the microfinance promise in the past decade microfinance programs have demonstrated that it is possible to lend to low income households while maintaining high repayment rates even without requiring collateral the programs promise a revolution in approaches to alleviating poverty and spreading financial services and millions of poor households are served globally a growing body of economic theory demonstrates how new contractual forms offer a key to microfinance success particularly the use of group lending contracts with joint liability for the most part however high repayment rates have not translated into profits and studies of impacts on poverty yield a mixed picture in describing emerging tensions the paper highlights the diversity of innovative mechanisms beyond group lending contracts the measurement of financial sustainability the estimation of economic and social impacts the costs and benefits of subsidization and the potential to reduce poverty through savings programs rather than just credit the promise of microfinance has pushed far ahead of the evidence and an agenda is put forward for addressing critical empirical gaps and sharpening the terms of policy discussion

rotating and accumulating savings and credit associations a development perspective abstract financial self help groups in low income countries consist of two basic types rotating and accumulating savings and credit associations or roscas and ascras in the ascra funds are not immediately withdrawn but are left to grow for loan making comparing the two groups the author finds similarities and differences efforts to rectify the rosca s shortcomings have prompted many innovations and given birth to a hybrid preserving the best of both types in constant adaptation to changing environments

how should control theory be used to calculate a time consistent government policy we study different solutions to a simple one dimensional linear quadratic game with a large number of private agents and a government a time consistent solution is defined as a solution to the hamilton jacobi bellman equation i e as a policy for which the government has noprecommitment capability this solution is compared to a policy where the government has an instantaneous pre commitment i e an equilibrium in which the government has a period by period leadership in both cases we show how control theory should be applied to calculate the equilibrium and how to relate these equilibria to the differential game literature

the sources of sovereign risk a calibration based on levy stochastic processes abstract governments choose to issue risky or riskless debt depending on the nature of the stochastic process of output we use brownian motion and poisson shocks a modeling method in the literature on corporate default known as levy processes to approximate a decomposition of the output process into a smooth and a jump component using an eaton and gersovitz 1981 model of debt repudiation we show that the brownian part explains the counter cyclical behavior of the current account and the poisson part explains the risk of default thus enabling our model to account for key stylized facts regarding sovereign risk

debt relief and adjustment effort in a multi period model abstract this paper shows that if the period following the granting of debt relief is taken into account debt relief increases adjustment effort investment irrespective of whether there is an initial debt overhang or not

the debt overhang and the disincentive to invest abstract this paper is an attempt to explore the debt overhang hypothesis by an empirical examination of the investment experience of 13 severely indebted countries it begins with a discussion of the disincentive effect of debt overhang which is linked to some aspects of the adjustment measures that these countries are undergoing viz devaluation and reduction in public sector deficits this is followed by empirical analysis which demonstrates that first in countries with a debt overhang external debt captures many of the effects of other explanatory variables that traditionally explain investment second through 1971 1991 the relationship between external debt and investment is consistently a negative one however the first half of the period has strong time influences that exercise a positive influence on investment in the second half of the period time effects turn negative too thus explaining the fall in investment levels observed after 1982

uncertainty economic reforms and private investment in the middle east and north africa during the 1980s and the 1990s private investment in the middle east and north africa mena has on average shown a decreasing or stagnant trend this contrasts with the situation of the asian economies where private investment has always been more dynamic in this paper it is empirically shown for a panel of 39 developing economies among which four mena countries that in addition to the traditional determinants of investment such as the growth anticipations and the real interest rate government policies explain mena s low investment rate insufficient structural reforms which have most of the time led to poor financial development and deficient trade openness have been a crucial factor for the deficit in private capital formation the economic uncertainties of the region have represented another factor of the firm s decisions not to invest these uncertainties have consisted of the external debt burden and various measures of volatility

how well have social economy financial institutions performed during the crisis period exploring financial and social efficiency in spanish credit unions as social economy financial institutions credit unions have traditionally been considered less efficient than traditional banking entities however like banks and savings banks they have to be as efficient and competitive as possible to survive in today s business environment especially at times of crisis to date there have been very few studies on their efficiency and practically none for the crisis period moreover almost all the existing studies assess only financial efficiency without considering their social function this study examines the levels of both financial and social efficiency in spanish credit unions as well as their main determinants during the recent crisis we apply the two stage double bootstrap data envelopment analysis dea methodology based on panel data corresponding to all the credit unions active in spain between 2008 and 2013 the empirical results indicate that financial and social efficiency achieved an acceptable level although on average the former was slightly greater than the latter we also find that both age and merger and acquisition activity were positively influential on the financial efficiency of credit unions but had a significant negative effect on their social efficiency moreover the regional location of such entities and the financial crisis were also crucial determinants of both types of efficiency our findings are therefore useful for all the stakeholders of credit unions to know if these entities have been efficient according to a double bottom line accounting in the crisis period and hence to maintain successful social management that is compatible with satisfactory financial efficiency

