further evidence on business cycle asymmetries in g7 countries this paper tests for business cycle symmetry in g7 countries during the post world war ii period using a number of tests each reflecting alternative definitions of business cycle asymmetry the tests are applied to monthly coincident economic indicators of business cycles this found that business cycles in the us are characterized by both longitudinal deepness and transversal steepness and sharpness asymmetries further it is found that asymmetric transition probabilties and time irreversibility are due to nonlinearities on the contrary business cycles in germany exhibits a symmetric behaviour between these extremes are the other countries for which at least one of the tests here considered rejects the null of cyclical symmetry particularly business cycle is characterized by deepness and sharpness in canada asymmetry in persistence in france and japan and asymmetric transition probabilities in france and united kingdom

consumer environmental concern and green product purchase in malaysia structural effects of consumption values this study examines the effects of consumption values i e functional value social value emotional value conditional value and epistemic value on malaysian consumers environmental concern as expressed in their purchase of green products it also investigates the differences between three usage groups light average and heavy users and the signi cant factors that promote those differences the study applies a quantitative method in which a structured self administered questionnaire is used data is analysed using the structural equation modelling sem technique via the analysis of moment structure amos computer programme version 21 and one way analysis of variance anova using the statistical package for social sciences spss computer programme version 21 empirical results confirm that social value has the paramount impact on consumers environmental concern as expressed by their purchase of green products and that epistemic value and functional value quality rank behind functional value price emotional value and conditional value have no significant effects statistically significant differences were observed when comparing the light users with average users and with heavy users p 0 05 the findings of this study introduce a new momentum for the preceding discoveries on consumer environmental concern as shown in the purchase of green products which is inadequately covered in the malaysian context they also provide important information for companies and encourage them to place more emphasis on social value epistemic value and functional value quality in their manufacturing in order both to boost environmental concern among consumers in their purchasing decision making and to produce green goods that will be readily liked by consumers

u s and canadian industrial production indices as coupled oscillators abstract this paper uses ozaki s 1985 variable amplitude coefficient model to explore the impact of different types of dynamical linkages coupling between the indices of industrial production for the u s and canada empirical analysis reveals that for each country the requisite lag structure extends for up to six years and that the coupling linkages are functions of lagged changes in growth rates incorporating these linkages leads to an increased degree of oscillation in the equilibrium paths a marginal improvement in stability and somewhat greater synchronization between the two series the out of sample forecasts for each series are improved by the coupling

consequences of debt forgiveness strategic default contagion and lender learning i use a unique data set of loans to small business owners to examine whether lenders face adverse consequences when they grant debt forgiveness to borrowers i provide evidence consistent with borrowers communicating their debt forgiveness to other borrowers who then more frequently strategically default on their own obligations this strategic default contagion is economically large when the lender doubles debt forgiveness the default rate increases by 10 9 on average using an exogenous shock to the lender s forgiveness policy my findings suggest that as the lender learns about the extent of borrower communication the lender tightens its debt forgiveness policy to mitigate default contagion

the brevity and violence of contractions and expansions abstract early studies of business cycles argued that contractions in economic activity were briefer shorter and more violent rapid than expansions this paper systematically investigates this claim and in the process discovers a robust new business cycle fact contractions in employment are briefer and more violent than expansions but we cannot reject the null of equal brevity and violence for expansions and contractions in output the difference arises because employment typically lags output around peaks but they coincide in their troughs we discuss the performance of existing business cycle models in accounting for this fact and conclude that none can fully account for it we then show that a business cycle model with asymmetric adjustment costs on employment and a choice of when to scrap old technologies can account for the business cycle fact both qualitatively and quantitatively

event risk covenants and bondholder returns in leveraged buyouts abstract prebuyout bondholders on average suffer statistically significant wealth losses in leveraged buyouts bonds with strong covenant protection however gain value while those with no protection lose value the disposition of bonds after buyouts e g remained outstanding called tendered defeased is also strongly linked to type of covenant protection we also document that covenant use declines for bonds issued after 1980 finally the losses to bondholders are small compared with the gains accruing to shareholders

