financial develop ment might be endogenous we use instruments from the literature on law finance and growth to control for this our results suggest that in the long run inequality is less when financial development is greater consistent with galor and zeira 1993 and banerjee and newman 1993 although the results also suggest that inequality might increase as financial sector development increases at very low levels of financial sector development as suggested by greenwood and jovanovic 1990 this result is not robust we reject the hypothesis that financial development benefits only the rich our results thus suggest that in addition to improving growth financial development also reduces inequality

state regulation of takeovers and shareholder wealth the case of new york s 1985 takeover statutes past studies of takeover regulations have found that such rules increase the premiums paid to the shareholders of successfully acquired targets jarrell and bradley argue that these higher premiums harm shareholders by discouraging takeover activity and protecting inefficient managers bebchuk argues that the higher premiums do not significantly reduce the number of takeovers so that shareholders benefit on average from the higher premiums paid in successful acquisitions this article uses the event study method to measure the net effect of two takeover statutes passed by the new york state legislature in 1985 the results support the conclusion of jarrell and bradley that despite the higher premiums paid to successfully acquired target shareholders ex post these laws on average harm shareholders ex ante

market reaction to the formation of export trading companies by american banks the stock and bond market reactions to american banks announcements of their intentions to form export trading companies are investigated the results are robust to various return generating model specifications and are consistent with the view that the markets do not believe that u s bank export trading companies will be successful

the effects of the nlra on stockholder wealth in the 1930s whereas most recent research examining the effects of the nlra on labor management relations has focused on the impact of specific provisions of the law this study provides an estimate of the impact of the passage of the nlra on 75 firms that were at great risk of being unionized in the 1930s taking changes in shareholder wealth as a measure of the shift in the balance of power caused by the nlra the authors find that the passage of the nlra caused a statistically and economically significant decline in shareholder wealth for the sampled firms specifically by april 1937 stockholder wealth in the firms was 15 9 lower than would have been expected had the nlra not been enacted t he impact of public policy on the balance of power between labor and management has always been a fundamental topic in industrial relations recent changes in many labor management relationships have renewed interest in the influence of public policy on labor relations and raised questions of how modifications in these policies might alter the behavior of the parties according to delaney lewin and sockell 1985 the empirical research on this topic has largely concentrated on specific provisions of the wagner act such as election procedures and regulation of employer unfair labor practices for example getman gold

the gains from takeover deregulation evidence from the end of interstate banking restrictions this paper uses interstate banking deregulation to explore the benefits of takeover deregulation and how these benefits are distributed across different firms we find large and significant abnormal returns around the interstate banking and branching efficiency act of 1994 which imply it created 85 billion of value in the banking industry consistent with an active market for corporate control allowing beneficial consolidation and providing needed discipline there is a strong negative relationship between banks abnormal returns and their prior performance consistent with managerial entrenchment limiting takeover discipline banks with higher insider ownership lower outside block ownership and or less independent boards have lower abnormal returns imagine an economy in which strict regulation has prohibited all takeover activity and the governing body suddenly announces that the restrictions on mergers and acquisitions will be eliminated in one year the capital market response to this announcement would establish the aggregate value added from an active corporate control market and differences between individual firms stock price reactions would reveal which firms benefit most from unrestricted consolidation and takeover discipline in some ways this hypothetical situation became reality for the u s banking industry in 1994 when congress wrote and passed the interstate banking and branching efficiency act ibbea this legislation liberalized the bank takeover market by eliminating the various state laws restricting bank mergers across state lines the ibbea was widely expected to accelerate the consolidation already occurring within the banking industry see for example american banker 10 11 94 a more active takeover market should increase firm values in at least two ways first unrestricted consolidation would allow firms to better utilize