large external debt and slow domestic growth a theoretical analysis abstract this paper analyzes the optimal rescheduling strategy of lenders whose claims on a country show a discount on the secondary markets the paper shows that lenders should proceed as follows they should split the debt into two components a performing and a nonperforming part they should act as if the debt amounted to the performing part and scale down how much money the borrower should service on that part only as a result it is shown that the efficient servicing of the debt crowds in investment the paper relates this result to the debt overhang argument according to which too large a nominal claim may reduce investment and the market value of the debt

low investment and large ldc debt in the 1980s this paper aims at disentangling the correlation between ldc debt and investment in the 1980s the author shows that a large debt was not an unconditional predictor of low investment in the 1980s nor was investment abnormally low when compared to a financial autarky rate calculated in the text he does find however that the actual service of the debt crowded out investment for the rescheduling countries he shows that 1 percent of gdp paid abroad reduced domestic investment by 0 3 percent of gdp this is identical to the correlation between investment and foreign finance observed in the 1960s copyright 1993 by american economic association

to give or to forgive aid versus debt relief is generalized debt relief an effective development strategy or should assistance be tailored to countries characteristics to answer this question the authors build a simple model in which recipient governments reveal their creditworthiness if donors offer them to choose between aid and debt relief since offering such a menu is costly it is preferred by donors only when the cost of assistance is low and the probability that an indebted country is creditworthy is high enough for lower probabilities and higher costs of assistance donors prefer a policy of only debt relief very limited aid is the preferred policy only for high costs of assistance and low probabilities that the government is creditworthy

roscas as financial agreements to cope with self control problems abstract we consider a model in which people with limited self control can sign binding financial agreements among themselves thereby forming coalitions we show that these financial agreements may help them to alleviate their self control problems we then demonstrate that there exists a stable structure of coalitions in which people form rotating savings and credit associations roscas we therefore provide a behavioral rationale for one of the most prevalent and puzzling financial institutions in developing countries finally we derive and discuss some empirical predictions

gender biases in bank lending lessons from microcredit in france the evidence on gender discrimination in lending remains controversial to capture gender biases in banks loan allocations we observe the impact on the applicants of a microfinance institution mfi and exploit the natural experiment of a regulatory change imposing a strict eur 10 000 loan ceiling on microcredit descriptive statistics indicate that the presence of the ceiling is associated both with bank mfi co financing and with harsher treatment of female borrowers to investigate causal links we develop an econometric approach that addresses the concerns of selection biases multicollinearity and endogeneity our empirical findings suggest that the change in the mfi s gender related attitude was triggered by banks through co financing hence we speculate that co financing pushes ceiling constrained mfis to import whatever biases in loan granting that the banks are prone to overall this paper stresses that apparently benign regulations such as loan ceilings can significantly harm the women s empowerment efforts made by mfis

debt relief investment and growth from 1989 to 2004 the donor community provided approximately 400 billion in debt relief to developing countries in an attempt to promote growth and reduce poverty using a sample of 118 developing countries this paper empirically assesses the impact of debt relief on growth via 1 resources made available for investment from reduced debt service payments and 2 improved incentives to invest from a reduced debt stock although the results show no general evidence of a growth effect from debt relief the study provides certain evidence that it promotes investment and thereby growth in countries not classified as hipcs

the growth of us credit unions abstract the growth of us credit unions during the 1990s is investigated empirically using univariate and multivariate cross sectional and panel estimation techniques univariate tests of the law of proportionate effect suggest that in general large credit unions grew faster than their smaller counterparts on average credit unions with above average growth in one period tended to experience below average growth in the next smaller credit unions tended to have more variable growth than large ones while credit unions share a common co operative philosophy they differ in terms of age profile scope for membership growth charter type and financial structure and performance in estimations of a multivariate growth model most of these characteristics are found to have a significant influence on the size growth relationship while large state chartered credit unions grew faster than their smaller counterparts the reverse was true for federally chartered credit unions in general if larger credit unions grew faster than smaller ones they tended to do so for specific reasons because their charters were less restrictive because they were more efficient or because they had a financial structure that was more conducive to growth therefore credit union growth was not random but highly systematic

