the evolving landscape of banking the structure of the financial services industry is in flux liberalization deregulation and advances in information technology have changed the financial landscape dramatically interbank competition has heated up and banks face increasing competition from nonbanking financial institutions and the financial markets the predictability of the industry with low levels of financial innovation little innovation in distribution channels and well defined and rigid institutional structures is gone product innovations new distribution channels and emerging new competitors are in abundance moreover the subprime crisis that has hit the financial sector in 2007 2008 appears to have a major impact on the structure of the industry this article emphasizes the importance of understanding the economics of banking for assessing the changes in the industry in particular we point at relationship banking as a prime source of the banks comparative advantage the proliferation of transaction oriented banking trading and financial market activities does however seriously challenge relationship banking in order to focus on these issues in a rigorous way we will evaluate the key insights from the relationship banking literature including the potential complementarities and conflicts of interest between intermediated relationship banking activities and financial market underwriting securitization etc activities we also address the issue of the optimal conglomeration of bank activities including the empirical evidence on scope and scale economies we analyze the strategic positioning of banks in the currently highly uncertain competitive arena and link this to the theory of the firm and particularly firm boundaries and learning

the economic value of farm program base mixed integer programming and dynamic programming models were used to obtain the implicit economic value of the initial endowment of base acreage on a cotton farm while low levels of initial base have almost no impact on land value high levels can be worth a considerable premium with the implicit value of additional initial base endowment increasing at an increasing rate this pattern of increasing implicit value can be explained by provisions of the farm program allowing base to be created by a landowner who develops a planting history in a program commodity

expanding the solution set organizational economics and agri environmental policy abstract the market failure paradigm dominates agri environmental research and policy organizational economics provides an alternative framework for analyzing agri environmental problems and points to alternative solutions in this paper the traditional approach of creating markets for environmental goods and services is critiqued and set aside to provide space for an organizational analysis from an organizational perspective the relationship between the state and agricultural agents is viewed as grounded in an over arching exchange relationship including elements of cooperation and trust such a collaborative exchange relationship may prove useful in supporting exchange between agricultural agents and the state leading to the provision of ecological goods and services highlighting the potential of organizational economics the analysis suggests that agri environmental research and policy go further in accounting for and investigating the unique organizational modes of exchange governing the production of food fiber and ecological goods and services

towards more efficient compensation programmes for tourists benefits from agriculture in europe this paper covers nonmarket services provided by farmers for recreational purposes in several central european regions a regionally specified general equilibrium model is used to derive the efficiency conditions for a competitive equilibrium to guarantee a pareto optimal outcome moreover we present green agricultural compensation programmes in europe and their assessment from an economic perspective the empirical analysis focuses on tourists willingness to pay wtp for the provision of agricultural landscape enhancing services in austria a comparison of these measures with current voluntary compensation payments made to farmers for the preservation of an agricultural countryside in several austrian tourism communities suggests that the hypothetical contingent valuation cv results represent a valid order of magnitude for the value of recreation related agricultural services as far as agricultural policy is concerned environmental improvement the stabilization of agricultural income levels diminishing intrasectoral income differences and the development of economically disadvantaged rural regions can be expected from directly subsidizing farmers for the provision of countryside amenities

internal capital markets and the competition for corporate resources this article examines the role of corporate headquarters in allocating scarce resources to competing projects in an internal capital market unlike a bank headquarters has control rights that enable it to engage in winner picking the practice of actively shifting funds from one project to another by doing a good job in the winner picking dimension headquarters can create value even when it cannot help at all to relax overall firm wide credit constraints the model implies that internal capital markets may sometimes function more efficiently when headquarters oversees a small and focused set of projects this article analyzes the process by which internal capital markets channel limited resources to different uses inside a company in so doing it seeks to address two related sets of questions first what is the fundamental economic rationale for creating an internal capital market that is under what circumstances can it make sense to combine several technologically distinct projects under one roof and have them seek funding from corporate headquarters as opposed to setting them up as stand alone companies that each raise external financing on their own second given this rationale what is the optimal size and scope of an internal capital market should headquarters be involved in funding a large number of projects or just a few and should these projects be unrelated to one another or in similar lines of business the answers to both sets of questions flow from the insight that in a credit constrained setting where not all positive npv projects can be financed headquarters can create value by actively reallocating scarce funds across projects for example the cash flow generated by one division s activities may be taken and spent on investment in another division where the returns are higher or alternatively one division s assets may be used as collateral to raise financing that is then diverted to the other division simply put individual projects must compete for the scarce funds and headquarters job is to pick the winners and losers in this competition