stock market reactions to the depository institutions deregulation and monetary control act of 1980 abstract this paper evaluates the effects of events leading to the passage of the depository institutions deregulation and monetary control act of 1980 the evidence suggests that the initial proposal of the act by then president carter and the final passage of the act by the house of representatives produced positive abnormal returns to stockholders of large commercial banks stockholders of small commercial banks and small savings and loans on the other hand generally experienced negative abnormal returns furthermore when hopes of passage of the act faced significant negative positive abnormal returns were experienced by stockholders of large small commercial banks

reaching out access to and use of banking services across countries the authors 1 present new indicators of banking sector penetration across 99 countries based on a survey of bank regulatory authorities 2 show that these indicators predict household and firm use of banking services 3 explore the association between the outreach indicators and measures of financial institutional and infrastructure development across countries and 4 relate these banking outreach indicators to measures of firms financing constraints in particular they find that greater outreach is correlated with standard measures of financial development as well as with economic activity controlling for these factors the authors find that better communication and transport infrastructure and better governance are also associated with greater outreach government ownership of financial institutions translates into lower access while more concentrated banking systems are associated with greater outreach finally firms in countries with higher branch and atm penetration and higher use of loan services report lower financing obstacles thus linking banking sector outreach to the alleviation of firms financing constraints

an analysis of the impact of deposit rate ceilings on the market values of thrift institutions this paper examines the impact of changes in deposit interest rate regulations on the common stock values of savings and loan institutions the analysis indicates that stockholder owned savings and loans s l s have experienced statistically significant declines in equity market values at the announcement of the removal of ceilings on certain consumer small saver certificate accounts and the introduction of short term variable rate money market certificates we find the evidence to be consistent with the hypothesis that s l s have earned economic rents from restrictions on interest rates paid to small saver accounts and that relaxation of interest rate ceilings has reduced these rents a central issue in the economics of regulation is whether regulators behave in a way that primarily benefits the economic agents whose actions they are supposed to regulate the proposition that regulation is demanded and acquired by the regulated and that regulations are designed and administered primarily for their benefit was originally put forth by stigler 19 and has come to be known as the capture theory of regulation an alternative view is that regulators adopt policies which serve some other perhaps public or possibly the regulators own interest and that administration of these policies does not benefit the regulated entities this paper examines the regulation of savings and loan associations deposit interest rates and reports evidence pertaining to the impact of the administration of regulation regulation of interest rates paid to depositors in federally insured savings and loan associations began in 1966 since that time several changes in the maximum allowed interest rates deposit rate ceilings have been made these changes present an opportunity to observe the impact of one form of regulatory action on savings and loan institutions deposit rate regulation has been the subject of extensive previous research the empirical investigations have focused primarily on two issues 1 the allocational efficiency and wealth redistribution effects of rate ceilings and 2 the impact of deposit rate ceilings on the flow of funds into the residential

auditor reputation the impact of critical reports issued by government inspectors in recent years u k department of trade investigations into the affairs of a specific company have sometimes been critical of the work done by its auditors and reporting accountants this article assesses the impact of this criticism on the auditor s reputation in particular it examines the stock price performance of the auditor s listed clients the results show a small wealth loss for the audit clients the article also examines the impact of the department of trade criticism on an audit firm s number of listed clients and its future audit fees compared to a control group the criticized auditors appear to suffer a small loss in market share based on number of listed clients and on audit fees the evidence suggests that criticized auditors incurred economic losses from the damage to their reputations this is consistent with models of reputation advanced in the industrial organization literature

does the japanese governance system enhance shareholder wealth evidence from the stock price effects of top management turnover this article examines the stock price effects of top management turnover announcements for 432 japanese corporations from 1985 to 1990 we find that these announcements are associated with significantly positive abnormal returns the returns are greater when turnover is forced than when turnover represents normal succession the stock price effects are also significantly positive when turnover is forced and the successor is appointed from outside the firm we find that large shareholders play an important role during outside succession this evidence suggests that the disciplinary decisions of japanese governance mechanisms are consistent with shareholder wealth maximization article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