time irreversibility and egarch effects in us stock index returns in this paper we suggest using a modified version of the time reversibility tr test of chen chou and kuan 2000 as a complementary diagnostic test for time series models the modified cck test is easy to compute and requires weaker moment conditions than existing tests our simulations demonstrate that this test is powerful against asymmetry in volatility but the bds test is not in the empirical study of us stock index returns we first find that these returns are all time irreversible applying the garch and egarch models to these returns we also find that the q and bds tests always accept the null hypothesis and cannot distinguish between these models by contrast the modified cck test accepts only the egarch model with an order that can accommodate the underlying asymmetry in volatility our results suggest that the detected time irreversibility in these return series may be attributed to volatility asymmetry and that such asymmetry may be captured using a proper egarch model copyright 2002 john wiley sons ltd

the chaotic duopolists revisited the adjustment process of three oligopolists is studied under cournot and stackelberg action it is demonstrated that with an iso elastic demand function and constant marginal costs the system can result in periodic or in chaotic behaviour in particular the case with two identical and one different oligopolists is focused which turns into a virtual duopoly though displaying a wider set of bifurcations than can occur in genuine duopoly

a duopoly game with heterogeneous green supply chains in optimal price and market stability with consumer green preference abstract as environmental problems exponentially rising the necessity of environmental protection and green purchase behavior is addressed by the increasing consumers this paper aims to analyze the effects of consumer green preference on members optimal decisions and the speed of the adjustment of the optimal price strategies for heterogeneous green supply chains the results elaborate that consumer green preference significantly influences the product green level of the manufacturer and the supplier and has intricate effects on the speed of the adjustment of the boundedly rational supply chain which directly affects the social stability the vicious competition and the unbalance market are caused by the overreaction of the boundedly rational and naive supply chain to consumer green preference

conservatism and debt abstract despite the unquestionable influence of conservatism disagreement remains about what economic demands lead to financial reporting conservatism research examining lenders demands for reporting conservatism has been questioned for ignoring conservative contract modifications we document that these modifications exist but are not ubiquitous we find contract modifications are more likely when agency costs are higher and litigation tax and equity demands for conservatism are lower however we find a positive association between unexplained reporting conservatism and contract modifications suggesting contractual modifications alone do not fulfill lenders demands for conservatism

the contracting benefits of accounting conservatism to lenders and borrowers abstract this paper examines the ex post and ex ante benefits of accounting conservatism to lenders and borrowers in the debt contracting process i expect conservatism to benefit lenders ex post through the timely signaling of default risk as manifested by accelerated covenant violations and to benefit borrowers ex ante through lower initial interest rates consistent with these predictions i find that more conservative borrowers are more likely to violate debt covenants following a negative price shock and that lenders offer lower interest rates to more conservative borrowers

cointegration and threshold adjustment this article proposes an extension to the engle granger testing strategy by permitting asymmetry in the adjustment toward equilibrium in two different ways we demonstrate that our test has good power and size properties over the engle granger test when there are asymmetric departures from equilibrium we consider an application namely whether there exists cointegration among interest rates for instruments with different maturities this issue has been widely tested with mixed results we argue that either cautious policy or possibly opportunistic behavior on the part of the federal reserve implies that an equilibrium relationship between short and long term interest rates exists but that adjustments from disequilibrium are asymmetric in nature empirical tests using u s yields confirm the asymmetric nature of error correction among interest rates of different maturities

debt dilution and sovereign default risk we measure the effects of debt dilution on sovereign default risk and study debt covenants that could mitigate these effects we calibrate a baseline model with endogenous debt duration and default risk in which debt can be diluted using data from spain we find that debt dilution accounts for 78 percent of the default risk in the baseline economy and that eliminating dilution increases the optimal duration of sovereign debt by almost 2 years eliminating dilution also increases consumption volatility but still produces welfare gains the debt covenants we study could help enforcing fiscal rules