cross compliance as payment for public goods understanding eu and us agricultural policies cross compliance cc is a mechanism for encouraging farmers to fulfill certain environmental conditions in return for governmental support payments introduced to united states us and european union eu agricultural policy from the 80s onwards upcoming new us farm bill 2012 and eu common agricultural policy after 2013 policies will include cc cross compliance is seen i as a policy for enforcing environmental objectives or ii as a way to organize and reward agricultural public good production in recent years the instrument s effectiveness and efficiency have been criticized to validate the deviating understandings we drew back on an economic institutionalist perspective we found that regarding eu cc as payment for public goods does not generally align with the existing german property rights distribution in both the eu and us cc standards above those contained regulatory law have characteristics of a payment for public goods but create severe problems we conclude that cc even if useful for triggering and broadening environmental protection efforts may cause several long term problems therefore the rights structure should be clearly communicated law enforcement function should be temporary the instrument should be included in an overall concept and payments should be better linked to the environmental output

comparing optima do simplifying assumptions affect conclusions consider a family of maximization models in which the optimum trades off beneficial and costly effects then comparative statics derived under many kinds of simplifying assumptions about the benefits technology are also true for general convex and nonconvex technologies for example any comparative statics conclusion about investment by a risk averse decision maker under uncertainty that holds when expected returns are described by a general linear function also holds for an arbitrary nonlinear expected return function

revisiting the bright and dark sides of capital flows in business groups prior studies report that the business group structure and the associated intra group capital flows are prone to conflicts of interest between controlling shareholders and minority investors yet business group is a prevalent and stable structure around the globe particularly where capital markets are underdeveloped using data from china this paper empirically studies the trade off between the negative and positive roles played by intra group capital flows and tests the efficiency implications of such trade off we find that from the perspective of the whole group intra group capital flows are most efficient when the groups are least subject to conflicts of interest between controlling shareholders and minority shareholders and when they face strong external financing constraints

political economy of public policies insights from distortions to agricultural and food markets the agricultural and food sector is an ideal case for investigating the political economy of public policies many of the policy developments in this sector since the 1950s have been sudden and transformational while others have been gradual but persistent this paper reviews and synthesizes the literature on trends and fluctuations in market distortions and the political economy explanations that have been advanced based on a rich global data set covering a half century of evidence on commodities countries and policy instruments the paper identifies hypotheses that have been explored in the literature on the extent of market distortions and the conditions under which reform may be feasible

the value of embedded real options evidence from consumer automobile lease contracts under the common assumption of constant interest rates we show that penalties for early termination of a lease are often structured in such a way that the cancellation option embedded in consumer automotive leases has little value furthermore our estimates drawn from a sample of three popular car models over 1990 to 2000 indicate that the stand alone value of the lease end purchase option is on average about 16 of the market value of underlying used vehicles or about 1 462 per contract finally we examine the sensitivity of our option value estimates to model parameters and default risk recent years have witnessed a dramatic growth in the leasing of automobiles for instance overall industry sales data indicate that about a third of the new vehicles and trucks sold in the united states are leased hendel and lizzeri 2002 and miller 1995 and the federal reserve board survey of family finances reports that the use of leased vehicles by individuals nonbusiness consumers has risen from 2 9 to 5 8 over the 1992 to 2001 period azicorbe kennickell and moore 2003 consumer automobile lease contracts for new cars often include two embedded options that are not associated with a typical debt contract the first is a cancellation option that allows the lessee to terminate the lease early the second is a european call option which gives the lessee the right but not the obligation to purchase the leased used vehicle at the scheduled termination of the lease at a predetermined exercise price both of these options are simple examples of real options because the asset underlying these options is a used car that is a real asset however these options constitute a special case of real options since they are embedded in the lease contract which is a financial credit instrument theoretical analyses of lease contracts show that the cancellation option is quite valuable schallheim and mcconnell 1985 with respect to the purchase option hendel and lizzeri 2002 argue that they can play an important role in

a theorem on portfolio separation with general preferences abstract necessary and sufficient restrictions upon arbitrary utility functions for portfolio separation for any degree are derived for complete markets generalizing the expected utility theorems of cass and stiglitz j econ theory2 1970 122 160 portfolio separation is shown to be nearly synonymous with lewbel s econometrica59 1991 711 730 definition of demand rank which is characterized using standard duality methods journal of economic literature classification numbers g11 c43 d11