social multi criteria evaluation methodological foundations and operational consequences in order to address contemporary issues economics and decision sciences need to expand their empirical relevance by introducing more and more realistic thus more complex assumptions in their models one of the most interesting research directions in the field of public economics is the attempt to introduce political constraints interest groups and collusion effects explicitly j j laffont incentives and political economy 2000 the main argument developed here is the proposal of the concept of social multi criteria evaluation smce as a possible useful framework for the application of social choice to the difficult policy problems of our millennium where as stated by funtowicz and ravetz facts are uncertain values in dispute stakes high and decisions urgent this paper starts from the following main questions 1 why social multi criteria evaluation 2 how should such an approach be developed the foundations of smce are set up by referring to concepts from complex system theory and philosophy such as reflexive complexity post normal science and incommensurability to give some operational guidelines on the application of smce basic questions to be answered are 1 how is it possible to deal with technical incommensurability 2 how can we deal with the issue of social incommensurability to answer these questions using theoretical considerations and lessons learned from real world case studies is the main objective of the present article

ex dividend returns the mexican puzzle abstract we study ex dividend returns in mexico where an imputation system entitles individual investors to a net dividend tax credit based on taxation we expect ex day abnormal returns to be negative or at most zero in mexico however they are significantly positive because ex day returns are positive even for stocks restricted to mexican nationals they are not attributable to foreign stockholders tax considerations none of the market microstructure based hypothesis in the literature can explain these positive ex day returns ex day returns in mexico are a puzzle

multiple criteria decision making combined with finance a categorized bibliographic study abstract this paper provides a categorized bibliography on the application of the techniques of multiple criteria decision making mcdm to problems and issues in finance a total of 265 references have been compiled and classified according to the methodological approaches of goal programming multiple objective programming the analytic hierarchy process etc and to the application areas of capital budgeting working capital management portfolio analysis etc the bibliography provides an overview of the literature on mcdm combined with finance shows how contributions to the area have come from all over the world facilitates access to the entirety of this heretofore fragmented literature and underscores the often multiple criterion nature of many problems in finance

debt relief and governance quality in developing countries summary in this paper we empirically discuss whether or not debt relief has been economically rational in the past 15 years from analyzing the determinants of debt relief our results suggest that governance quality did not play a role in the decision of creditor countries to forgive debt in the 1990s furthermore even the actual debt burden of highly indebted poor countries was not crucial in deciding whether or not debt forgiveness was granted rather debt relief followed a strong path dependence those countries whose debt had been forgiven in the first half of the 1990s were also granted debt forgiveness in the second half of the decade however this allocation pattern changed at the beginning of the 21st century when path dependence diminished and some dimensions of governance quality were taken into account by donor countries

market valuation of tax timing options evidence from capital gains distributions we examine a distribution that is taxed as a capital gain rather than as a dividend since the distribution induces a realized capital gain while the price change is an unrealized gain ex day return behavior provides evidence of the value of tax timing capital gains we show that investors are compensated 7c in unrealized gains for each dollar of realized capital gains that is 1 of realized capital gains is equivalent to 93c of unrealized gains an investor with a tax rate on realized gains of 15 has an effective tax rate on unrealized capital gains of 8 6 capital gains taxes can be deferred until assets are sold this feature provides the investor who purchases a security with an option regarding the timing of the realization of capital gains and losses this option can be used to lower one s expected tax liability even if capital gains tax rates remain constant for different holding periods an investor who delays the realization of a gain effectively enjoys compound returns on the postponed taxes if capital losses are tax deductible or partially tax deductible tax timing is even more valuable since investors can follow the strategy of selling stocks with capital losses early while postponing the sale of winners recent evidence lends support to the contention that some investors respond to this tax timing option for example odean 1998 shows that u s investors are more likely to sell losers in december than other months similarly grinblatt and keloharju 2002 show that at the end of the tax year finnish investors are more likely to realize losses than gains this type of tax motivated trade seems to affect market returns as shown by poterba and weisbenner 2001 who demonstrate that end of year tax loss selling is related to return variation in the month of january

the relationship between turkey s foreign debt and economic growth an asymmetric causality analysis tackling foreign debt that arises as a result of limited and ineffective use of resources is an item that remains on the agenda particularly for developing countries in this study we examine the

