investment in site specific crop management under uncertainty implications for nitrogen pollution control and environmental policy this paper applies an option pricing model to analyze the impact of uncertainty about output prices and expectations of declining fixed costs on the optimal timing of investment in site specific crop management sscm it also analyzes the extent to which the level of spatial variability in soil conditions can mitigate the value of waiting to invest in sscm and influence the optimal timing of adoption and create a preference for custom hiring rather than owner purchase of equipment numerical simulations show that while the net present value npv rule predicts that immediate adoption is profitable under most of the soil conditions considered here recognition of the option value of investment indicates that it is preferable to delay investment in sscm for at least 3 years unless average soil quality is high and the variability in soil quality and fertility is high the use of the option value approach reveals that the value of waiting to invest in sscm raises the cost share subsidy rates required to induce immediate adoption above the levels indicated by the npv rule

domestic and international determinants of bank profits foreign banks in australia abstract this paper develops and tests a model that integrates the existing multinational bank literature with the domestic bank profits literature using data for australia this paper demonstrates that an integrated model results in a small increase in explanatory power when compared to models drawn solely from the multinational banking literature the paper finds that profits are a negative function of competitor market share and bank licence status and a positive function of australian size and home gdp growth it is argued that there is incomplete integration between the market segments of domestic and multinational banks due to the first mover advantages of incumbent banks

regulation and investment in the u s telecommunications industry abstractreversing a two decade deregulatory trend of telecommunications services in 2010 u s regulators embarked on an aggressive regulatory agenda including but not limited to the regulation of high speed internet services under the auspices of net neutrality using utility style regulations codified in the 1930s firms regulators and analysts feared a reduction in capital spending contradicting established policy goals of expanding internet availability and adoption in this article a difference in differences regression model augmented with randomization inference is applied to government data on capital spending in telecommunications large negative effects on investment are found the estimated effects are robust across changes in estimation periods and model specifications and multiple tests of the model s assumptions lend credibility to the findings

size growth and transnationality among the world s largest banks this essay investigates the relationship between size and growth rate of large international banks and then relates these to the banks degree of transnationality we test two sets of three propositions each the first three propositions are pi that the growth rate of each bank over some period is independent of its size p2 that the variability of growth rates is independent of the banks size and p3 that the banks growth rates in two consecutive periods are independent of each other the second three propositions are p4 that there is no association between size and transnationality p5 that transnationality and growth are independent and p6 that there is no relationship between transnationality and the variability of growth rates the growth referred to is primarily that of assets as a measure of size for the two propositions concerning the variability of growth rates we supplement this measure with one of the market value of the banks equity the results have implications for concentration in internathis paper investigates six propositions relating to gibrat s law of proportionate growth the growth referred to is that of book assets and total market value the results have implications for concentration in international banking and for depositor safety and the social cost of insuring it and provide evidence on economies of scale and on the transnational spread of the industry

conglomerates and industry distress focusing on economic distress episodes in an industry we estimate the effect of conglomeration on resource allocation distressed segments have higher sales growth higher cash flow and higher expenditure on research and development than single segment firms this is especially true for segments with high past performance for unrated firms and in competitive industries single segment firms increase cash holding and the diversification discount reduces during industry distress firms with high past performance acquire their industry counterparts and firms with low past performance exit the distressed industry industries more prone to distress have greater conglomeration overall conglomeration enables segments to avoid financial constraints during industry distress the author 2011 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oup com oxford university press

are there spatial spillovers in the adoption of clean technology the case of organic dairy farming this paper examines spatial spillovers associated with the adoption of organic dairy farming we hypothesize that neighboring farmers can help to reduce the uncertainty of organic conversion by lowering the fixed costs of learning about the organic system a spatially explicit 10 year panel dataset of more than 1 900 dairy farms in southwestern wisconsin is used as input into a reduced form econometric model of the decision to convert to organic production using an identification strategy that exploits the panel aspect of the micro dataset we find evidence that the presence of neighboring organic dairy farms affects the conversion decision

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

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

does the source of capital affect capital structure prior work on leverage implicitly assumes capital availability depends solely on firm characteristics however market frictions that make capital structure relevant may also be associated with a firm s source of capital examining this intuition we find firms that have access to the public bond markets as measured by having a debt rating have significantly more leverage although firms with a rating are fundamentally different these differences do not explain our findings even after controlling for firm characteristics that determine observed capital structure and instrumenting for the possible endogeneity of having a rating firms with access have 35 more debt copyright 2006 oxford university press

investment decisions in finite lived monopolies abstract this paper studies the value and optimal timing for investment in finite lived monopolies extending the literature on real option games by considering the cases of random and certain lived monopolies under these settings firms face the risk of demonopolization that can occur as a random or a certain event we show that these new settings produce significantly different results when compared to the canonical monopolistic and duopolistic models in a certain lived monopoly the leader invests sooner than in a duopoly if there is a risk of being preempted and later than in a monopoly if the leader role is pre assigned in a random lived monopoly entry occurs somewhere between the duopoly and monopoly cases higher uncertainty delays investment in all cases