designing payments for environmental services in theory and practice an overview of the issues abstract payments for environmental services pes have attracted increasing interest as a mechanism to translate external non market values of the environment into real financial incentives for local actors to provide environmental services es in this introductory paper we set the stage for the rest of this special issue of ecological economics by reviewing the main issues arising in pes design and implementation and discussing these in the light of environmental economics we start with a discussion of pes definition and scope we proceed to review some of the principal dimensions and design characteristics of pes programs and then analyze how pes compares to alternative policy instruments finally we examine in detail two important aspects of pes programs their effectiveness and their distributional implications pes is not a silver bullet that can be used to address any environmental problem but a tool tailored to address a specific set of problems those in which ecosystems are mismanaged because many of their benefits are externalities from the perspective of ecosystem managers pes is based on the beneficiary pays rather than the polluter pays principle and as such is attractive in settings where es providers are poor marginalized landholders or powerful groups of actors an important distinction within pes is between user financed pes in which the buyers are the users of the es and government financed pes in which the buyers are others typically the government acting on behalf of es users in practice pes programs differ in the type and scale of es demand the payment source the type of activity paid for the performance measure used as well as the payment mode and amount the effectiveness and efficiency of pes depends crucially on program design

a conservation industry for sustaining natural capital and ecosystem services in agricultural landscapes conservation investment in agricultural landscapes has evolved to take a more market based or business approach however current levels of conservation investment are not likely to mitigate degradation to natural capital and ecosystem services we propose the further evolution of a conservation industry to generate substantially increased investment in conservation in agricultural landscapes particularly from the private sector a mature conservation industry is envisaged as comprising of investors producers and service providers who produce conservation products and services exchanged via market transactions a number of requirements for a viable and effective conservation industry are identified including institutional infrastructure conservation market institutions and regulatory systems information provision quantifying benefits business models and accounting and auditing standards and facilitation entrepreneurship incubation and capacity building a conservation industry requires careful design and planning in order to operate effectively whilst it is not without risk a conservation industry has the potential to increase participation and investment in conservation actions and enhance the sustainability of agricultural landscapes

diversification diseconomies of scope and vertical contracting evidence from the taxicab industry this paper studies how firms reorganize following diversification proposing that firms use outsourcing or vertical disintegration to manage diseconomies of scope we also consider the origins of scope diseconomies showing how different underlying mechanisms generate contrasting predictions about the link between within firm task heterogeneity and the incentive to outsource following diversification we test these propositions using microdata on taxicab and limousine fleets from the economic census the results show that taxicab firms outsource by shifting the composition of their fleets toward owner operator drivers when they diversify into the limousine business the magnitude of the shift toward driver ownership is larger in less urban markets where the tasks performed by taxicab and limousine drivers are more similar these findings suggest that 1 firms use outsourcing to manage diseconomies of scope at a particular point in the value chain and 2 interagent conflicts can be an important source of scope diseconomies

agri environmental policy and urban development patterns a general equilibrium analysis this paper investigates the spatial effects that the provision of environmental public goods have on residential location choices in a suburban context specifically a spatial general equilibrium framework is developed to analyze the consequences of adopting an agri environmental policy promoting the provision of positive farming externalities we use a static monocentric model of an open city where agricultural bid rents and agricultural amenities vary endogenously in space and where the positive externalities associated with agricultural production are valued by households consistent with empirical evidence of the potential side effects that conservation policies may have in terms of urbanization patterns and land price changes we show that under certain conditions implementing an agri environmental policy may promote additional suburban development moreover we demonstrate that the emergence of disconnected suburban areas may be significantly influenced by the location of land regulated by an agri environmental policy finally we discuss distributional aspects and show that while introducing an agri environmental policy has a negative impact on most residential land value it can have positive effects on farmland and residential land located within the regulated areas suggesting the non neutrality of such policies regarding the agents assets

distributional conflict in organizations abstract hierarchy can function as an instrument to channel influence activities or power struggles in organizations contrary to what has frequently been argued we show that multi divisional organizations may involve lower influence costs than single tier organizations even though they offer more scope for organizational conflict and have more executives that can be influenced these benefits derive from two effects first part of the conflict in multi divisional organizations takes place on the division level where a small number of agents fight over only a fraction of the overall prize second by grouping agents into common divisions multi divisional organizations create free rider problems in rent seeking our model sheds new light on the desirability of divestitures and the transition from the u to the m form by us corporations in the 1920s

