comment on cole the view that small rms face greater problems in obtaining credit thanlarge rms has a long history going back at least as far as the loan relationshipmodels of hodgeman 1961 and wood 1975 and the credit rationing work ofja ee and modigliani 1969 nevertheless there are few studies that provideor analyze direct evidence that credit is rationed with nonprice terms to rms at the macro level most empirical studies of business credit availability use in direct proxies ranging from early studies such as ja ee and modigliani 1969 who gauged availability by the share of small sized loans among all bank loans to more modern models that point to a role of cash ow as a determinant ofinvestment at the micro level empirical studies have indirectly tested forthe existence of credit rationing by assessing the behavior of loan pricing e g berger and udell 1992 1995 testing whether liquidity or cash owhas a greater impact on investment by smaller rms relative to larger rms e g fazzari et al 1988 or investigating whether smaller rms more heavilyuse expensive trade credit during periods of tight credit e g ja ee 1971 pe tersen and rajan 1994 cole 1998 lls a void in the literature on credit availability by testing how rm characteristics a ect a small rm s likelihood of experiencing a loan denialusing a unique cross section data set that provides direct evidence of nonpricecredit rationing this paper nds that preexisting nancial service relationshipswith a lender have a positive e ect on the probability of loan approvals con sistent with prior studies arguing that banks gain information about credit riskfrom monitoring borrower deposit activity e g black 1975 fama 1985 nakamura 1993 in addition results indicate that much of the e ect of

political donations and the allocation of public procurement contracts abstract we study whether and when firms donations to political parties induce favouritism in public procurement allocations our analysis builds on a unique comprehensive dataset covering all public procurement contracts and all corporate donations to major political parties in the czech republic over the period from 2007 to 2014 and exploits changes in political control over regional governments within this period for identification purposes we find that firms donating 10 more to a political party gaining losing power witness an increase decrease in the value of their public procurement contracts by 0 5 0 6 importantly and in line with theoretical expectations these effects only arise for contracts allocated under less restrictive procurement allocation processes assessing the underlying mechanisms we show that donating firms receive more small contracts allocated under less regulated procurement procedures face less competition in more regulated and open procurement procedures and tend to win with bids further above the estimated cost of the procurement contract

monetary transmission through bank loans or bank liabilities interest in the transmission of monetary fluctuations to real output has dominated macroeconomics since at least the eighteenth century since then many observers have noted the tendency of a monetary expansion to be followed initially by an expansion of real output and later by an increase in prices while the reason for the long run price change is well understood understanding the short run impact of money on nominal output remains an active unresolved research topic most theoretical models explain the transmission of monetary fluctuations to real output as a consequence of sticky prices or expectations the stickiness is either due to informational imperfections or to contractual rigidities while the policy implications of the two types of stickiness differ both types of model predict a transitory response of real output to a shock in nominal money balances neither the informational imperfection nor the contractual rigidity story is completely compelling and both rely on the central role played by movements in real balances and perceived real interest rates yet for thirty five years following world war ii neither significant movements in the anticipated real rate nor large interest elasticities of spending were apparent despite this the empirical correlation of money and output fluctuations has been found in most time periods and countries consequently the need for alternative explanations of monetary transmission or a credible reverse causation story remains strong

the finance growth nexus evidence from bank branch deregulation this paper provides evidence that financial markets can directly affect economic growth by studying the relaxation of bank branch restrictions in the united states we find that the rates of real per capita growth in income and output increase significantly following intrastate branch reform we also argue that the observed changes in growth are the result of changes in the banking system improvements in the quality of bank lending not increased volume of bank lending appear to be responsible for faster growth

the dark side of board political capital enabling blockholder rent appropriation resource dependence theorists argue that boards of directors with political capital can benefit focal firms by reducing uncertainty and providing preferential resources here we develop theory reg

