one sided performance measures under gram charlier distributions angel leon would like to acknowledge the financial support from the spanish ministry for science and innovation through the grant eco2014 58434 p and from the grant prometeoii 2013 015 manuel moreno gratefully acknowledges financial support by grants p12 sej 1733 and ppii 2014 030 p

new issues in corporate finance flow of funds data are used to compare methods of finance in 5 countries over the period 1970 to 1985 many of the problems associated with previous studies are avoided by estimating net instead of gross financing proportions the degree of consolidation of accounts reciprocal arrangements between borrowers and lenders and compensating deposit requirements on borrowers no longer distort financing patterns corrections for inflation are provided by employing flow rather than stock figures and using own aggregation procedures to derive stock measures significant variations in financing emerge these are not readily explained by traditional descriptions of corporate finance in particular taxation as an alternative the paper suggests that relationships between borrowers and lenders establish forms of commitment that are conducive to the provision of long term finance the separation between investment and finance which has been the starting point of corporate finance theory is untenable in a multiperiod context in which terms of finance define future allocation of control

the dual structure of incomplete demand systems integrability of incomplete demand systems is discussed the concepts of weak integrability quasi expenditure function quasi indirect utility function and quasi utility function are defined their relationships to the expenditure function indirect utility function and utility function are developed the dual structure of the quasi functions permits exact welfare analysis and reveals the conditional preference structure for the commodities of interest new results relating the uniqueness and exactness of consumer s surplus to the structure of the expenditure and indirect utility functions are obtained

optimal asset allocation aid system from one size vs tailor made performance ratio abstract optimal asset allocation well fitting investors goals is a pressing challenge in risk management making a step forward to the sharpe ratio the parameter dependent sortino satchell generalized rachev and farinelli tibiletti performance ratios are suggested for personalizing asset allocation tailor made optimal asset paths for five different investor risk profiles are traced over a rolling 12 month investing horizon our simulations show a satisfactorily good match between asset allocation and correspondent risk profile specifically generalized rachev ratios outperform in personalized allocation for extreme risk profiles i e conservative and aggressive investors whereas sortino satchell and farinelli tibiletti ratios for those that are more moderate sharpe ratio confirms its ability in constructing steady diversified portfolios although underperformed

liquidity shocks size and the relative performance of hedge fund strategies abstract we examine whether the increase in the flow of capital to hedge funds over the period 1994 2005 had a negative impact on performance more specifically we study the relative performance of small versus large funds for each of the hedge fund strategies our results indicate that on an absolute return basis small funds outperform large funds on a risk adjusted return basis however we find that large funds outperform small funds and that large funds are also shown to hold less liquid assets and take on less systematic and idiosyncratic risk than small funds further funds that experience positive liquidity shocks generally outperform those that experience negative liquidity shocks we also find evidence that hedge fund managers that are aggressive in dealing with liquidity shocks perform better than hedge fund managers that are conservative in dealing with liquidity shocks

a dynamic analysis of interfuel substitution in u s industrial energy demand using data for 1960 92 to analyze interfuel substitution in the u s industrial sector a dynamic linear logit model is shown to provide superior global properties than a comparable dynamic translog model confirming earlier static results by t j considine 1989 the linear logit model provides a direct unbiased estimate of the rate of dynamic adjustment indicating a median response lag of less than two years excluding fuels used for nonenergy purposes yields larger estimates of the price elasticities for coal and oil and indicates generally greater potential for interfuel substitution than when using aggregate data

sufficient conditions for expected utility to imply mean standard deviation rankings empirical evidence concerning the location and scale condition this paper presents and implements a procedure which examines for empirical support for the location and scale condition the kolmogorov smirnov multisample test is used to determine if the distribution functions describing the nonsystematic risk component of rate of return for portfolios of common stock are equal to one another except for location and scale implications concerning the relationship between mean variance and expected utility efficient sets are noted copyright 1992 by royal economic society