japan s shift from process to product patents in the pharmaceutical industry an event study of the impact on japanese firms in 1975 japan expanded the scope of its patent law by introducing product patents for newly developed chemical and pharmaceutical products we use rate of return data from the tokyo stock exchange for japanese pharmaceutical companies to examine the impact of the change in the patent law our empirical findings indicate that the passage of the new patent law induced an excess return of approximately 26 percent to a portfolio of large pharmaceutical companies companies with r d programs specializing in new product development experienced large gains while companies with r d programs specializing in imitative process patents experienced no gains

using stock price data to measure the effects of regulation the interstate commerce act and the railroad industry this article usesjinancial data to measure the effects of the passage of the interstate commerce act of 1887 and subsequent legislative and judicial developments on firms in the railroad industry the results indicate that the interstate commerce act had a significant positive impact on railroad stock prices and that court decisions in the 1890s which severely restricted the powers of the interstate commerce commission caused negative stock price reactions thesefindings offer support for the revisionist view of regulatory history according to which the railroads welcomed regulation as a means offacilitating the enforcement of cartel like agreements

measuring household usage of financial services in recent years the number of surveys on access to and use of financial services has multiplied but little is known about whether the data generated are comparable across countries or within the same country over time a randomized experiment in ghana tested whether the identity of the respondent and the inclusion of product specific cues in questions affect reported rates of use of financial services rates of household use are almost identical whether the head reports on behalf of the household or whether the rate is tabulated from a full enumeration of household members a less complete summary of household use of financial services results when randomly selected informants nonheads of household provide the information for credit from formal institutions informal sources of savings and insurance reported use is higher when questions are asked about specific financial products rather than about the respondent s dealings with types of financial institutions in short who is asked the questions a

a new database on the structure and development of the financial sector this article introduces a new database of indicators of financial structure and financial development across countries and over time the database is unique in that it combines a wide variety of indicators that measure the size activity and efficiency of financial intermediaries and markets it improves on previous efforts by presenting data on the public share of commercial banks introducing indicators of the size and activity of nonbank financial institutions and constructing measures of the size of bond and primary equity markets this article introduces a new database the first to provide comprehensive measures of the development structure and performance of the financial sector this database is the first to define and construct indicators of the size and activity of nonbank financial intermediaries such as insurance companies pension funds and non deposit money banks it is also the first to include indicators of the size of primary equity markets and primary and secondary bond markets in constructing the database authors carefully deflate measures and match stock and flow variables

regulator selection and endogenous systematic risk a major issue in the financial literature of regulated industries is whether the cost of capital is endogenous to the regulatory process cross spectral estimates of the market model are used to determine if the method of regulator selection contributes to either frequency dependence or phase shift lead lag in electric utility systematic risk it is determined here that electric utilities regulated by elected commissions experience frequency dependence in systematic risk this finding lends support to the assertion that the cost of capital is endogenous to the regulatory process

election returns as a signal of changing regulatory climate abstract this paper considers the effects of changes in regulatory climate on the expected future profitability of regulated electric utilities previous researchers addressing issues relating to regulatory environment have examined the determinants of investor perceptions of regulatory climate the effect that the method of commissioner selection in particular has on regulatory climate and the effects of regulatory climate on the cost of capital to the regulated firm this paper seeks to ascertain the importance of regulatory climate by examining the stock market performance of regulated electric utilities at the time of an unanticipated change in regulatory environment these results indicate that in those states in which the change in regulatory climate was most clearly unanticipated an adverse change in the regulatory environment did result in negative abnormal returns to utilities operating in those states thereby indicating a reduction in the expected future profitability of the regulated firms in addition our results provide support for the proposition that the firm s systematic risk is lower when enforcement of regulation is more stringent