the bright side of internal capital markets we examine capital expenditure decisions of discount firms in response to wal mart s entry into their markets before wal mart s entry focused incumbents and discount divisions of diversified incumbents are similar in size geographic dispersion and firm debt levels however discount divisions of diversified firms are significantly more productive after wal mart s entry diversified firms are quicker to either exit the discount business or stay and fight also their capital expenditures are more sensitive to the productivity of their discount business internal capital markets function well as transfers are away from the worsening discount divisions it appears diversified firms make better investment decisions

corporate diversification and credit constraints real effects across the business cycle we study whether differences in access to credit cause focused firms to perform differently from diversified firms in the product market prior work has identified binding credit constraints for bank dependent firms during recessions we assess whether corporate diversification alleviates these constraints we find that during recessions sales growth rates drop more for bank dependent focused firms than for rival segments of bank dependent diversified firms we also find that during recessions inventory growth rates drop more for bank dependent focused firms than for bank dependent diversified firms even after we control for contemporaneous sales growth consistent with a credit constraint explanation we find no difference in the sensitivities to recessions of bank independent focused and bank independent diversified firms jel g30 g31 g32 copyright 2006 oxford university press

slippage in the conservation reserve program or spurious correlation a rejoinder the conservation reserve program crp pays farmers about 2 billion per year to retire cropland under ten to fifteen year contracts recent research by wu found that slippage an unintended stimulus of new plantings offsets some of crp s environmental benefits wu does not account for the endogeneity of crp enrollments furthermore the data used by wu cannot be used to estimate slippage arising from a price feedback effect we replicate wu s findings demonstrate the possible presence of spurious correlation and construct new estimates with corrections for endogeneity and other econometric problems we find no convincing evidence of slippage

evaluating conservation auctions with unknown bidder costs the scottish fishing vessel decommissioning program as an alternative to the more traditional fixed price schemes governments can run auctions to purchase environmental services from private agents governments have so far chosen the discriminatory price dp over the uniform price up format theoretical and experimental studies have concluded that the dp usually performs better than the up in terms of cost effectiveness using field data from two fishing vessel decommissioning auctions in scotland we find ambiguous results regarding relative dp and up performances a novel approach for estimating the underlying bidder costs shows that bid shading and cost heterogeneity can each determine relative auction performance jel q22 q28

how not to pay field experimental evidence on the design of redd payments abstract payments for ecosystem services pes can use many design features we investigate the impact of payment conditionality types i e different specifications when to pay and when not to pay for pes on deforestation and agricultural production in a lab in the field experiment our experiment also tests variations in contract period and payment volatility we designed a highly visual simulation game to characterize the decision situation of a cattle rancher in brazil the player can expand extensive pasture by deforestation or intensify existing pasture the model includes both a land and a capital constraint we applied the game in an economic framed lab in the field experiment in tocantins brazil payments conditional on forest carbon stock lead to slow but steady deforestation while payments conditional on forest carbon stock change suppressed deforestation more strongly but payments conditional on stock increase cattle production while payments conditional on stock change have no effect on production thus depending on the level of leakage either type of conditionality can be more cost effective in reducing global carbon emissions contracts with limited periods lead to strong deforestation after the end of the payment period payment volatility had no significant effect

tobin s q and the importance of focus in firm performance using tobin s q as a measure of performance we seek to estimate the relative importance of industry focus and share effects in determining firm performance our methods are analogous to those of richard schmalensee and like him we find that industry effects account for the majority of the explained variance however we also find that firm effects exist in the form of focus effects that is narrowly diversified firms do better than widely diversified firms we interpret this finding as consistent with profit maximization by firms with different factor endowments

competition risk neutrality and loan commitments abstract we rationalize fixed rate loan commitments forward credit contracting with options in a competitive credit market with universal risk neutrality future interest rates are random but there are no transactions costs borrowers finance projects with bank loans and choose ex post unobservable actions that affect project payoffs credit contract design by the bank is the outcome of a non cooperative nash game between the bank and the borrower the initial formal analysis is basically in two steps first we show that the only spot credit market nash equilibria that exist are inefficient in the sense that they result in welfare losses for borrowers due to the bank s informational handicap second we show that loan commitments because of their ability to weaken the link between the offering bank s expected profit and the loan interest rate enable the complete elimination of informationally induced welfare losses and thus produce an outcome that strictly pareto dominates any spot market equilibrium perhaps our most surprising result is that if the borrower has some initial liquidity it is better for the borrower to use it now to pay a commitment fee and buy a loan commitment that entitles it to borrow in the future rather than save it for use as inside equity in conjunction with spot borrowing