the political economy of the maoist conflict in india an empirical analysis we study the maoist naxalite conflict in india by constructing a comprehensive district level database combining conflict data from four different terrorism databases to socioeconomic and geography data from myriad sources using data on 360 districts for three time periods we find that land inequality and lower incomes are important factors behind the conflict exploiting the micro structure of the data we show that growth of incomes of scheduled tribes significantly decreases the intensity of the conflict finally we show that historical property rights institutions from colonial times that go back centuries affect present day conflict outcomes

sharpe thinking in asset ranking with one sided measures abstract if we exclude the assumption of normality in return distributions the classical risk reward sharpe ratio becomes a questionable tool for ranking risky projects in line with sharpe thinking a general risk reward ratio suitable to compare skewed returns with respect to a benchmark is introduced the index includes asymmetrical information on 1 good volatility above the benchmark and bad volatility below the benchmark and 2 asymmetrical preference to bet on potential high stakes and the aversion against possible huge losses the former goal is achieved by using one sided volatility measures and the latter by choosing the appropriate order for the one sided moments involved the omega index see cascon a keating c shadwick w 2002 introduction to omega the finance development centre and the upside potential ratio see sortino f van der meer r plantinga a 1999 the dutch triangle journal of portfolio management 26 i fall 50 58 follow as special cases

insiders incentives for asymmetric disclosure and firm specific information flows abstract recent research suggests that insiders incentives for capturing cash flows affect price formation process in which insiders are inclined to withhold good news and to accelerate the release of bad news jin and myers 2006 we investigate whether insiders incentives for private control benefit proxied by control ownership wedge affect firm specific return characteristics we find that control ownership wedge is negatively related to the likelihood of positive return jumps and positively related to the extent of asymmetric market reaction to good news rather than to bad news overall our results support the notion that corporate insiders increase opaqueness and withhold good news in order to capture unexpected cash flow

executive turnover and firm performance in china executive turnover and its link to firm performance can provide a crucial measure of how effectively a firm solves the two sets of principal agent problems a the diverging interests between top management and shareholders which may result in managerial entrenchment and b the diverging interests between controlling shareholders and minority shareholders which may lead to the expropriation of the latter by the former or tunneling as referred to in the literature tying the personal fortune of top executives to the firm s performance aligns the interests of shareholders and those of management it also breaks up the insider alliance between the controlling shareholder and management thereby helping protect the interests of minority shareholders although there is a large literature on executive turnover in western firms research on executive turnover in non western firms is limited and this paper is the only one on china a closer look at the executive turnoverperformance link in china one of the two major internal discipline mechanisms in corporate governance is particularly relevant since effective markets for corporate control are missing in china the largest developing and transitional economy in the world furthermore china is an interesting case because both types of agency problems are acute due to poorly defined property rights and weak investor protection which result largely from its command economy legacy

two moment decision models and expected utility maximization two moment decision models are consistent with expected utility maximization only if the choice set or the agent s preferences are restricted this paper identifies a restriction which is sufficient to ensure this consistency and confirms that it holds in many economic models the implications for economic analysis are then derived two different approaches to representing an agent s preferences over strategies yielding random payoffs are in wide use under the mean standard deviation ms approach the agent is assumed to rank the alternatives according to the value of some function defined over the first two moments of the random payoff while the expected utility eu criterion assumes that the expected value of some utility function defined over payoffs is used instead the fact that there are these two competing approaches has generated a considerable literature some authors are concerned with the advantages and disadvantages of each while others deal with conditions under which the potentially different approaches would yield the same results or at least approximately so space does not

the use of linear logit models for dynamic input demand systems this paper demonstrates that a linear logit model with appropriate constraints can be used to specify a system of cost share equations that satisfy neoclassical economic conditions unlike many other flexible functional forms the logistic function is particularly well suited for incorporating dynamic adjustment mechanisms the empirical results suggest that the use of static models overstates short run own price elasticities and understates the corresponding long run price effects