patterns of political action committee contributions to the 1980 campaigns for the united states house of representatives our most robust findings can be summarized as follows u the spatial location of candidates is important in determining the pattern of campaign contributions many pacs and all pac types except agricultural cooperatives contribute in a manner highly consistent with a simple spatial model there is little giving by an individual pac to candidates at opposite ends of the dimension there is no instance of a pac contributing to incumbents located at each end of the dimension and only to challengers of incumbents in the middle or vice versa contributions against incumbents i e to challengers of incumbents are often spatial mirror images of a pac s giving in favor of incumbents though this statement must be tempered by the fact that the large majority of pacs give relatively little money to challengers few pacs give money to both challenger and incumbent in the same race giving in open seat races is if anything even more spatially consistent than in races where an incumbent is running while many individual pacs exhibit patterns of contributions consistent with the ideological dimension the data for 1980 suggest that there was no particular bias toward one end of the spectrum or the other taking all pacs together essentially eliminates the effect of the location variable in the regressions giving in races with an incumbent on the ballot was overall balanced across the dimension there are however ideological distinctions even among groups as broadly defined as the fec categories for the corporate labor and trade membership health groups the incumbent s location on the ideological dimension is an important explanatory variable even when other factors specific to the incumbent are considered of course ideology matters to nonconnected groups too they just tend to balance each other off in positive money though not in negative on average corporate and trade groups favor conservative incumbents and opponents of liberal incumbents labor pacs do the opposite except for labor pacs party is not an important variable in explaining positive contributions once the incumbent s voting record is taken into account for contributions to challengers however party is significant corporate nonconnected and trade pacs gave to opponents of democrats labor pacs did the opposite the expected closeness of the election is always an important variable both positive money and contributions to challengers increase as the probability of a strong challenge increases this suggests that pacs are sensitive to the potential impact of contributions on electoral outcomes although committee assignments have some importance in explaining campaign contributions by pac categories their net effect is never strong except in the case of cooperatives this is almost certainly because of the diversity of interests represented by pacs in every category except coops which are essentially one giant pac of milk producers we would surmise that competitive forces in the house result in most members having a portfolio of committee assignments that provides maximum advantage vis a vis each member s constituency it would therefore be surprising if overall committee assignments by themselves pointed to significant differences in generating campaign resources being chairman or ranking minority member of a committee has no impact on campaign contributions other things equal seniority as measured by number of consecutive years in office has a complicated role for positive contributions seniority has a nonmonotonic effect with contributions being higher for the most junior and most senior members ceteris paribus than for incumbents with average seniority negative contributions however are not significantly related to seniority

the economics of small business finance the roles of private equity and debt markets in the financial growth cycle abstract this article examines the economics of financing small business in private equity and debt markets firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle we show the sources of small business finance and how capital structure varies with firm size and age the interconnectedness of small firm finance is discussed along with the impact of the macroeconomic environment we also analyze a number of research and policy issues review the literature and suggest topics for future research

the incidence of secured debt evidence from the small business community critics claim that theories of secured debt fail to explain the widespread use of collateral because they incorrectly predict when a loan will be secured this paper provides the first rigorous statistical test of the transaction cost models of secured debt data from two samples of over 1 000 small business loans generally support the common set of predictions of these theories the incidence of secured debt is positively related to probability of default loan size loan maturity and marketability of assets changes in the legal and economic environment also alter firms decisions regarding the pledging of collateral

competitive equilibrium in the credit market under asymmetric information abstract we study a competitive credit market equilibrium in which all agents are risk neutral and lenders a priori unaware of borrowers default probabilities admissible credit contracts are characterized by the credit granting probability the loan quantity the loan interest rate and the collateral required the principal result is that in equilibrium lower risk borrowers pay higher interest rates than higher risk borrowers moreover the lower risk borrowers get more credit in equilibrium than they would with full information no credit is rationed and collateral requirements are higher for the lower risk borrowers