implications for gaap from an analysis of positive research in accounting based on extant literature we review the positive theory of gaap the theory predicts that gaap s principal focus is on control performance measurement and stewardship and that verifiability and conservatism are critical features of a gaap shaped by market forces we recognize the advantage of using fair values in circumstances where these are based on observable prices in liquid secondary markets but caution against expanding fair values to financial reporting more generally we conclude that rather than converging u s gaap with ifrs competition between the fasb and the iasb would allow gaap to better respond to market forces

seniority and maturity of debt contracts abstract this paper provides a model of how borrowers with private information about their credit prospects choose seniority and maturity of debt increased short term debt leads lenders to liquidate too often it also increases the sensitivity of financing costs to new information although better than average borrowers desire information sensitivity the model implies that short term debt will be senior to long term debt and that long term debt will allow the issue of additional future senior debt the model also has implications on the structure of leveraged buyouts and on how various types of lenders respond to potential defaults

effect of derivative accounting rules on corporate risk management behavior abstract i examine the effect of the accounting standard for derivative instruments sfas no 133 on corporate risk management behavior i classify a derivative user as an effective hedger eh firm if its risk exposures decreased after the initiation of the derivatives program and as an ineffective hedger speculator is firm otherwise i find that volatility of cash flows and risk exposures related to interest rate foreign exchange rate and commodity price decrease significantly for is firms but not for eh firms suggesting that is firms engaged in more prudent risk management activities after the adoption of sfas no 133

discussion of the effects of corporate governance on firms credit ratings abstract ashbaugh skaife collins and lafond 2006 the effects of corporate governance on firms credit ratings journal of accounting and economics this issue find that better governed firms receive better credit ratings and poor governance costs the median speculative grade firm 38 million in excess interest they also find that managers choose to be poorly governed to expropriate wealth the results from the primary analysis are persuasive leaving little doubt on whether ratings agencies value corporate governance however the authors estimate of the economic costs of poor governance is likely to be overstated despite the evidence on the costs of poor governance the final analysis leaves the question as to why firms choose to be poorly governed largely unanswered

covenants and collateral as incentives to monitor although monitoring borrowers is thought to be a major function of financial institutions the presence of other claimants reduces an institutional lender s incentives to do this thus loan contracts must be structured to enhance the lender s incentives to monitor covenants make a loan s effective maturity and the ability to collateralize makes a loan s effective priority contingent on monitoring by the lender thus both covenants and collateral can be motivated as contractual devices that increase a lender s incentive to monitor these results are consistent with a number of stylized facts about the use of covenants and collateral in institutional lending modern finance theory suggests that financial intermediaries such as commercial banks insurance companies and finance companies monitor and control their borrowers on behalf of other investors 1 this article investigates how the loans made by these institutions can be structured so as to best enhance the institutions role as delegated monitors covenants and collateral are common features of loans made by financial institutions but these features are somewhat difficult to justify consider loan covenants clauses in a loan contract that require the borrower to take or refrain from various actions berlin and mester 1992 magee and sridhar 1994 and park 1994 show that by giving institutions the right to renegotiate or call loans when covenants are violated covenants serve as tripwires that enhance the flexibility and efficiency of financial contracting also as documented in smith and warner 1979 control rights from covenants reduce borrower adverse selection or moral hazard nevertheless by allowing institutions to demand repayment based on any information contractible or not

dynamic security design convergence to continuous time and asset pricing implications an entrepreneur with limited liability needs to finance an infinite horizon investment project an agency problem arises because she can divert operating cash flows before reporting them to the financiers we first study the optimal contract in discrete time this contract can be implemented by cash reserves debt and equity the latter is split between the financiers and the entrepreneur and pays dividends when retained earnings reach a threshold to provide appropriate incentives to the entrepreneur the firm is downsized when it runs short of cash we then study the continuous time limit of the model we prove the convergence of the discrete time value functions and optimal contracts our analysis yields rich implications for the dynamics of security prices stock prices follow a diusion reflected at the dividend barrier and absorbed at zero their volatility as well as the leverage ratio of the firm increase after bad performance stock prices and book tomarket ratios are in a non monotonic relationship a more severe agency problem entails lower price earning ratios and firm liquidity and higher default risk