the agency problems embedded in firm s equity investment we find that agency problems are embedded in firm s excess and abnormal equity investments that are mainly dictated by controlling shareholder s motives and ethical choices manifested in ownership and board structure the excess equity investment is gauged with respect to industry average the abnormal equity investment is specifically referred to the number of nominal investment companies that are fully controlled by the controlling owners while subject to little governance our empirical evidences of 345 taiwanese non financial listed firms show that firm s excess and abnormal equity investments are negatively correlated with controlling shareholder s cash flow rights while are positively correlated with the control cash flow deviation and board affiliation the results are supportive of the positive incentive hypothesis and the negative entrenchment hypothesis put forth by la porta et al 2002 journal of finance57 1147 1171 and claessen et al 2002 journal of finance57 2741 2742 the negative relation between equity investment and firm s value further supports the agency postulation that corporate excess and abnormal equity investments represent a leeway for controlling shareholder to exploit wealth of minority shareholders this study potentially contributes to the literature of business ethics by portraying an empirically testable linkage from controlling owner s ethical choices to his actions and therefore firm s value

combining mean reversion and momentum trading strategies in foreign exchange markets abstract the literature on equity markets documents the existence of mean reversion and momentum phenomena researchers in foreign exchange markets find that foreign exchange rates also display behaviors akin to momentum and mean reversion this paper implements a trading strategy combining mean reversion and momentum in foreign exchange markets the strategy was originally designed for equity markets but it also generates abnormal returns when applied to uncovered interest parity deviations for five countries i find that the pattern for the positions thus created in the foreign exchange markets is qualitatively similar to that found in the equity markets quantitatively this strategy performs better in foreign exchange markets than in equity markets also it outperforms traditional foreign exchange trading strategies such as carry trades and moving average rules

strategic urban projects in amsterdam and new york incomplete contracts and good faith in different legal systems contracts between local government and private investment agencies play an important role in strategic urban projects real estate cycles provide only a narrow window of opportunity within which to draft such contracts a legal system should therefore not impede the possibility of reaching an agreement quickly instead it should facilitate efficient ways of reaching an agreement lengthy contracting may contribute to the persistence of real estate market cycles this paper explores the question of whether the civil law principle of good faith facilitates the drafting of incomplete contracts which may be efficient in situations of high uncertainty and complexity as was the case with two strategic inner city projects the south axis in amsterdam and battery park city in new york city the paper further establishes that good faith does play a considerable role in the differences in contracting practice

law finance and firm growth we investigate how differences in legal and financial systems affect firms use of external financing to fund growth we show that in countries whose legal systems score high on an efficiency index a greater proportion of firms use long term external financing an active though not necessarily large stock market and a large banking sector are also associated with externally financed firm growth the increased reliance on external financing occurs in part because established firms in countries with well functioning institutions have lower profit rates government subsidies to industry do not increase the proportion of firms relying on external financing the corporate finance literature suggests that market imperfections caused by conflicts of interest and informational asymmetries between corporate insiders and investors constrain firms in their ability to fund investment projects the magnitude of these imperfections depends in part on the effectiveness of the legal and financial systems because these systems differ across countries the literature implies that there should exist systematic cross country differences in firms ability to obtain external capital to finance investment in this paper we examine whether the underdevelopment of legal and financial systems does prevent firms in some countries from investing in potentially profitable growth opportunities in particular we focus on the use of long term debt or external equity to fund growth see our earlier work demirgut kunt and maksimovic 1996a which compares firms financial structures in developed and developing countries and finds the greatest difference to be in the provision of long term credit we estimate a financial planning model to obtain the maximum growth rate that each firm in our thirty country sample could attain without access to long term financing we then compare these predicted growth rates to growth rates realized by firms in countries with differing degrees of development in their legal and financial systems our approach enables us to identify specific characteristics of the legal and financial systems that are associated with long term financing of firm growth thus we provide a micro level test of the hypoth

measuring the consumer welfare effects of carbon penalties theory and applications to household energy demand abstract this study implements a money metric approximation to the hicksian equivalent variation hev based on observable demand functions this approach is a less restrictive approximation to the hev than the marshallian consumer surplus mcs in situations where mcs is misleading this study also implements a generalized logit demand system that conforms better to the theory of consumer behaviour than standard flexible functional forms eg translog the almost ideal demand system aids generalized leontief and minflex laurent models the generalized logit model was estimated using new york state level and company level data on residential consumption of electricity natural gas and fuel oil the demand model and money metric were combined to measure the consumer welfare effects of carbon penalties on electricity and fuels while the application is specific the generalized logit model of demand and the money metric measure of welfare change can encompass a wider range of applications than conventional methods of analysis