returns to capital in microenterprises evidence from a field experiment small and informal firms account for a large share of employment in developing countries the rapid expansion of microfinance services is based on the belief that these firms have productive investment opportunities and can enjoy high returns to capital if given the opportunity however measuring the return to capital is complicated by unobserved factors such as entrepreneurial ability and demand shocks which are likely to be correlated with capital stock the authors use a randomized experiment to overcome this problem and to measure the return to capital for the average microenterprise in their sample regardless of whether they apply for credit they accomplish this by providing cash and equipment grants to small firms in sri lanka and measuring the increase in profits arising from this exogenous positive shock to capital stock after controlling for possible spillover effects the authors find the average real return to capital to be 5 7 percent a month substantially higher than the market interest rate they then examine the heterogeneity of treatment effects to explore whether missing credit markets or missing insurance markets are the most likely cause of the high returns returns are found to vary with entrepreneurial ability and with measures of other sources of cash within the household but not to vary with risk aversion or uncertainty

regulation and systematic risk the case of electric utilities a primary finding is that the presence and intensity of regulation strongly affect systematic risk the empirical results support the view that beta is endogenous to regulation and suggest caution regarding the use of observed measures of systematic risk in assessing the cost of capital in regulatory procedures results suggest that systematic risk is not only endogenous but also uniformly lower in regulated versus unregulated regimes beta is lower the more intensive the degree of regulation and the results hold whether regulation is measured in terms of conferred authority statutes and judicial opinions of inputs resources devoted to regulation or of outputs regulated price the record for the period 1969 74 when factor prices for electric utilities were rising dramatically suggests that the observed lowering of risk cannot be attributed to simple regulatory lag on the other hand the results are observationally equivalent to regulation lowering systematic risk as a by product of wealth redistribution or because reduced risk is the preferred outcome of political constituents 32 references 8 tables

what can regulators regulate the case of bank entry previous researchers have claimed that the banking acts of 1933 and 1935 reduced the annual rate of entry of new commercial banks by as much as 50 percent between 1936 and 1962 in contrast the authors find that this legislation did not reduce bank entry rates previous studies did not account for legislative changes that reduced restrictions over branch banking and stimulated growth in the number of branches in about half the states during the 1936 62 period after accounting for these changes in branching laws it becomes clear that entry of new banks was depressed by growth in branch banks not by restrictive federal regulations copyright 1992 by ohio state university press

a future for carbon taxes abstract carbon taxes have been frequently advocated as a cost effective instrument for reducing emissions however in the practice of environmental policies only six countries have implemented taxes based on the carbon content of the energy products in this paper we evaluate carbon taxes with regard to their competitiveness distributional and environmental impacts the evidence shows that carbon taxes may be an interesting policy option and that their main negative impacts may be compensated through the design of the tax and the use of the generated fiscal revenues

capital market response to emission rights returns evidence from the european power sector prior studies on the distributional effects of the european union s emission trading scheme eu ets have so far only relied on supply and demand data empirical evidence from capital markets has been missing we address this gap and measure the ets s economic consequences using the expectations of investors towards the regulatory impact on firm value employing a multifactor model we show that returns on common stock of the largest affected industry power generation are positively correlated with rising prices for emission rights this implies that the market predicts that firms are not only able to pass on their share of the regulatory burden to customers but even achieve windfall profits by overcompensating for the costs

the differential impact of two significant court decisions concerning banking consolidation abstract two 1981 court rulings effectively removed the possibility that federal regulatory agencies could apply the theory of probable future competition to block future bank mergers and takeovers results show that the impact of this regulatory change which occured without any contemporaneous public press coverage led to a significant decline in the wealth of shareholders of banks that had been active acquirers these findings are consistent with mueller s size maximization and roll s hubris hypothese