debt renegotiation and debt overhang evidence from lender mergers this paper studies whether debt renegotiation mitigates debt overhang and improves investment efficiency using mergers between lenders participated in the same syndicated loans as natural experiments that exogenously reduce the number of lenders and thus make renegotiation easier i find that firms affected by the mergers experience more loan renegotiations and increase capital expenditure investment i also find that the effect is stronger for firms with higher q suggesting improved investment efficiency further evidence suggests that the effect concentrates on loans without performance pricing provisions and unsecured loans providing further support that lender mergers improves investment efficiency for firms suffering from debt overhang ex ante

does corporate lending by banks and finance companies differ evidence on specialization in private debt contracting this paper establishes empirically the existence of specialization in private market corporate lending adding a new dimension to the public versus private debt distinctions now common in the literature comparing corporate loans made by banks and by finance companies we find that the two types of intermediaries are equally likely to finance information problematic firms however finance companies tend to serve observably riskier borrowers particularly more leveraged borrowers evidence supports both regulatory and reputation based explanations for this specialization in passing we shed light on various theories of debt contracting and intermediation and present facts about finance companies

debt covenant violations and managers accounting responses abstract this paper examines accounting changes costs of default and accounting based covenants violated by 130 firms reporting violations in annual reports i find that managers of firms approaching default respond with income increasing accounting changes and that the default costs imposed by lenders and the accounting flexibility available to managers are important determinants of managers accounting responses i also document that private lending agreements are the first violated that net worth and working capital restrictions are the most frequently violated restrictions and that in 52 percent of the cases lenders require concessions from borrowers to resolve default

the bunch of sustainability labels do consumers differentiate abstract a huge number of sustainable labels addressing the different pillars of sustainability emerged over the last years some labels promote factors which already imply other sustainability issues e g organic incl animal friendliness to a certain extent hence the question arises how consumers react towards the redundancies of different sustainability labels to add to the literature this study applies a latent class model for discrete choices first to test whether consumers take different sustainable labels into account when making their decision and second to test how consumers deal with different sustainable labels that are partly claiming the same aspect results indicate that three consumer segments with well distinguished preferences and willingness to pay measures for the respective attributes can be identified one group being the price sensitives exclusively deciding on the product with the lowest price regardless of any sustainable attribute of the product another group opts for products with a sustainable label without any clear preference for a specific sustainable attribute but expressing a clear willingness to pay more for all presented sustainable labels i e the label choosers a third group can be named price conscious label discriminators for them some sustainable aspects provide negative utility when labelled exclusively e g organic or free of genetically modified organisms but labelled together e g organic together with free of genetically modified organisms or animal welfare it provides them significantly positive utility even though being redundant by definition based on our findings there is no general statement to be made regarding the question whether different sustainable aspects complement or substitute each other the research rather emphasizes that a differentiated look at different consumer types and different labels symbolizing sustainability is needed the research adds to the existing literature by examining not only the relevance and acceptance of different sustainable labels to different consumer segments but also the interrelationship of different sustainable labels the study clearly shows that with regard to different sustainable labels the more the merrier does not always apply however almost 85 of the market could be satisfied with a universal sustainability label

performance pricing in bank debt contracts abstract performance pricing links bank debt interest rate spreads to a borrower s performance via two options interest decreasing performance pricing reduces spreads if credit quality improves it is more common when prepayment is more likely or costly and when adverse selection costs are higher and is less common when multiple performance measures better predict credit quality interest increasing performance pricing increases spreads if credit quality deteriorates it is more common when lenders reduce interest rates to add this provision when downgrades are more likely and when moral hazard costs are higher we find lower spreads for contracts with interest increasing performance pricing