daily seasonality in crude oil returns and volatilities abstract in this article we test for the existence of daily seasonality in returns and volatilities of crude oil using a dummy augmented garch specification for the period from may 1987 to october 2013 our key findings are as follows i volatilities on mondays are significantly higher than on all other weekdays providing the important insight that seasonal effects should be considered when forecasting crude oil volatility ii returns on the other hand tend to be lower on mondays than on other weekdays suggesting profitable investment strategies based on this seasonal pattern in fact the analysis of a simple long short trading rule based on the monday effect provides some evidence that it can outperform a passive buy and hold approach however it cannot do so to an extent that is statistically significant iii our seasonality results are fairly robust to the choice of other frequently used garch model variants like garch m tgarch and cgarch

coase versus the coasians who should enforce laws or contracts judges or regulators many coasians though not coase himself advocate judicial enforcement we show that the incentives facing judges and regulators crucially shape this choice we then compare the regulation of e nancial markets in poland and the czech republic in the 1990s in poland strict enforcement of the securities law by a highly motivated regulator was associated with a rapidly developing stock market in the czech republic hands off regulation was associated with a moribund stock market i introduction at the heart of economists traditional skepticism about government regulation is the coase theorem coase 1960 the theorem states that when property rights are well dee ned and transaction costs are zero market participants will organize their transactions in ways that achieve efe cient outcomes when they can do so it is not necessary for the government to engage in corrective actions through taxes regulations or even legal rules financial markets are often used to demonstrate the coase theorem s case against regulation advocates of the regulation of these markets point to a variety of potential failures such as the ability of security issuers to expropriate both potential and existing investors through misrepresentation or proe t diversion investors fear of such expropriation prevents e rms from raising external funds and keeps efe cient projects from being undertaken not so reply the coasians they point out that most securities transactions take place between sophisticated adults and that both the buyers and the issuers of securities have available to them a vast range of private arrangements to achieve efe ciency including contracts such as corporate charters certie cation by intermediaries and various forms of bonding such contracts render most laws and regulations unnecessary stigler 1964 easterbrook and fischel 1991

investor protection and corporate governance recent research has documented large differences among countries in ownership concentration in publicly traded firms in the breadth and depth of capital markets in dividend policies and in the access of firms to external finance a common element to the explanations of these differences is how well investors both shareholders and creditors are protected by law from expropriation by the managers and controlling shareholders of firms we describe the differences in laws and the effectiveness of their enforcement across countries discuss the possible origins of these differences summarize their consequences and assess potential strategies of corporate governance reform we argue that the legal approach is a more fruitful way to understand corporate governance and its reform than the conventional distinction between bank centered and market centered financial systems

stochastic dominance and expected utility survey and analysis while stochastic dominance has been employed in various forms as early as 1932 it has only been since 1969 1970 that the notion has been developed and extensively employed in the area of economics finance agriculture statistics marketing and operations research in this survey the first second and third order stochastic dominance rules are discussed with an emphasis on the development in the area since the 1980s

sufficient conditions for expected utility to imply drawdown based performance rankings the least restrictive sufficient condition for expected utility to imply sharpe ratio rankings is the location and scale ls condition see meyer 1987 the ls condition includes the normal and many other asymmetric and leptokurtic distributions commonly used in finance in this paper we argue that this condition is also sufficient for expected utility to imply drawdown based performance measure rankings because for investment funds satisfying the ls condition it does not matter whether funds are ranked with the sharpe ratio or with a drawdown based performance measure as the rankings are identical hence the same conditions that provide an expected utility foundation for the sharpe ratio also provide an expected utility foundation for drawdown based performance measures theoretically drawdown based performance measures are as good as the sharpe ratio

a nonlinear expenditure system using a linear logit specification recent literature on the estimation of models of consumer expenditure patterns indicates that engel curves are nonlinear and demographic variables are important determinants of demand a linear logit household expenditures model is presented which automatically displays adding up properties derived from the budget constraint while permitting great flexibility in the engel curves in addition homogeneity and symmetry can be imposed and tested and by a simple transformation the coefficients can be estimated by linear regression another advantage of the model is that demographic variables such as household size and composition can be introduced without sacrificing the adding up properties