banking services for everyone barriers to bank access and use around the world using information from 193 banks in 58 countries the authors develop and analyze indicators of physical access affordability and eligibility barriers to deposit loan and payment services they find substantial cross country variation in barriers to banking and show that in many countries these barriers can potentially exclude a significant share of the population from using banking services correlations with bank and country level variables show that bank size and the availability of physical infrastructure are the most robust predictors of barriers further the authors find evidence that in more competitive open and transparent economies and in countries with better contractual and informational frameworks banks impose lower barriers finally though foreign banks seem to charge higher fees than other banks in foreign dominated banking systems fees are lower and it is easier to open bank accounts and to apply for loans on the other hand in systems that are predominantly government owned customers pay lower fees but also face greater restrictions in terms of where to apply for loans and how long it takes to have applications processed these findings have important implications for policy reforms to broaden access

estimating the structure of market reaction to news information events and lumber futures prices we develop a new event study technique the distributional event response model derm appropriate to relatively slowly evolving information events we apply the model to twelve years of daily lumber futures prices and analyze the effects of three different types of information releases a monthly housing starts estimates b aperiodic administrative and judicial announcements about u s canada trade disputes and c novel and unprecedented court decisions related to the endangered species act esa the information releases are different in ways that predict their relative speeds of impoundment in prices we find that housing start events are absorbed more quickly than trade events which are absorbed more quickly than esa events

the reaction of bank stock prices to news of derivatives losses by corporate clients abstract from march through may of 1994 several large nonfinancial firms announced millions of dollars in losses from derivatives deals especially those arranged by bankers trust accompanying these announcements and related news stories were allegations that bankers trust had either misrepresented lied or deceived its clients using sur methods we investigate how these announcements affected bankers trust and three portfolios of banks dealers nondealers and nonusers our results indicate significant cumulative abnormal returns of 12 14 bankers trust 5 56 13 dealer banks and 2 45 32 nondealer user banks the evidence suggests an intra industry information transfer effect consistent with rational pricing the replacement cost of derivative contracts is an important factor in explaining the variation in abnormal returns across banks

does the japanese stock market price bank risk evidence from financial firm failures the ability of the japanese stock market to appropriately price the riskiness of japanese financial firms has been frequently questioned particularly in light of japan s widespread financial distress in recent years and poor disclosure requirements this paper examines the response in equity returns of japanese banks to the failure of four commercial banks and two securities firms between 1995 and 1998 using event study methodology the analysis finds that share prices of surviving banks on the whole responded unfavorably to the failures and that financially weaker survivors were more adversely affected this suggests that despite the distress and alleged opaqueness bank shareholders were able to use available indicators of financial condition both to incorporate new information quickly into stock prices and to differentiate among banks

security price reactions around corporate spin off announcements abstract we examine security price reactions around the announcements of 123 voluntary spin offs by 116 firms between 1963 and 1981 involving a pro rata distribution of the common stock of a subsidiary to the stockholders of the parent firm the median spin off in the sample is 6 6 of the original equity value and is associated with an abnormal return of 7 0 from 50 days prior to the announcement through completion of the spin off no evidence is found to indicate the gains to stockholders represent wealth transfers from senior securityholders over the entire event period we find positive gains for firms engaging in spin offs to facilitate mergers or to separate diverse operating units but negative returns to firms responding to legal and or regulatory difficulties in the two day interval surrounding the first press announcement we find positive average excess returns for all groups

the impact of the 1980 depository institutions deregulation and monetary control act on market value and risk evidence from the capital markets the depository institutions deregulation and monetary control act of 1980 brought about major changes in the banking industry this study employs capital market data to examine the act s impact on the relative competitive positions of distinct classes of firms within the industry the evidence supports the hypothesis that federal reserve system banks profited from the regulatory change at the expense of nonmember banks and savings and loans copyright 1988 by ohio state university press

the economic effects of client losses on otc bank derivative dealers evidence from the capital market this paper investigates the economic impact of client derivatives losses on otc derivatives dealers its focus is on the capital marketers reaction to losses suffered by four end users of otc derivatives products arranged with bankers trust new york evidence is provided on the impact of these end user losses on bankers trust itself as well as whether these losses produced any systemic or contagion effects extending to other major bank otc derivatives dealers finally the paper investigates whether possible systemic effects may be associated with bank specific characteristics such as the level of derivatives exposure counterparty risk and reliance on trading income copyright 1996 by ohio state university press