estimating the density tail index for financial time series the tail index of a density has been widely used as an indicator of the probability of getting a large deviation in a random variable most of the theory underlying popular estimators of it assume that the data are independently and identically distributed i i d however many recent applications of the estimator have been to financial data and such data tend to exhibit long range dependence we show via monte carlo simulations that conventional measures of the precision of the estimator which are based on the i i d assumption are greatly exaggerated when such dependent data are used this conclusion also has implications for estimates of the likelihood of getting some extreme values and we illustrate the changed conclusions one would get using equity return data

institutional differences and international private debt markets a test using mandatory ifrs adoption institutional differences between countries result in additional information risks between borrowers and lenders in cross border private loans this study examines the effect of these information risks on the structure of optimal debt contracts in international cross border versus domestic private debt markets using mandatory ifrs adoption as an indicator for institutional changes that reduced differences between countries i compare attributes of international versus domestic loans before and after ifrs adoption i find that in the pre ifrs period international loans are associated with a higher credit spread a weaker relationship between the bank and the borrower a more diffuse loan syndicate and less reliance on accounting based covenants than domestic loans these results are consistent with incremental information risks in international debt markets that make it more costly for lenders to screen and monitor borrower credit quality resulting in a more arm s length relationship between borrowers and lenders many of these associations attenuate after ifrs adoption suggesting that the pre ifrs differences in contract terms are driven by incremental information risks related to institutional differences between countries my findings imply that incremental information risks result in a different optimal contract in international debt contracts compared to domestic debt contracts

accounting information in financial contracting the incomplete contract theory perspective this paper reviews theoretical and empirical work on financial contracting that is relevant to accounting researchers its primary objective is to discuss how the use of accounting information in contracts enhances contracting efficiency and to suggest avenues for future research we argue that incomplete contract theory broadens our understanding of both the role accounting information plays in contracting and the mechanisms through which efficiency gains are achieved by discussing its rich theoretical implications we expect incomplete contract theory to prove useful in motivating future research and in offering directions to advance our knowledge of how accounting information affects contract efficiency

the importance of accounting changes in debt contracts the cost of flexibility in covenant calculations abstract in this paper we examine how the exclusion of voluntary and mandatory accounting changes from the calculation of covenant compliance affects the interest rate charged on the loan after controlling for self selection bias and other factors known to affect loan spreads we find that the rate charged is 84 basis points lower when voluntary accounting changes are excluded and 71 basis points lower when mandatory accounting changes are excluded our results suggest that borrowers are willing to pay substantially higher interest rates to retain accounting flexibility that may help them avoid covenant violations and to avoid duplicate record keeping costs

the determinants of the maturity of corporate debt issues we document the determinants of the term to maturity of 7 369 bonds and notes issued between 1982 and 1993 our main finding is that large firms with investment grade credit ratings typically borrow at the short end and at the long end and of the maturity spectrum while firms with speculative grade credit ratings typically borrow in the middle of the maturity spectrum this pattern is consistent with the theory that risky firms do not issue short term debt in order to avoid inefficient liquidation but are screened out of the long term debt market because of the prospect of risky asset substitution traditionally capital structure research has focused on how much of a firm s future cash flows should be paid out to debtholders instead of equityholders an equally important issue is when future cash flows should be paid out to debtholders a firm that finances its projects with short term debt risks serious financial difficulty if the debt cannot be extended similarly a firm that finances its activities with long term debt can sacrifice profits by needlessly risking mismanagement of resources after cash flows are returned from investments but before they are due to debtholders this study investigates the factors that firms consider when choosing the maturity of their liabilities we document the determinants of the maturity of 7 368 public debt issues made by u s corporations between 1982 and 1993 our empirical tests are based on existing theoretical models that relate the maturity of a firm s borrowings to the riskiness of its cash flows the time until investments pay off the quality of information held by outsiders the expected