spin offs divestitures and conglomerate investment we examine whether spin offs or divestitures cause improvements in conglomerate investment efficiency at issue are endogeneity of these restructuring decisions and correct measurement of investment efficiency endogeneity is a problem because the factors that induce firms to spin off or divest divisions may also improve investment efficiency measurement error is a problem because efficiency measures employ tobin s q as a noisy proxy for investment opportunities we find important differences between firms that divest or spin off and a control sample after accounting for these differences and for measurement error in q we find no evidence of improvements in investment efficiency

consumers surplus as an exact and superlative cardinal welfare indicator this article shows that the bennet bowley consumer surplus measure is an exact measure of allais disposable surplus if the consumer s utility function is of the translation homothetic generalized quadratic form the bennet bowley consumer surplus measure therefore is a superlative cardinal welfare measure for the entire class of translation homothetic preferences because the exactness results in this article apply for cardinal welfare measures they can be meaningfully aggregated across consumers to make aggregate welfare comparisons

phasing out of environmentally harmful subsidies consequences of the 2003 cap reform abstract subsidies linked to production have been classified as environmentally harmful by the oecd a core element of the eu 2003 common agricultural policy cap reform is to decouple income support from production this paper estimates the environmental consequences of this policy reform an agricultural sector model using a modified version of the positive mathematical programming method depicts the complex natural structural and political relationships of austrian farming changes in management measures can be analyzed with respect to their environmental effects by using appropriate indicators simulation results show that the 2003 cap reform will reduce the average cost of production and may improve environmental conditions regarding soil water and greenhouse gases when compared to a scenario without reform thus the new cap is likely to bring about outcomes which the previous reform agenda 2000 promised but did not deliver

dual approaches to the analysis of risk aversion we present a dual formulation of choice under uncertainty based on a few simple assumptions about preferences it is shown that the additive separability restriction on preferences key to expected utility theory can be dropped with little loss of analytic power for a broad class of choice problems dual risk premiums are characterized and it is shown that placing various invariance restrictions on them leads naturally to generalizations of the concepts of cara crra and lrt familiar from expected utility theory each of these generalizations conforms to a notion of homotheticity

using choice experiments to investigate the policy relevance of heterogeneity in farmer agri environmental contract preferences agri environmental contracts are used to provide incentives for nature management on private land in e g the european union the aim of this article is to investigate preference heterogeneity for agri environmental contracts among farmers in order to discuss potential policy improvements utilising heterogeneity we used a choice experiment to elicit farmers stated preferences for afforestation contracts four attributes are investigated purpose of afforestation option of cancelling the contract monitoring and compensation level all attributes present a potential conflict between farmers and authorities interests which emphasises the importance of knowing how to handle these interests a random parameter logit model shows that having the option to cancel the contract decreases farmers required compensation level and monitoring increases it furthermore farmers are willing to accept a lower compensation when the aim is to protect biodiversity and ground water relative to recreation latent class models with class probability variables reveal discrete heterogeneity and support a division into four groups with divergent preferences for example a group of farmers who already have forest areas does not find the option of cancelling the contract important whereas another group relying on the farm for income requires higher compensation the findings indicate potential for efficiency gains from targeting the contracts

a more robust definition of subjective probability the goal of choice theoretic derivations of subjective probability is to separate a decisionmaker s underlying beliefs subjective probabilities of events from their preferences attitudes toward risk classical derivations have all relied upon some form of the marschak samuelson independence axiom or the savage sure thing principle which imply that preferences over lotteries conform to the expected utility hypothesis this paper presents a choice theoretic derivation of subjective probability in a savage type setting of purely subjective uncertainty which neither assumes nor implies that the decisionmaker s preferences over lotteries necessarily conform to the expected utility hypothesis copyright 1992 by the econometric society

the strategic impact of resource flexibility in business groups we show that in business groups with efficient internal capital markets resources may be channelled to either more or less profitable units depending on the amount of internal resources a group may exit a market in response to increased competition or channel funds to the subsidiary operating in that market this has important implications for the strategic impact of group membership affiliation to a monopolistic subsidiary can make a cash rich poor firm more less vulnerable to entry deterrence also resource flexibility within a group makes subsidiaries reaction functions flatter thus discouraging rivals strategic commitments when entry is accommodated