flexing muscle corporate political expenditures as signals to the bureaucracy when corporations and their employees spend money in the political arena to what extent are they purchasing special treatment complaints about the deleterious effects of corporate money in politics are ubiquitous in american political discourse however in order to pinpoint the place of these expenditures in american democracy and to appreciate fully the consequences of various reform proposals itiscriticaltoidentifytheprecisemechanism through which any preferential treatment might occur in this spirit scholars have suggested that corporations make political expenditures because they hope to influence government behavior through either explicit quid pro quos with legislators for constituency service or favorable votes baron 1989 grossman and helpman 1994 2001 improved access to legislators hall and wayman 1990 langbein 1986 or enhancement of the electoral prospects of sympathetic incumbents pooleandromer1985 empiricalevidenceverifying a definitive relationship between expenditures and specific policy change unfortunately has proven elusive in a recent review essay ansolabehere de figueiredo and snyder 2003 116 conclude contributions explain a miniscule fraction of the variation in voting behavior in the u s congress they suggest thatcontributionsarebetterthoughtofasconsumption goods that fulfill a desire to participate in politics than as investment in a political marketplace

duty fear and tax compliance the heuristic basis of citizenship behavior theory the costs imposed by income tax and other citizenship duties provide powerful incentives to free ride yet the likelihood of getting caught the primary self interested deterrent to free riding is unlikely to be known with much accuracy by most citizens thus the duty heuristic provides not only a direct motivation to comply but also influences behavior through cognitive processes that bias self interested beliefs about the advantages of free riding hypothesis citizens beliefs about their duty to obey laws of the state bias their information processing and judgements about the fear of getting caught and punished for disobedience so citizens reporting greater commitment to obey tax laws systematically overestimate the expected penalty for noncompliance methods regression analysis of survey and tax return data for 445 taxpayers results subjective risk of getting caught is more closely related to duty than to objective risk factors objective audit probabilities affect only taxpayers with greater temptation to cheat but duty influences tempted taxpayers as much as ordinary taxpayers

commercial paper bank reserve requirements and the informational role of loan commitments abstract an explanation is provided of the often observed purchase of back up bank loan commitments by corporations immediately preceding their sale of dealer placed commercial paper since loan commitments are typically viewed as hedging instruments our paper explains why a risk neutral corporation would purchase this type of instrument and how it is priced it is assumed that while firms know their own credit risks neither banks nor the paper market can distinguish between some credit applicants we show that the purchase of a commitment can identify these firms to the market the equilibrium is partially revealing of the firms with unobservable quality those with higher quality identify themselves by purchasing commitments while those with lower quality sell unbacked paper and are pooled together unbacked paper is sold also by firms whose quality is observable unidentified firms in the lowest quality range do not sell commercial paper

equilibrium loan pricing under the bank client relationship abstract we determine the loan interest rate policy of a lender who is better informed about a client than other potential lenders the informational advantage possessed by the informed lender derives from the durability of information acquired as a result of an extant relationship given heterogeneous potential loan rate offers to the client by competitive lenders and client search costs the incumbent lender s policy of loan interest rate offers is examined we show that the optimal loan rate will exceed the incumbent lender s cost of funds and will exceed the average offer of competing lenders the potential lenders will offer loan rates that are exceeded by their cost of funds implying immediate losses in order to attract the client and to thereby earn expected profits in the future finally we show that the expected remaining duration of a lender client relationship is decreasing in the existing length of the relationship thus clients that have been with a particular lender longer will be more likely to leave and establish a relationship with another lender

some talk money in politics a partial review of the literature the financing of political campaigns is an area of active scholarly study i review some of the recent literature and discuss important methodological issues that arise in empir ical research on campaign expenditures and campaign contributions the effects of campaign expenditures and advertising on candidate and ballot measure elections are summarized as are the impacts of contributions on contributors welfare many states have changed their campaign finance laws in the past few years and i describe work that exploits variations in these laws a discussion of the strategies used by interest groups to allocate their campaign contributions provides insights into contributors motives