government expenditures and revenues evidence from asymmetric modeling 1 introductionexamining the empirical relationship between government revenues and expenditures is a crucial step in understanding the future path of the budget deficit four alternative explanations have been used to describe the relationship between these variables in the budgetary process i the tax and spend hypothesis ii the spend and tax hypothesis iii the fiscal synchronization hypothesis and iv the institutional separation hypothesis the issue of which hypothesis best describes the nature of the budgetary process has yet to be resolved in the literature however existing research has implicitly assumed that the state of the budget and whether or not the budget deficit or surplus is worsening or improving does not matter we argue that government decision makers may take these factors into account when determining expenditures and tax policy as such this article reexamines the tax spend debate by using a more robust econometric technique that allows for asymmetry in the relationship between revenues and expenditures until now the empirical evidence on the tax spend debate has focused almost exclusively on two conventional econometric techniques depending on the cointegrating properties between revenues and expenditures these techniques are based on either variations of the unrestricted vector autoregression uvar or the vector autoregression error correction model ecm 1 if for example the two budgetary variables are not cointegrated then the application of causality2 tests requires the use of stationary variables in the uvar model 3 on the other hand if the two budgetary variables are cointegrated then the application of causality tests requires an ecm specification it is important to note that the ecm specification implicitly assumes that the adjustment process of expenditures and revenues due to disequilibrium between the variables is strictly symmetric indeed if the adjustment is asymmetric then the symmetric adjustment implicitly assumed in the conventional techniques to ascertain causality implies model misspecification this specification error may lead to misguided and perhaps inappropriate fiscal policy decisions accurate estimation of the revenue and expenditure process is especially important as changes in taxes and spending alter incentives for work investment and productive activity cea 2004 thus the anticipated behavioral responses of households and businesses may be better captured by more general models that allow for asymmetry in the tax spend relationship to this end this article examines the existence of cointegration between revenues and expenditures and the corresponding ecm specification by using the recently developed techniques of asymmetric modeling in particular we employ the threshold autoregression tar and momentum threshold autoregression m tar models developed by enders and granger 1998 and enders and siklos 2001 within the context of these models we shed new light on whether budget surpluses versus budget deficits or an improving budget versus a worsening budget have asymmetric effects on the dynamic behavior of expenditures and revenues there is an a priori rationale for modeling asymmetry in the budget and for the response of its components to disequilibrium this rationale can be categorized into four factors first the fiscal policymakers may respond differently to a deviation of the deficit or surplus from its long run trend one would expect for example that the response would be more aggressive if the deficit was greater than its long run trend than if it was less than its trend second it is widely acknowledged that there is a very close connection between the budget and the business cycle through automatic fiscal stabilizers and discretionary fiscal measures to the extent that the business cycle is asymmetric the associated change in the budget may also be asymmetric

the equilibrium relationship among money income prices and interest rates evidence from a threshold cointegration test the long run equilibrium relationship among money income prices and interest rates in japan is investigated by the threshold cointegration test which allows for asymmetric adjustment introduced by enders and siklos 2001 the threshold cointegration approach provides clear evidence of the cointegration relationship characterized by asymmetric adjustment by allowing for asymmetric adjustment results are obtained showing the stability of the money demand function similar to lucas 1988 who pointed out that the money demand function is stable if unit income elasticity is imposed in particular the estimated results show that the adjustment process toward equilibrium is highly persistent above an appropriately estimated threshold whereas the adjustment process toward equilibrium quickly converges below it this finding indicates that deviations from equilibrium resulting from increases in money or decreases in income and prices are highly persistent

capital structure and debt structure using a novel dataset that records individual debt issues on the balance sheets of public firms we demonstrate that traditional capital structure studies that ignore debt heterogeneity miss substantial capital structure variation relative to high credit quality firms lowcredit quality firms are more likely to have a multi tiered capital structure consisting of both secured bank debt with tight covenants and subordinated non bank debt with loose covenants we discuss the extent to which these findings are consistent with existing theoretical models of debt structure in which firms simultaneously use multiple debt types to reduce incentive conflicts jel g32