coinsurance effect and bank lines of credit abstract the coinsurance effect hypothesis predicts that firm diversification reduces financial constraints through imperfectly correlated cash flows among segments we empirically test the hypothesis by studying the relation between coinsurance effect and bank lines of credit we find that coinsurance effect is associated with a higher availability of bank lines of credit and that diversified firms hold a higher level of bank lines of credit if they have higher investment opportunities and if they are bank dependent we find that diversified firms hold a higher fraction of corporate liquidity in the form of bank lines of credit due to the coinsurance effect the findings are consistent with the coinsurance effect hypothesis and contribute to the debate on the value consequence of firm diversification by disclosing a specific channel through which firm diversification affects financial constraints

the impact of stock market information production on internal resource allocation abstract we analyze the resource allocation decision of a manager inside a multidivision firm whose compensation is based on the firm s stock price we find that internal investments exhibit a positive correlation across the firms divisions namely when two single division firms merge the optimal investment level in one division becomes more positively related to the investment level in the other division in addition following a spinoff divisional investments decline increase whenever the separated division has a project with a low high sharpe ratio finally multidivision firms trade at a discount which is larger the more diverse the investment sets of the divisions

what drives investment cash flow sensitivity around the world an asset tangibility perspective motivated by ongoing debates on investment cash flow sensitivity icfs and its documented decline and disappearance in the u s we investigate the determinants of icfs using firm level data across 41 countries for the 1993 2013 period we document an important role of asset tangibility in explaining the patterns in icfs asset tangibility affects icfs through two channels investment intensity and cash flow persistence as the share of tangible capital investment and cash flow persistence has fallen in developed economies icfs has declined in contrast as developing economies operate with more tangible capital have higher investment rates and more persistent cash flows their icfs is more stable the results support our explanation of icfs as a reflection of capital investment intensity and income predictability rather than a measure of financial constraints

taking stock a comparative analysis of payments for environmental services programs in developed and developing countries abstract payments for environmental services pes are an innovative approach to conservation that has been applied increasingly often in both developed and developing countries to date however few efforts have been made to systematically compare pes experiences drawing on the wealth of case studies in this special issue we synthesize the information presented according to case characteristics with respect to design costs environmental effectiveness and other outcomes pes programs often differ substantially one from the other some of the differences reflect adaptation of the basic concept to very different ecological socioeconomic or institutional conditions others reflect poor design due either to mistakes or to the need to accommodate political pressures we find significant differences between user financed pes programs in which funding comes from the users of the es being provided and government financed programs in which funding comes from a third party the user financed programs in our sample were better targeted more closely tailored to local conditions and needs had better monitoring and a greater willingness to enforce conditionality and had far fewer confounding side objectives than government financed programs we finish by outlining some perspectives on how both user and government financed pes programs could be made more effective and cost efficient

are internal capital markets efficient using segment information from compustat we find that the investment by a segment of a diversified firm depends on the cash flow of the firm s other segments but significantly less than it depends on its own cash flow the investment by segments of highly diversified firms is less sensitive to their cash flow than the investment of comparable single segment firms the sensitivity of a segment s investment to the cash flow of other segments does not depend on whether its investment opportunities are better than those of the firm s other segments

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

the effectiveness of payments for environmental services we adopt a theory based approach to synthesize research on the effectiveness of payments for environmental services in achieving environmental objectives and socio economic co benefits in varying contexts our theory of change builds on established conceptual models of impact pathways and highlights the role of 1 contextual dimensions e g political institutional and socio economic conditions spatial heterogeneity in environmental service values and provision costs and interactions with pre existing policies and 2 scheme design e g payment type and level contract length targeting and differentiation of payments in determining environmental and socio economic outcomes to shed light on the overall effectiveness of payment schemes and its determinants we review counterfactual based empirical evaluations comparative analyses of case studies and meta analyses our review suggests that program effectiveness often lags behind the expectations of early theorists however we also find that theory has advanced sufficiently to identify common reasons for why payment schemes fail or succeed moreover payment schemes are often rolled out along with other policy instruments in so called policy mixes advances in theory and evaluation research are needed to improve our understanding of how such policy mixes interact with the targeted social ecological systems 2017