market structure and discrimination the case of small businesses this paper examines bank market structure to draw inferences concerning the role of discrimination in credit markets for small businesses the authors analyze credit application and denial rates loans outstanding and interest rates across demographic groups this set of variables in combination with information on local bank market structure helps them distinguish among borrower preferences lender tastes and inadequate lender information as likely causes of differences in credit market experiences of small business operators from distinct demographic groups the authors find that white men and women can expect similar treatment in credit markets with some benefits to female owned firms located in concentrated banking markets minorities by contrast fare worse than whites moreover by appealing to becker s 1957 classic theories we find some clear evidence to support the view that prejudicial discrimination is at least partly to blame

trade credit and informational asymmetry commonly used trade credit terms implicitly define a high interest rate that operates as an efficient screening device where information about buyer default risk is asymmetrically held by offering trade credit a seller can identify prospective defaults more quickly than if financial institutions were the sole providers of short term financing the information is valuable in cases where the seller has made nonsalvageable investments in buyers since it enables the seller to take actions to protect such investments traditional explanations for the widespread use of trade credit fall into two categories the financing motive holds that capital market imperfections enable sellers to finance buyer purchases at lower cost than financial institutions ferris 4 argues that trade credit provides payment flexibility and thus reduces the overall need for buyers and sellers to maintain precautionary balances emery 3 contends that noncompetitive rents of financial institutions can be circumvented by sellers and buyers through provision of trade credit however the financing motive is not sufficient to explain why small suppliers offer trade credit the wide cross sectional variation in terms or why large buyers often take the prompt payment discount late a second set of explanations is best described as pricing motivations for trade credit provision nadiri 10 argues that availability of alternative payment terms can increase product demand but does not indicate why the offered terms could not be duplicated by financial institutions schwartz and whitcomb 14 argue that trade credit is used to circumvent robinson patman and similar prohibitions on price discrimination the correctness of this position depends on the charge to users of trade credit exceeding the cost of provision by the seller although the explanation is possible in principle an empirical question remains as to why variations in actual credit terms appear to be based on product market rather than buyer characteristics the literature also contains analyses of the impact of changing macroeconomic conditions on trade credit terms and aggregate credit flows schwartz 13 for example employs a financing motive for trade credit to conclude that restrictive monetary policy can be partly mitigated by liberalization of trade credit terms by firms with relatively easy access to capital markets however a microeconomic

the power of the purse and its implications for bureaucratic policy making a dilemma of the power of the purse is thatcutting an agency s budget may make a desired policyinfeasible i examine the implications of thisdilemma with a repeated game in which a bureau choosesunobservable policies after a legislature sets itsbudget the bureau is work averse and has its ownpolicy preferences and therefore may cheat but thelegislature may perform an audit to recover slack funds a main result is that if the legislaturedesires a higher policy level than the agency then itfaces a trade off between good but wasteful policiesand bad but efficient ones

bank credit commitments credit rationing and monetary policy when loan needs are uncertain and bankruptcy is costly contracts resembling bank credit commitments dominate ordinary debt contracts the fees charged on commitments reduce bankruptcy risk by smoothing out borrowers loan payments reduced bankruptcy risk entitles borrowers to larger loans thereby reducing the risk of quantity rationing even if commitments reduce rationing risk monetary policy is not necessarily weaker under commitment finance a rise in lenders cost of funds perhaps reflecting a monetary contraction can reduce the expected value of a project more under a commitment than under an ordinary debt contract copyright 1994 by ohio state university press

information access and contributions a signaling model of lobbying interest groups pay monetary contributions to gain access and provide information to a policymaker if their interests are aligned with those of the policymaker s constituency they have costless access and report their private information truthfully if their interests conflict they are forced to pay a strictly positive contribution in order to enhance the credibility of their reports the policymaker bases her policy decision on the competing reports and the size of the contributions accompanying these reports the interest groups contribution decisions are plagued by a free rider problem i derive the implications of this problem for the size and pattern of contributions and for the degree of information aggregation