union effects on productivity profits and growth has the long run arrived this article interprets literature examining union effects on economic performance production function studies indicate small overall union impacts on productivity positive effects where they exist appear to result from management response to decreased profit expectations and from a natural selection process lower profitability among unionized firms is well established more interesting is the possibility that unions appropriate quasi rents deriving from long lived tangible and intangible capital the connection between unions investment behavior and productivity growth emerges as a particularly fruitful line of empirical inquiry although it does not encourage a sanguine view of unionism s long run impact

debt equity swaps regulation k and bank stock returns abstract since the early 1980s the financial health of several highly levered ldcs has become increasingly precarious their financial problems in turn imply potentially serious financial problems for their creditors foremost among whom are some of the largest banks in the american financial system in order to relieve some of the pressure on the lending firms the board of governors has recently amended regulation k which provides guidelines for international banking operations to allow for unrestricted investment in foreign nationalized firms through the mechanism of the debt equity swap this paper examines the capital market reaction to the regulatory change and we find that 1 investors on average viewed the change as a wealth increasing event 2 the magnitude of the market reaction was significant and positively related to the level of foreign lending exposure and 3 among ldc lenders the capital market reaction differed significantly between money center and non money center banks

the rise and fall of railtrack plc an event study forming railtrack was a key part of the privatization of british rail br railtrack took over the ownership of br s fixed infrastructure in april 1994 and its parent company the railtrack group was floated in may 1996 on the london stock exchange lse despite the group posting some excellent financial results in the early years railtrack s record on infrastructure improvement and safety was frequently criticized this apparent inconsistency between shareholder interests and public service obligations culminated in railtrack being placed in administration in october 2001 in view of this apparent inconsistency and the high court claim for additional compensation brought against the government by a group of 49 000 small investors the reaction of the stock market to 19 key events is modelled among other things we find when railtrack announced after the fatal derailment of a high speed train near the hertfordshire town of hatfield that there would be a 6 month programme of emergency track repairs t

do epa defendants prefer republicans evidence from the 2000 election i introduction there is an extensive body of literature documenting the effects of political interference in bureaucratic agencies much of this deals with the enforcement of antitrust disputes as mediated by the federal trade commission a corresponding literature on the political control of the environmental bureaucracy does not exist however there is a perception that the aggressiveness of environmental protection agency epa enforcement could vary from one administration to the next 1 the present article aims to subject these anecdotal impressions to empirical tests it uses the change in the price of publicly quoted companies that have civil judicial litigation outstanding with the epa when a political event takes place such as a presidential election to assess the market s reaction to this event ii literature review the biggest problem in doing empirical studies of the effect of political and legislative changes on stock market valuations is the fact that these changes happen slowly over a period of months or years given the assumption of efficient markets stock markets should immediately reflect all available information including the possibility of political changes this is the reason why studies of the effect of legislation and political change on market valuations have generally found insignificant results as in binder 1985 cutler 1988 downs and tehranian 1988 and graddy et al 1992 2 this article uses a better measure of the probability of a political event the measure of the probability of the outcome of an election is obtained from the iowa electronic market iem only herron et al 1999 and knight forthcoming have used this data source for similar purpose before 3 the iem is a set of continuous double auction markets operated by the university of iowa henry b tippie school of business most of the existing literature in this field has used opinion poll data such as brander 1991 the disadvantages of this are well known they are usually conducted over several days and so do not represent the probability of the election of a candidate on a single day they do not represent probabilities of election but rather expected vote shares they are not usually released daily and finally they have wide margins of error especially long before an election when many people have not yet made up their minds who to support herron et al 1999 pp 58 59 these are also some of the reasons that economists are generally skeptical of surveys preferring to rely instead on revealed preferences the only other possibility is the use of bookmaker s odds as used by roberts 1990b this still has the disadvantage that odds are not quoted daily and so must be interpolated also the present study attempts to measure the importance of political control of the environmental bureaucracy the existing literature focused on a variety of other federal agencies and industries iii data and empirical model data the dependent variable used here is the abnormal daily returns to the stock market price of a company that has environmental litigation outstanding on the day of an election the idea is that if the market considers the company to be politically sensitive then the returns to the company s shares should respond to changes in the probability of a political event as reported by the iem the stock market data comes from the center for research in security prices cr sp 4 the article uses individual company returns as opposed to the construction of portfolios of stocks that are then combined with data on returns to the portfolio as used by roberts 1990b and herron et al 1999 the present paper uses interaction terms between the likelihood of political events and individual characteristics of the companies such as the industry that they are in and the number of times they have been sued before this is not possible when aggregate portfolio returns are used because that would not allow the isolation of disaggregated individual company effects