time irreversibility and business cycle asymmetry the problem of business cycle symmetry is addressed within the context of time reversibility to this effect the authors introduce a time domain test of time reversibility the tr test in an application they show that time irreversibility is the rule rather than the exception for two well known representative macroeconomic data sets this shows that many components of the business cycle have asymmetric fluctuations the characterization of asymmetry provided by the tr test shows that many series exhibit steepness asymmetry a few series appear to be either deep or sharp copyright 1996 by ohio state university press

negotiated measurement rules in debt contracts this paper investigates contractual definitions of net income and net worth and the cross sectional variation in definitions of net income in a large sample of private debt contracts to shed light on the debt contracting demand for accounting numbers the descriptive evidence indicates that removing transitory earnings is one principal concern in the measurement of earnings but not in the measurement of net worth in the extreme contracts are never written on comprehensive income as an earnings concept whereas accumulated other comprehensive income is included in net worth in most contracts in contrast conservative adjustment in the sense of including certain types of negative earnings but not the corresponding positive earnings does not seem to be a primary consideration in measuring net income and net worth cross sectionally i find that net income is more likely to be defined differently from the gaap when net income plays a more important role in a contract when the loan maturity is longer and when transitory earnings are less useful for debt contracting collectively the evidence shows that debt contracting parties choose contracting variables in a manner consistent with efficient contracting and that transitory earnings are relatively less useful in measuring firm performance for debt contracting

bridging the gap the design of bank loan contracts and distance how do the distance constraints faced by lenders in acquiring borrower information affect the design of bank loan contracts theoretical studies posit that greater information asymmetry leads to the allocation of stronger ex ante decision rights to the lender the uninformed party consistent with this hypothesis we find that upon inception contracts tend to be more restrictive when firms seek loans from remote lenders this finding is robust to potential endogeneity bias and simultaneity of various loan terms overall we establish a strong informational link between distance and loan contract design

asymmetry in business fluctuations international evidence on friedman s plucking model abstract friedman s plucking model of business fluctuations suggests that output cannot exceed a ceiling level and it is occasionally plucked downward by recession output has depth and steepness this study uses a sample of 12 industrial and emerging economies and finds some evidence that negative shocks are largely transitory while positive shocks are mostly permanent in a few cases as implied by the plucking model output fluctuations tend to be asymmetric recessions are transitory and duration dependent although expansions are not there is however serial correlation in almost all cases international evidence on friedman s plucking model is far from robust

level dependent annuities defaults of multiple degrees abstractmotivated by the risk of stopped debt coupon payments from aleveraged company in nancial distress we value a level dependentannuity contract where the annuity rate depends on the value of anunderlying asset process the range of possible values of the asset isdivided into a nite number of regions the annuity rate is constantwithin each region but may di er between the regions we considerboth in nite and nite annuities with or without bankruptcy risk i e bankruptcy occurs if the asset value process hits an absorbing bound ary such annuities are common in models of debt with credit risk in nancial economics suspension of debt service under the us chap ter 11 provisions is one well known real world example we presentclosed form formulas for the market value of such multi level annuitiescontracts when the market value of the underlying asset is assumedto follow a geometric brownian motion the authors thank zheng huang and bernt ksendal for comments and discusssions an earlier version of this paper has been presented at fibe 2008 nhh keywords multi level annuity credit risk nancial distress jel classi cations g33 g13 g32

are statistical reporting agencies getting it right data rationality and business cycle asymmetry this article provides new evidence on the rationality of early releases of industrial production ip and producer price index ppi data rather than following the usual practice of examining only first available and fully revised data we examine the entire revision history for each variable thus we are able to assess for example whether earlier releases of data are in any sense less rational than later releases and when data become rational our findings suggest that seasonally unadjusted ip and ppi become rational after approximately 3 4 months whereas seasonally adjusted versions of these series remain irrational for at least 6 12 months after initial release for all variables examined we find evidence that the remaining revision is predictable from its own past or from publicly available information in other economic and financial variables in addition we find a clear increase in the volatility of revisions during recessions suggesting that early data releases are less reliable in toughe