the value of the voting right a study of the milan stock exchange experience i study the large premium 82 percent attributed to voting shares on the milan stock exchange the premium varies according to the ownership structare and the concentration of the voting rights and it can be rationalized in the presence of enormous private benefits of control a case study seems to indicate that in italy private benefits of control can easily be worth more than 60 percent of the value of nonvoting equity a tentative explanation for these findings is provided traditional finance theory disregards the value of voting rights in pricing common stock in most cases this omission does not seem harmful many studies of differential voting stocks in different countries have indicated that voting rights are generally worth between 10 percent and 20 percent of the value of common stock the italian evidence i present differs sharply from this view in italy voting shares that have inferior dividend rights trade at an average premium

measuring economic welfare new methods preface 1 an introduction to the money metric 2 the marginal utility of money as an integrating factor 3 calculation of the money metric 4 the approach of dupuit and marshall 5 the hicksian approach 6 approximations based on consumer surplus 7 a reconsideration of the theory of index numbers 8 the money metric as a basis for calculation of social welfare functions 9 measurement of the social costs of monopoly 10 a final comment and conclusion references index

do countries matter for voluntary disclosure evidence from cross listed firms in the us this paper explores the likelihood and consequences of voluntary disclosure proxied by management earnings forecasts for a sample of 1005 cross listed firms in the us from 40 countries over the period 1996 2005 our study is grounded in a three tiered conceptual framework that relies on insights from and implications of institutional theory agency theory and bonding theory to explain the costs and benefits associated with voluntary disclosure consistent with institutional theory and agency theory our results indicate that disclosure likelihood increases with the strength of cross listed firms home country legal institutions and is also influenced by us listing type product market internationalization and ownership structure further our results show that voluntarily committing to us disclosure practice is associated with lower information asymmetry which supports reputational bonding theory overall our study provides a costs and benefits framework to understand voluntary disclosure practices in an international context our work also presents evidence that home country institutions still matter when foreign firms migrate into the us financial market which highlights the importance of country level institution development

two moment decision models and expected utility maximization comment the two most common approaches to analyzing behavior under uncertainty are the expected utility model eu and the meanstandard deviation model ms jack meyer 1987 has recently established in this review that when the choice set consists of random variables which are represented by distribution functions that differ from one another only by location and scale parameters eu and ms are consistent in the sense that any eu ranking of elements of a choice set can also be represented by an ms ranking no claim has been made by meyer regarding the euand ms efficient sets however it can be easily shown that with no additional restrictions risk averters euefficient set is a subset in the weak sense of the ms efficient set in this note we extend meyer s work and prove that under a certain restriction on the support of the distribution random variables which are ms efficient are also eu efficient namely ms and eu yield identical efficient sets we analyze separately the relationship of msand eu efficient sets for all unrestricted u with u 0 and alternatively for all risk averse u with u 0 and u 0 only pairwise comparisons of risky options are considered

the balance of power in closely held corporations abstract we analyze a closely held corporation characterized by the absence of a resale market for its shares we show that the founder of the firm can optimally choose an ownership structure with several large shareholders to force them to form coalitions to obtain control by grouping member cash flows a coalition internalizes to a larger extent the consequences of its actions and hence takes more efficient actions than would any of its individual members the model has implications for the optimal bundling of cash flow and voting rights and for the optimal number and size of shareholders

reviewing the business case for corporate social responsibility new evidence and analysis this study complements previous empirical research on the business case for corporate social responsibility csr by employing hitherto unused data on corporate social performance csp and proposing statistical analyses to account for bi directional causality between social and financial performance by allowing for differences in the importance of single components of csp between industries the data in this study overcome certain limitations of the databases used in earlier studies the econometrics employed offer a rigorous way of addressing the problem of endogeneity due to simultaneous causality although the study s results provide no evidence that there is a generic or universal business case for csr they indicate that there is a strong link between single stakeholder related issues of csr and financial performance however the analysis does not establish causality within these relationships