finance and the sources of growth the authors evaluate whether the level of development in the banking sector exerts a causal impact on economic growth and its sources total factor productivity growth physical capital accumulation and private saving they use 1 a pure cross country instrumental variable estimator to extract the exogenous component of banking development and 2 a new panel technique that controls for country specific effects and endogeneity they find that banks do exert a large causal impact on total factor productivity growth which feeds through to overall gdp gross domestic product growth the long run links between banking development and both capital growth and private savings are more tenuous

carbon taxes a drop in the ocean or a drop that erodes the stone the effect of carbon taxes on technological change abstract we develop an economic partial equilibrium model for energy supply and demand with capital and labor as production factors and endogenous technological change through learning by research and learning by doing our model can reproduce the learning curve typical for bottom up energy system models the model also produces an endogenous s curved transition from fossil fuel energy sources to carbon free energy sources over the coming two centuries we use the model to study carbon taxes effects on fossil fuel and carbon free energy use and carbon dioxide emissions it is shown that without induced technological change carbon taxes have a modest effect on emissions while with induced technological change they accelerate the substitution of carbon free energy for fossil fuels substantially

the selection of public utility commissioners a re examination of the importance of institutional setting the result of a great many studies is that it makes no difference to the rate level whether the public utility commission is appointed or elected nevertheless the typical response to an inquiry regarding the effect of appointment versus election is that a difference in resulting rate structure should exist in this paper we have reconciled these views and more carefully examined the issue of whether institutional setting does matter in the setting of regulated electricity prices we suggest that one should not necessarily expect elected pucs to behave differently than appointed ones instead different behavior should be expected from pucs that are closer to their constituents than those more isolated irrespective of whether the puc is elected or appointed the results of an empirical examination based on a large sample of utilities operating during the period of 1981 83 support this view the more narrowly defined is the consumer voter group everything else the same the lower is the rate set by the puc

regulator selection and financial performance for public utilities selection method and the returns experienced by common equity owners abstract this paper extends the work of others who have analysed the relationship between regulatory process and regulatory outcome and examines the hypothesis that there is a difference in regulatory treatment received by public utilities depending on whether their regulators are elected directly by the public or appointed the hypothesis of differential treatment is tested using the market based returns and risks realized by the utility s common stockholders the relevance of these measures is based on the premise that share prices incorporate all information about the future expected cash flows of the firm and thus reveal any perceived differences in the treatment received or expected to be received from the two subsets of regulators raw return and risk measures indicate higher returns and lower risks for equity owners of electric utilities regulated by appointed commissioners for the periods 1964 1968 and 1970 1979 the outcome was reversed for the period 1980 1984 with the equity owners of electric utilities regulated by elected commissioners earning higher returns than owners of firms regulated by appointed commissioners when standard statistical testswere applied the only significant differences in risk adjusted returns were those for 1964 1968 when the owners of firms under appointed commissioners earned higher risk adjusted returns than did owners of firms regulated by elected commissioners