why do stock prices drop by less than the value of the dividend evidence from a country without taxes abstract it is well documented that stock prices on ex dividend days drop by less than the value of the dividend on average this has commonly been attributed to the effect of tax clienteles we examine data from the hong kong stock market where neither dividends nor capital gains are taxed as in the u s the average stock price drop is less than the value of the dividend specifically the average dividend for the period 1980 1993 is hk 0 12 and the average price drop is hk 0 06 we are able to account for this both theoretically and empirically through market microstructure arguments

the valuation effects of the 1977 community reinvestment act and its enforcement abstract we examine the wealth effects of the passage of the community reinvestment act cra of 1977 for commercial banks and savings and loan associations we find significantly negative average excess returns for small nyse amex banks and sl in contrast there is no evidence that large nyse amex institutions or nasdaq institutions experience wealth losses we also study the effects of individual cra protests against institutions and find they produce significantly negative excess returns which are not reversed when the protests are resolved our results have implications for proposed changes to cra and for the future consolidation of the financial services industry the results also demonstrate the difficulties associated with studying returns from the early years of the nasdaq market

ex dividend day stock price behavior discreteness or tax induced clienteles abstract since prices are constrained to discrete tick multiples while dividends are essentially continuous ex day price changes will not equal dividends we argue that the expected price drop is strictly less than the dividend but within one tick of the dividend the price drop to dividend ratio will i be less than one ii increase with dividends generally and iii decline between tick multiples giving a sawtooth pattern in the data since dividends and dividend yields are highly correlated discreteness will give the impression of tax induced dividend clienteles even if there are none taxable cash dividends and nontaxable stock dividends exhibit similar ex day behavior

tax induced trading around ex dividend days abstract this paper investigates trading volume around ex dividend days for taxable distributions cash dividends it is found that trading volume increases significantly around the ex dividend day this increase is more pronounced for high yield actively traded stocks and after brokerage commissions became negotiable the results are consistent with the hypothesis that short term traders have an impact on ex day price behavior at least for taxable distributions for non taxable distributions stock splits and stock dividends we find negative abnormal volume around ex day

carbon risk carbon risk awareness and the cost of debt financing we seek insights into potential benefits for firms adopting strategies to improve business sustainability in a carbon constrained future we investigate whether lenders incorporate a firm s exposure to carbon related risk into lending decisions through the cost of financing and if so importantly whether firms can mitigate the penalty by demonstrating an awareness of their carbon risks we use a sample of 255 firm year observations from eight industries over the period 2009 2013 we measure carbon related risk exposure as the firm s historical carbon emissions and our primary measure of carbon risk awareness is based on the firm s willingness to respond to the carbon disclosure project cdp survey we document a positive association between cost of debt and carbon risk for firms failing to respond to the cdp further this association is economically meaningful with a one standard deviation increase in carbon risk mapping into between a 38 and 62 basis point increase in the cost of debt equally we find that this penalty is effectively negated for firms exhibiting carbon risk awareness our results are robust when we consider alternate measures of carbon awareness disclosure through alternative medium to the cdp and firms annual cash investment in new capital assets using cleaner technology our results highlight not only the importance of carbon awareness as a business strategy for polluting firms but also its importance to lenders exposed to their clients default and reputational risk the debt market appears to incorporate historical carbon emissions and forward looking indicators of carbon performance

tick size nyse rule 118 and ex dividend day stock price behavior abstract bali and hite 1998 and dubofsky 1992 propose models in which market microstructure effects play a role in the ex dividend day price drop anomaly bali and hite suggest that the anomaly is caused solely by price discreteness while dubofsky suggests that nyse rule 118 is also involved we test these models by examining cum to ex day price drops during the one eighth one sixteenth and decimal tick size regimes while the evidence is qualitatively consistent with dubofsky s predictions neither model is satisfactory in a quantitative sense one of our main empirical findings is that no significant decline was evident in the magnitude of the ex day anomaly after the tick size reduction

financing vs forgiving a debt overhang abstract this paper examines the tradeoffs facing creditors of a country whose debt is large enough that the country cannot attract voluntary new lending if the country is unable to meet its debt service requirements out of current income the creditors have two choices they can finance the country lending at an expected loss in the hope that the country will eventually be able to repay its debt after all or they can forgive reducing the debt level to one that the country can repay the post 1983 debt strategy of the imf and the us has relied on financing but many current calls for debt reform call for forgiveness instead the paper shows that the choice between financing and forgiveness represents a tradeoff financing gives the creditors an option value if the country turns out to do relatively well creditors will not have written down their claims unnecessarily however the burden of debt distorts the country s incentives since the benefits of good performance go largely to creditors rather than itself the paper also shows that the tradeoff itself can be improved if both financing and forgiveness are made contingent on states of nature that the country cannot affect such as oil prices world interest rates etc