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

incentive compatibility in signaling games with a continuum of types on donne deux resultats utiles pour demontrer l existence et pour caracteriser des equilibres de separation dans des jeux de signalement

how does corporate political activity allowed by citizens united v federal election commission affect shareholder wealth abstractthe us supreme court case citizens united v federal election commission significantly altered the regulatory landscape for corporate political activity by permitting unlimited corporate expenditures by independent politically active groups this paper uses that event to determine the impact of corporate political activity on the stock prices of those firms that are most likely to utilize these new opportunities for political engagement our findings show that corporate political activity enhances shareholder wealth particularly in firms that are small to medium sized firms that spend relatively less on lobbying and firms operating in more heavily regulated industries

a model of the commercial loan rate this paper explores the theoretical and empirical determinants of the commercial loan rate charged by commercial banks based on a model of financial intermediary behavior which assumes monopolistic competition in asset and liability markets the model incorporates the constraint that banks must maintain at least a minimum quantity of bonds in asset portfolios equations are estimated on a time series basis to explain the behavior of commercial loan rates over the period 1953 to 1980 the evidence appears consistent with the hypothesis that commercial banks operate in a market characterized by imperfect competition and that they explicitly set loan rates the development of large scale econometric models has focused attention on the operation of the commercial loan market because of the importance of commercial loan activity in the transmission of monetary policy moreover it is commonly accepted that the quantity of commercial loans or changes in these loans has an important influence on the holding of free reserves by commercial banks and this implies that the commercial loan market has an effect on the supply of money 2 nevertheless the determinants of commercial loan rates have drawn relatively little analytical attention previous work on the commercial loan market has generally focused on the question of whether this market is characterized by credit rationing 3 most studies assume that the commercial loan market is generally competitive but at times the commercial loan rate does not clear the market the quantity of loans transacted is constrained by the supply function and commercial banks engage in nonprice rationing of customers a corollary of this rationing hypothesis is that events in the deposit market have an important influence on the quantity of commercial loans 4 the purpose of this paper is to explore the determinants of the commercial

campaign contributions as investments the u s house of representatives 1980 1986 this paper treats the market for special interest campaign contributions and political favors as a simple asset market the model yields a simple equilibrium relationship among three variables the total amount of investor contributions a candidate receives the monetary value of the favors he has promised and his probability of winning using data on open seat races for the u s house of representatives i confront the model with a series of tests despite the starkness of the model the results of these tests are highly supportive

specialization versus diversification as a venture capital investment strategy abstract much important work has informed us of rates of return earned by venture capitalists the importance of venture capitalists to the going public process and the criteria venture capitalists use to evaluate deals this paper seeks to add to the literature by testing hypotheses based upon both the finance and strategic management literature regarding certain venture capitalist investment practices venture capitalists seek to control or manage risk driscoll 1974 macmillan siegel and subbanarasimha 1985 financing structure and investment strategy provide several means for venture capitalists to do this tools available to the venture capitalist include portfolio diversification to spread risk across different industries firms or hot cold ipo markets to minimize unsystematic or investment specific risk information sharing networking and specialization can also be used to control unsystematic risk several hypotheses are developed from these conflicting perspectives data used to test the hypotheses are derived from responses to a survey of venture capitalists three hundred surveys were mailed to venture capitalists 98 or 32 7 returned usable responses portfolio diversification is a well known means to control risk exposure by reducing unsystematic or specific risks however bygrave 1987 1988 as well as financial intermediation theorists argues that maintaining a high degree of specialization is useful for controlling risk as well as for gaining access to networks information and deal flow from other venture investors the analyses of this paper build upon bygrave s work we construct more rigorous tests to resolve the conflict between the diversification and information sharing hypotheses our hypothesis tests were usually resolved in favor of the information sharing view for example venture capitalists in the sample that were heavily involved in seed round financing were diversified across fewer numbers of firms and industries further evidence in favor of information sharing is seen in investment patterns across different financing stages diversification would imply maintaining a portfolio of investments across the different investment stages the information sharing specialization view would argue that it is best to stay focused on a single stage or several connected stages the empirical evidence from the sample once again favors the specialization perspective this research provides information of use to venture capitalists as they seek information on how best to control risk to entrepreneurs as they learn of the factors venture capitalists consider in determining their investment strategy and to academicians as such studies provide insight to general industry practice and thus help to form the basis of classroom discussion and future research endeavors