the use of bank lines of credit in corporate liquidity management a review of empirical evidence abstract this paper reviews empirical evidence on the use of bank lines of credit as a source of corporate liquidity traditional explanation for lines of credit is that they provide insurance against liquidity shocks in much the same as way hoarding cash does however recent empirical research suggests that access to lines of credit is contingent on the credit quality of the borrower as well as the financial condition of the lender these findings suggest that lines of credit are an imperfect substitute for cash as a source of corporate liquidity

managerial biases and debt contract design the case of syndicated loans we examine whether managerial overconfidence impacts the use of performance pricing provisions in loan contracts performance sensitive debt psd managers with biased views may issue psd because

an empirical characterization of the dynamic effects of police spending on violent and property crime the study estimates the dynamic effects of shocks to police expenditures on measures of violent and property crime rates using annual u s state level data for the period 1960 2015 we employ a structural panel var model and achieve identification by imposing the restriction that police spending responds to structural shocks to crime with at least a lag of 1 year results indicate that a shock to police spending leads to a persistent and significant decreases in violent and property crime rates and b significant and persistent negative impacts on crime rates in periods of high crime but little impacts in periods of low crime variance decompositions show that shocks to police spending account for moderate to large proportions of the variability of u s state level crime rates our findings are robust across separate measures of violent and property crime rates as well as to the inclusion of additional variables to the baseline panel var model jel k42

mean reversion in equilibrium asset prices this paper demonstrates that negative serial correlation in long horizon stock returns is consistent with an equilibrium model of asset pricing when investors display only a moderate desire to smooth their consumption commonly used measures of mean reversion in stock prices calculated from historical returns data nearly always lie within a 60 percent confidence interval of the median of the monte carlo distributions implied by the authors equilibrium model from this evidence the authors conclude that the degree of serial correlation in the data could plausibly have been generated by their model copyright 1990 by american economic association

robust measures of skewness and kurtosis for macroeconomic and financial time series abstractthe sample skewness and kurtosis of macroeconomic and financial time series are routinely scrutinized in the early stages of model building and are often the central topic of studies in eco

are health expenditures and gdp characterized by asymmetric behaviour evidence from 11 oecd countries in this article we examine whether per capita health expenditures and per capita gdp for 11 oecd countries can be characterized by asymmetric behaviour we achieve this goal by using the nonparametric triples test suggested by randles et al 1980 we examine two forms of asymmetries namely deepness and steepness our main finding is that for 6 out of 11 countries namely for the usa the uk japan spain finland and iceland either per capita health expenditures or per capita gdp are characterized by asymmetric behaviour this finding to some extent casts doubt on those studies that model the relationship between health and gdp using unit root and cointegration tests that assume symmetric disturbances

how do firms choose their lenders an empirical investigation this article investigates which companies finance themselves through intermediaries and which borrow directly from arm s length investors our empirical results show that large companies with abundant cash and collateral tap credit markets directly these markets cater to safe and profitable industries and are most active when riskless rates or intermediary earnings are low we show that determinants of lender selection sharpen during investment downturns and that there are substantial asymmetries in the way firms enter and exit capital markets these results support a theoretical framework where intermediaries have better reorganizational skills but a higher opportunity cost of capital than bondholders

time reversibility tests of volume volatility dynamics for stock returns abstract non parametric tests based on the concept of time reversibility in statistical mechanics are applied to assess the dynamic implications of the mixture of distributions hypothesis mdh the tests show that shocks to volume and volatility are dynamically asymmetric thus rejecting the one factor mdh

the effects of firm initiated clawback provisions on bank loan contracting abstract although firm initiated clawbacks reduce accounting manipulation they also induce managers to engage in suboptimal activities e g reduce research and development r d expenses to achieve earnings targets to assess the effectiveness of clawback provisions we examine their impact from debtholders point of view we find that banks use more financial covenants and performance pricing provisions in the loan contracts and decrease interest rates after firms initiate clawbacks moreover we also find that loan maturity increases and loan collateral decreases subsequent to clawback adoption taken together our findings indicate that firm initiated clawback provisions enhance financial reporting quality thereby reducing the information uncertainty that financing providers face