debt levels debt composition and sovereign spreads in emerging and advanced economies this paper studies the relationship between sovereign spreads and the interaction between debt composition and debt levels in advanced and emerging market countries it finds that in emerging market countries there is a significant correlation between spreads and debt levels this correlation however is not statistically significant in countries where most public debt is denominated in local currency in advanced economies the magnitude of the correlation between debt levels and spreads is about one fifth of the corresponding correlation for emerging market economies in eurozone countries however the correlation between spreads and debt ratios is similar to that of emerging market countries the paper also shows that the financial crisis amplified the relationship between spreads and debt levels within the eurozone but had no effect on the relationship between spreads and debt in stand alone countries finally the paper shows that the relationship between debt levels and spreads is amplified by the presence of large net foreign liabilities this amplifying effect of net foreign liabilities is larger in the eurozone than in stand alone advanced economies the paper concludes that debt composition matters and corroborates the original sin hypothesis that rather than being a mere reflection of institutional weakness the presence of foreign currency debt increases financial fragility and leads to suboptimal macroeconomic policies copyright 2013 oxford university press

curse or blessing has the impact of debt relief lived up to expectations a review of the effects of the multilateral debt relief initiatives for low income countries as the multilateral debt relief initiatives draw to a close this article reviews the impacts of debt relief to low income countries lics building on both the theoretical and empirical literature

ex dividend price behavior of common stocks this study examines common stock prices around ex dividend dates such price data usually contain a mixture of observations some with and some without arbitrageurs and or dividend capturers active our theory predicts that such mixing will result in a nonlinear relation between percentage price drop and dividend yield not the commonly assumed linear relation this prediction and another important prediction of theory are supported empirically in a variety of tests marginal price drop is not significantly different from the dividend amount thus over the last several decades one for one marginal price drop has been an excellent average rule of thumb article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

stabilising economic growth through risk sharing macro instruments the risk sharing principles of islamic finance have ironically been studied and used extensively outside the muslim world the development of early european city states was founded on the risk sharing principle the risk sharing financing helped these city states to develop their infrastructure and rule the scientific and economic landscape of the west the western financial system of today still carries traces of risk sharing in the form of venture capital financing albeit the primary focus has diverted to risk shifting based debt financing over the past decades much effort and research has gone into establishing a viable set of islamic financial institutions most muslim nations are heavily indebted with high reliance on multilateral financing primarily based on high interest rates this vicious cycle of interest rates and debt has stunted the growth of these nations and worsened the conditions of the masses this research brings to the forefront the concept of an equity in nature gdp linked paper which allows for enhanced risk sharing based sovereign financing it aims to present empirical proof of the stability this instrument offers in economic growth for a large sample of developing economies comprising bulk of islamic countries while analysing the empirical work a strong favourable argument for this instrument is derived for its benefits in stability through this study we endeavour to initiate a thought provoking and practical discussion for further development of these instruments for the betterment of developing countries

domestic taxes and the external debt laffer curve this paper highlights the role of the domestic tax system in determining the economic consequences of an external debt overhang the analysis indicates that fairly strong and probably unrealistic assumptions about the domestic tax system are needed to argue that the investment disincentives associated with the debt overlhang are large enough to place a country on the wrong side of the debt laffer curve a simple taxation scheme is specified and it is shown that a country can be on the wrong side of its debt laffer curve only if it is on the wrong side of its tax laffer curve

a credit score system for socially responsible lending ethical banking microfinance institutions or certain credit cooperatives among others grant socially responsible loans this paper presents a credit score system for them the model evaluates social and financial aspects of the borrower the financial aspects are evaluated under the conventional banking framework by analysing accounting statements and financial projections the social aspects try to quantify the loan impact on the achievement of millennium development goals such as employment education environment health or community impact the social credit score model should incorporate the lender s know how and should also be coherent with its mission this is done using multi criteria decision making mcdm the paper illustrates a real case a loan application by a social entrepreneur presented to a socially responsible lender the decision support system not only produces a score but also reveals strengths and weaknesses of the application

the political economy of the enhanced hipc initiative only three years after its endorsement bythe world bank and the imf the heavilyindebted poor country hipc initiativewas considerably altered and enhanced thispolicy shift can be explained as a resultof utility maximization behavior bynational and international politicians international bureaucrats and ngo apolitico economic model suggests that theoverall rise of hipc default risk and thesymbolic value of the year 2000 have beenthe two major determinants of changes involume eligibility and conditionalityrequirements