how internal constraints shape interest group activities evidence from access seeking pacs interest groups contribute much less to campaigns than legally allowed consequently prevailing theories infer these contributions must yield minimal returns i argue constraints on pac fundraising may also explain why interest groups give little i illuminate one such constraint access seeking pacs rely on voluntary donations from affiliated individuals e g employees and these pacs alienate donors with partisan preferences when giving to the opposite party first difference in differences analysis of real giving shows donors withhold donations to access seeking pacs when pacs contribute to out partisan politicians next an original survey of corporate pac donors demonstrates they know how their pacs allocate contributions across parties and replicates the observational study in an experiment donors partisanship thus limits access seeking pacs fundraising and influence this provides a new perspective on why there is little interest group money in elections and has broad implications for how partisan preferences and other internal constraints shape interest group strategy

campaign finance and voter welfare with entrenched incumbents two candidates compete for elective office each candidate has information she would like to reveal to the voters but this requires costly advertising the candidates can solicit contributions from interest groups to finance such advertising these contributions are secured by promises to perform favors for the contributors should the candidate win the election voters understand this and elect the candidate they like best taking into account their expectations about promises to special interests there is an incumbency advantage in fundraising which is sometimes so great that the incumbent faces no serious opposition at all introducing partial public financing through matching funds improves voter welfare in districts that have advertising under the decentralized system while it can reduce welfare in other districts the optimal policy must strike a balance between these two effects

why is there so little money in u s politics in this paper we argue that campaign contributions are not a form of policy buying but are rather a form of political participation and consumption we summarize the data on campaign spending and show through our descriptive statistics and our econometric analysis that individuals not special interests are the main source of campaign contributions moreover we demonstrate that campaign giving is a normal good dependent upon income and campaign contributions as a percent of gdp have not risen appreciably in over 100 years if anything they have probably fallen we then show that only one in four studies from the previous literature support the popular notion that contributions buy legislators votes finally we illustrate that when one controls for unobserved constituent and legislator effects there is little relationship between money and legislator votes thus the question is not why there is so little money politics but rather why organized interests give at all we conclude by offering potential answers to this question this abstract was borrowed from another version of this item

a transactions theory of trade credit use this paper derives a transactions theory of trade credit use from the motives of trading partners to economize on the joint costs of exchange in the formal analysis uncertain delivery time is used to generate a demand by firms to hold inventories of both goods and money trade credit is viewed as a mechanism that separates the exchange of money from the uncertainty present in the exchange of goods by forewarning both trading partners of the timing of money flows credit permits a reduction in precautionary money holdings and the more effective management of net money accumulations

the politics of government decision making a theory of regulatory capture the paper develops an agency theoretic approach to interest group politics and shows the following 1 the organizational response to the possibility of regulatory agency politics is to reduce the stakes interest groups have in regulation 2 the threat of producer protection leads to low powered incentive schemes for regulated firms 3 consumer politics may induce uniform pricing by a multiproduct firm 4 an interest group has more power when its interest lies in inefficient rather than efficient regulation where inefficiency is measured by the degree of informational asymmetry between the regulated industry and the political principal congress