a decision theoretic foundation for reward to risk performance measures abstract in this paper we prove that partial moments based performance measures e g omega kappa upside potential ratio sortino satchell ratio farinelli tibiletti ratio value at risk based performance measures e g var ratio cvar ratio rachev ratio generalized rachev ratio and other admissible performance measures are a strictly increasing function in the sharpe ratio the theoretical basis of this result is the location and scale property and two other plausible and mild conditions our result provides a decision theoretic foundation for all these frequently used performance measures moreover it might explain the empirical finding that all these measures typically lead to very similar rankings

the persistence of profits in banking an international comparison this article examines the dynamics of bank profitability in the usa germany great britain france italy and switzerland over the period 1993 2014 we find long run bank profit persistence in all six countries in the period before the financial crisis in 2008 banks with large capital ratios are persistently more profitable and there is little evidence of a link between bank size and the persistence of bank profits commercial saving banks are persistently more less profitable in four of the six countries the effects of the financial crisis in 2008 differed dramatically across countries as well as across ownership types while us banks experienced dramatic declines in the immediate aftermath of the crisis they recovered much faster than their european counterparts and essentially retain their long run profit potential by the year 2014

corporate structure liquidity and investment evidence from japanese industrial groups this paper presents evidence suggesting that information and incentive problems in the capital market affect investment we come to this conclusion by examining two sets of japanese firms the first set has close financial ties to large japanese banks that serve as their primary source of external finance and are likely to be well informed about the firm the second set of firms has weaker links to a main bank and presumably faces greater problems raising capital investment is more sensitive to liquidity for the second set of firms than for the first set the analysis also highlights the role of financial intermediaries in the investment process

on the costs of a bank centered financial system evidence from the changing main bank relations in japan we examine the effects of bank firm relationships on firm performance in japan when access to capital markets is limited close bank firm ties increase the availability of capital to borrowing firms but do not lead to higher profitability or growth the cost of capital of firms with close bank ties is higher than that of their peers this indicates that most of the benefits from these relationships are appropriated by the banks finally the slow growth rates of bank clients suggest that banks discourage firms from investing in risky profitable projects however liberalization of financial markets reduces the banks market power the close relationship between manufacturing firms and financial institutions in japan has recently been at the center of the debate on the appropriate financial system for the reforming economies of eastern europe as opposed to the anglo saxon separation of finance and industry long term ties between main banks and their client firms involving bank loans bank equity holding and some bank appointed personnel which are common in japan and germany have often been described as a growth oriented financial system that could serve the needs of developing and reformed economiies better than anonymous capital markets modeled after the arnerican and british financial systems the claim that close ties between investmentoriented banks and industrial firms could help overcome the difficulties of relative backwardness dates back to gerschenkron 1962 who investigates european development rosovsky 1961 applies gerschenkron s framework to the analysis of japanese growth more recently aoki patrick and sheard 1994 hoshi kashyap and loveman 1994 and teranishi 1993 among others portray the close ties between finance and industry in japan as an important factor in the international competitiveness of modern japanese

does the choice of performance measure influence the evaluation of hedge funds abstract the sharpe ratio is adequate for evaluating investment funds when the returns of those funds are normally distributed and the investor intends to place all his risky assets into just one investment fund hedge fund returns differ significantly from a normal distribution for this reason other performance measures for hedge fund returns have been proposed in both the academic and practice oriented literature in conducting an empirical study based on return data of 2763 hedge funds we compare the sharpe ratio with 12 other performance measures despite significant deviations of hedge fund returns from a normal distribution our comparison of the sharpe ratio to the other performance measures results in virtually identical rank ordering across hedge funds

beyond sharpe ratio optimal asset allocation using different performance ratios abstract as the assumption of normality in return distributions is relaxed classic sharpe ratio and its descendants become questionable tools for constructing optimal portfolios in order to overcome the problem asymmetrical parameter dependent performance ratios have been recently proposed in the literature the aim of this note is to develop an integrated decision aid system for asset allocation based on a toolkit of eleven performance ratios a multi period portfolio optimization up covering a fixed horizon is set up at first bootstrapping of asset return distributions is assessed to recover all ratios calculations at second optimal rebalanced weights are achieved at third optimal final wealth is simulated for each ratios eventually we make a robustness test on the best performance ratios empirical simulations confirm the weakness in forecasting of sharpe ratio whereas asymmetrical parameter dependent ratios such as the generalized rachev sortino satchell and farinelli tibiletti ratios show satisfactorily robustness