internal versus external capital markets this paper presents a framework for analyzing the costs and benefits of internal versus external capital allocation we focus pritnarily on comparing an internal capital market with bank lending while both represent centralized forms of financing in the former case the financing is owner provided while in the latter ceise it is not we argue that the ownership aspect of internal capital allocation has three important consequences 1 it leads to more monitoring than bank lending 2 it reduces managers entrepreneurial incentives and 3 it makes it easier to efficiently redeploy the assets of projects that are performing poorly under existing management

on marginal risk behavior this paper examines marginal risk behavior in a decision theoretic setting that is sufficiently general to accommodate any decision making model representable by a certainty equivalent the analysis shows that risk aversion in its usual sense is a special case of marginal risk aversion associated with mean preserving changes in gambles thus marginal risk behavior and risk behavior are not inherently different rather they manifest similar behavior evaluated at different gambles the paradox of marginal risk loving risk averters arises from mixing definitions of an increase in risk

a theory of socialistic internal capital markets abstract we develop a model of a two division firm in which the strong division has on average higher quality investment opportunities than the weak division we show that in the presence of agency and information problems optimal effort incentives are less powerful and thus managerial effort is lower in the strong division this leads the firm to bias its project selection policy against the strong division the selection bias is more severe when there is a larger spread in the average quality of investment opportunities between the two divisions

a definition of uncertainty aversion a definition of uncertainty or ambiguity aversion is proposed it is argued that the definition is well suited to modelling within the savage as opposed to anscombe and aumann domain of acts the defined property of uncertainty aversion has intuitive empirical content behaves well in specific models of preference multiple priors and choquet expected utility and is tractable tractability is established through use of a novel notion of differentiability for utility functions called eventwise differentiability

the economics of a public fund for environmental amenities a study of crp contracts the problem of targeting crp purchases to buy environmental amenities under productivity and environmental heterogeneity is considered gini coefficients and lorenz curves are used to measure the effectiveness of spending under alternative targeting criteria the environmental benefits considered are water erosion wind erosion surface water quality and wildlife habitat the three alternative targeting criteria examined include purchasing land according to i the benefit to cost ratio ii the level of benefits and iii the level of cost results indicate that the degree of variability and correlation determine the extent to which suboptimal targeting achieves a significant portion of available environmental benefits

agri environmental policies in the eu and united states a comparison abstract agri environmental policies aeps in the united states and the european union are examples of payments for environmental services that pay farmers to reduce the negative externalities of agricultural production while serving as a means to transfer public funds to farmers we show that despite similar origins aeps in the two regions differ both in their specific objectives and in their implementation for example aeps in most member states of the eu 15 have the additional objective of using agriculture as a driver for rural development this objective is achieved by compensating farmers for the private delivery of positive public goods such as attractive landscapes produced by agriculture the rationale is market failure and there is empirical evidence that europeans are willing to pay for such positive externalities no comparable provision exists in u s policy by contrast u s aeps focus almost entirely on reducing agriculture s negative externalities such as soil erosion second we find that u s programs are more targeted than their eu counterparts and take opportunity cost into account the eu programs on the other hand address a wider range of externalities and are focused more on the paying for a particular farming process than reducing specific negative externalities the eu takes a broader view of aeps than does the united states both in terms of type of activity that can be funded and by using less targeting by land characteristics and so the european program could be more easily used as a mechanism for transferring income to producers despite this we find evidence that many of the amenities targeted by the programs are demanded by the population

a reexamination of the conglomerate merger wave in the 1960s an internal capital markets view one possible explanation for bidding firms earning positive abnormal returns in diversifying acquisitions in the 1960s is that internal capital markets were expected to overcome the information deficiencies of the less developed capital markets examining 392 bidder firms during the 1960s we find the highest bidder returns when financially unconstrained buyers acquire constrained targets this result holds while controlling for merger terms and for different proxies used to classify firms facing costly external financing we also find that bidders generally retain target management suggesting that management may have provided companyspecific operational information while the bidder provided capital budgeting expertise

first order risk aversion and the equity premium puzzle abstract this paper integrates yaari s dual theory of choice under uncertainty into a multiperiod context and examines its implications for the equity premium puzzle an important property of these preferences is that of first order risk aversion which implies in our model that the risk premium for a small gamble is proportional to the standard deviation rather than the variance since the standard deviation of the growth rate in aggregate consumption is considerably larger than its variance the model can generate both a small risk free rate and a moderate equity premium