who benefits from secondary market price stabilization of iops abstract initial public offerings that receive secondary market price support from their underwriters are characterized by severely attenuated selling by small quantity presumably retail traders and more aggressive selling by large quantity presumably institutional traders the increase in institutional trading is concentrated in the first day of trading while the attenuation of retail trading persists this pattern exists in spite of the likelihood that retail investors receive relatively large initial allocations of fully priced stabilized offers thus the evidence is consistent with institutional investors being the primary beneficiaries of price stabilization efforts and with the use of penalty bids to constrain retail selling activity

the credit effects of monetary policy evidence using loan commitments in addition to the usual channels monetary policy may affect spending by changing the supply of bank loans and the creditworthiness of borrowers this paper tests for these credit effects using a contractual difference across commercial bank loans the author finds that bank loans not made under a commitment slow after tight policy while loans under commitment accelerate or are unchanged this divergence coincides with reports of tighter credit by lenders and by small firms suggesting the divergence reflects a reduction in the supply of credit to the firms without commitments rather than a reduction in their demand for loans

economic regulations red tape and bureaucratic corruption in post communist economies summary should state regulatory involvement in the economy necessarily generate corruption while excessive regulatory burden is often treated as a cause of corruption this paper argues otherwise it distinguishes regulatory policy or de jure regulatory regimes from regulatory implementation and offers a more nuanced argument about the relationship between state regulations and bureaucratic corruption the analysis of business survey data covering 25 post communist economies demonstrates that mechanisms of regulatory implementation rather than heavy handed regulatory policy are responsible for bribery this analysis draws attention to the theoretical distinction between different types of regulatory hurdles and their differential effects on the quality of governance

bank capital shocks dynamic effects on securities loans and capital abstract we used quarterly data for individual banks to estimate recent dynamic responses to bank capital shocks while it took bank capital and securities only one year to adjust to capital shocks liabilities and most loan categories took two to three years to complete their adjustments compared with those in the late 1980s capital shocks were twice as large and portfolio responses to capital shocks tended to be more rapid in the early 1990s larger banks adjusted each component of their portfolios faster than smaller banks capital shocks caused banks with capital shortfalls to contract more and more quickly in the 1990s than they had in the 1980s

determinants of venture capital firms preferences regarding the industry diversity and geographic scope of their investments abstract competition is intensifying in the venture capital industry in the u s the number of venture capital firms vcfs tripled from 1980 to 1989 supplier power in the form of institutional investors such as pension funds continues to grow foreign venture capital has grown to the extent that commitments to foreign vcfs exceeded domestic commitments in both 1988 and 1989 further alternative sources of financing for entrepreneurs such as individual investors angels corporations and strategic alliances are increasingly viable options vcfs face pressure to seek lower risk investments improve rates of return and provide value to new venture development surprisingly few scholarly studies have begun to investigate the strategies vcfs are aiming to implement in order to deal with this increasing pressure building on the premise that decisions regarding product market scope are a key component of firm strategy hofer and schendel 1978 this study examined 169 domestic vcfs in order to identify factors that might explain variations in preferences regarding the industry diversity and geographic scope of their investments the sample drawn from california massachusetts and texas represented about 27 of all u s based vcfs in 1987 the year in which the data were gathered in terms of the total size of investment portfolio the average for these 169 vcfs was 69 8 million which is statistically indistinguishable from the u s average of 65 million results indicate that 1 vcfs specializing in early stage ventures prefer less industry diversity and narrower geographic scope relative to other vcfs 2 corporate vcfs i e those owned by non financial corporations prefer less industry diversity but broader geographic scope relative to non corporate vcfs 3 larger vcfs prefer greater industry diversity and broader geographic scope than do smaller vcfs and 4 provision of small business investment companies sbic financing by the vcf has no impact on preferences regarding industry diversity but is associated with a preference for narrower geographic scope one implication of these results is that vcfs in the u s are not homogeneous as regards the intended product market scope of their portfolios this in turn holds implications not only for vcfs but also for their suppliers limited partners buyers entrepreneurs and policy makers vcfs can no longer rely on haphazard investment schemes they need to attract investors by virtue of the benefits offered by their portfolio strategy and they need to attract superior investments via offering valueadded services and know how potential investors in venture capital will want to examine for example the impact on risk and return of investing smaller amounts in several vcfs at one extreme versus making one large investment in a very diversified vcf at the other extreme the results of this and other studies suggest that outcomes timing magnitude and riskiness of returns of choosing such alternatives will vary widely and will depend in great part on the strategies of the vcfs involved it will not be possible for investors to make wise choices without a full examination of their own objectives and of the profiles of vcfs entrepreneurs with the most attractive ventures have alternative sources of financing to consider and should weigh the benefits of being financed and supported by various vcfs as part of the vcfs portfolios knowing a vcf s preferences regarding product market scope improves their chances of approaching and selecting the right fit and for those entrepreneurs with a narrower set of options such knowledge may make the difference between receiving and not receiving financing in a timely manner finally policy makers may be able to make use of knowledge of the forces that influence the investment strategies of vcfs presently concerns for policy makers may include the gap in seed capital increased foreign presence in the u s market and the export of promising innovative technology via alliances with foreign firms all of these factors are influenced by the strategies pursued by vcfs as they jockey for position in the increasingly competitive venture capital market