professional accountancy organizations and stock market development this study investigates the relationship between the ethical educational and disciplinary development of professional accountancy organizations paos in a given country and the development of that country s stock market using a comprehensive measure based on the responses of the major paos in 36 countries to a questionnaire designed by the international federation of accountants to assess the development of paos internationally we find a significantly positive association between the development of paos and stock market development in addition we find the positive association between the development of paos and stock market development to be more pronounced in countries with higher levels of investor protection a stronger public enforcement environment or lower levels of corruption suggesting the importance of complementary institutions in the relationship between paos and stock market development we also find that better developed paos are associated with better quality financial reporting finally our result also shows that relative to the investigation and discipline mechanism and educational requirements imposed by paos the ethical development of a country s professional accountants appears to have the strongest positive association with a country s stock market development

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

from state to private ownership issues from strategic industries abstract this paper investigates the effects of privatization for a panel of 189 firms from strategic industries headquartered in 39 countries and privatized between 1984 and 2002 strategic firms can hardly be compared to manufacturing or competitive industries as they are generally under state monopoly and involve specific issues such as regulation political and institutional constraints we examine the change in ownership and postprivatization means of control by the government and assess whether positive changes in performance obtain in these particular industries that include firms from the financial mining steel telecommunications transportation utilities and oil sectors we document that governments continue to exert influence on former state owned firms after three years by retaining golden shares and or appointing politicians to key positions in the firm our multivariate results reveal a negative effect of state ownership on profitability and operating efficiency which the presence of a sound institutional and political environment moderates

board independence and operating performance analysis on french company and individual data this article studies the relationship between board independence and firm operating performance in french listed companies we take advantage of an original database with a time series dimension that can be used to mitigate heterogeneity and dynamic endogeneity issues in addition this database can be disaggregated at the individual director level this design enables us to introduce firm fixed effects and individual fixed effects in firm performance equations thereby controlling for heterogeneity at the firm and individual levels our main result is to document a significant negative relationship between independence and accounting performance this result suggests that in the french context the costs of independence i e the informational gap supported by independent directors compared to insiders and affiliated directors outweigh the benefits of independence i e the reduction in agency costs

portfolio management and appropriation of private benefits of control in many countries around the globe portfolio managers utilize well accepted models assuming that a partial stake of ownership is proportionally valued this assumption is incorrect in markets in which traded firms or publicly held firms are controlled by major owners who would take any possible measure to protect and maintain a lock on control so they can secure a sellable asset to another control seeker in this case estimation of key parameters such as volatility expected returns and diversification effect may be grossly distorted we would argue that a major trigger for the value of the benefits of control is the ability of control owners to transfer assets from their own portfolio to a controlled publicly traded firm while it is obvious that these transfers will take place if and only if it is beneficial to the control owners the impact on the minor shareholders may not necessarily be negative and may vary depending on several parameters thus the benefits of control are not entirely private i e appropriation and diversion of the resources of publicly traded firms for the benefit of the control owners this paper aims to model the effect of the benefits of control on the value of a minority held public firms it focuses on two related issues that are discussed in the literature on the benefits of control what drives the value of the benefits of control given the empirical evidence that control seekers are willing to pay a significant premium for control and secondly can these benefits be rationally modeled to better understand these issues it then models a specific drive on the part of control seekers who in addition to their stake in a publicly traded firm own a private portfolio it could be argued that they may transfer inferior investments to the public firms that they control exploiting less than perfect transparency however while they own this valuable option of transferring inferior investments into the public firm these actions may still be beneficial to the minority shareholders we establish a model and derive a simulation procedure that are applied to several cases in which transfers are made in exchange for cash or equity instances of full disclosure or partial transparency the likelihood that the control owners actions will be contested in court level of risk and other parameters then we will compare the results to empirical finding the final model will be greatly simplified so that the end formula can be easily used by practitioners