ergodic fluctuations in deterministic economic models abstract nonperiodic business fluctuations are shown to exist with positive measure generically and to behave like stationary stochastic processes in the standard dynamic macro model the implication is that so called chaotic fluctuations are probable for random initial conditions in a large class of recursive economies

the determinants of industry political activity 1978 1986 c ampaign contributions made by corporate political action committees pacs are increasingly important and controversial in u s elections influence purchasing is often alleged by pundits and campaign finance reform is continually debated in congress in the academy social scientists have analyzed the allocation of interest group monies and have looked for possible impacts on legislation few however have tried to explain the total contributions of economic interest groups we shall analyze variations in contributions across industries and over time with an empirical model based on organizationally constrained profit maximizing behavior we assume that corporate pac contributions in an industry are raised to enhance industry profits subject to the constraints of organization costs and freeriding incentives our empirical work covers 124 industries over five election cycles from 1978 through 1986 both the costs and benefits of political activity vary across industries we argue that the benefits of political action are determined by direct contact with the government as a regulator or purchaser of industry output by government s ability to ameliorate adverse market conditions and by the industry s ability to solve collective action problems without government assistance the costs of industry political action arise mainly from collective action problems because effective political activity often requires concerted action by the constituent firms in each industry we also make a methodological contribution previous studies use statistical techniques that suffer from sample selectivity bias or else force the probability of acting politically to be explained by the same set of coefficients as is the amount of action taken we explain and employ a technique that accounts for both problems the results are consistent with the theses that industries follow investment oriented goals in deciding the amount of political action to undertake and that collective action problems are important constraints on industry political activity we can explain between 60 and 80 of the variation in contributions in our sample first we review existing work on corporate political activity particularly papers examining patterns of aggregate pac spending by industry then we present an organization cost constrained industryprofit maximizing model based on a comparison between an idealized zero organization cost industry and the more realistic case where organizing collective action is difficult the independent variables used in the analysis are also discussed and defined next we discuss the dependent variable and total industry contributions and explain our statistical method then the results are presented followed by a discussion of industry structure and political activity to make clear how our results can explain different contribution patterns we give examples using five actual industries

service induced campaign contributions and the electoral equilibrium candidates for office are modeled as promising services such as support for legislation and intervention in the bureaucracy to interest groups in exchange for campaign contributions an electoral equilibrium is characterized in which candidates choose service contribution offers and interest groups choose whether to contribute the model provides several explanations of congressional incumbents success in over 90 percent of their reelection contests a recognition advantage a high personal valuation of the office a lower cost of providing services and policy alignment with high demand interest groups the model yields predictions that are consistent with empirical findings on the relation between campaign contributions and election outcomes