japanese bank regulation and the activities of u s offices of japanese banks note the impact of regulations on markets especially in the banking sector has long been recognized this note considers the growth of u s activities of japanese banks with special emphasis on the role of japanese banking controls and regulations japanese authorities since world war ii have actively participated in their banking markets resulting in a banking sector that cannot respond freely to market conditions it is suggested here that japanese banks use the united states as an alternative source of funds during periods of tight credit in japan caused by these controls and it is found that during these periods u s activities of japanese banks increase this result emphasizes the importance of considering the international impact of regulations especially in markets with readily transported goods three loan demand equations are estimated to identify the importance of u s funds to japanese banks during periods of tight credit demand the first equation estimates a model of the determinants of demand for commercial and industrial loans from u s offices of japanese banks the customers for these loans cannot be determined from the data available but presumably include a relatively large number of japanese firms operating in both the united states and japan the second equation estimates a model of the demand by japanese banks for funds returned to japan via interbank loans from u s offices of japanese banks the third equation compares the demand for commercial and industrial loans of u s offices of japanese banks to that of u s banks overall the results support significantly the importance of u s offices of japanese banks to the japanese credit market section 1 reviews characteristics of japanese banking that may make u s offices especially attractive and the literature on foreign direct investment and how it relates

the entry and the activity level of foreign banks in italy an analysis of the determinants abstract although the theory of multinational banking has pointed out the importance of local profit opportunities the empirical evidence is still poor and deserves further investigation to this end we analyse entry decisions and activity levels of foreign banks operating in italy between 1983 and 1998 we consider 22 oecd countries 10 of which had at least one bank branch or subsidiary in italy entries and activity levels were related to the degree of economic integration as well as to the financial market features of the home country relative to italy unlike other studies besides economic integration the relative profitability of the banking activity proves to be a significant variable in that it highlights the importance of local market conditions in the past decade increased competition in the italian banking sector has reduced these profit opportunities driving foreign banks towards more innovative sectors of financial intermediation

information or regulation what drives the international activities of commercial banks information costs and regulatory barriers distinguish international financial markets from national ones using panel data on bilateral assets and liabilities of commercial banks i empirically determine the impact of information costs and regulations and i isolate intra eu financial linkages i confirm that information costs and regulations are important factors influencing international asset choices of banks but their relative importance differs among countries

information asymmetry valuation and the corporate spin off decision we empirically analyze the information hypothesis that the separation of a rm s divisions into independently traded units through a spin o enhances value because it mitigates information asymmetry about the rm consistent with this hypothesis we nd that rms that engage in spin o s have higher levels of information asymmetry compared to their industry and size matched counterparts and the information problems decrease signi cantly after the spin o the gains around spin o s are positively related to the degree of information asymmetry and this relation is more pronounced for rms with fewer negative synergies between divisions finally rms with higher growth opportunities and rms in need of external capital show a higher propensity to engage in spin o s they also raise more capital following a spin o which is consistent with the view that

the role of location related factors in u s banking involvement abroad an empirical examination this study examines the role of major location specific advantages in the international branch banking involvement of u s banks using pooled time series 1976 82 cross sectional thirty countries regression analysis this study finds that the u s business presence in foreign country has a strong positive effect on u s branch banking activity in that country in contrast the local market opportunity appears to have no significant effect these results hold for the entire set of countries as well as each of five subsets developed less developed european latin american and asian countries the openness of the host country to the establishment of new foreign bank branches does affect u s branch banking involvement this effect is most pronounced in the less developed countries particularly those in asia

factors affecting the performance of foreign owned banks in australia a cross sectional study abstract this study extends the existing literature of international banking by constructing a model of foreign intermediaries in australia an unresolved question is establishing those factors that result in banking across borders while a variety of theories attempt to explain international banking empirical tests are sparse mahajan a rangan n zardkoohi a 1996 journal of banking and finance 20 283 306 this study considers if the results to date apply in non us settings foreign bank size was found to be a positive function of bank licence parent size and time in australia and a negative function of australian net interest margins and fees the negative sign on net interest margins and fees is consistent with de young r nolle d 1996 journal of money credit and banking 28 622 636 foreign bank profits were a positive function of australian net interest margins and fees there was limited evidence of defensive expansion this paper concludes that foreign bank size is explained well by the existing theories of international banking but a wider model is appropriate for foreign bank profits

sics as delineators of economic markets the standard industrial classification sic is often used to divide firms into homogeneous markets firms classified into the same n 1 digit sic are thought to be more homogeneous than firms sharing only the same n digit sic this study measures how well the sic succeeds at combining firms into homogeneous economic markets assuming that firms in more similar economic markets should display more similar sales changes profit rates or stock price changes than firms in less similar economic markets the author finds that the sic is not successful at identifying firms with such similar characteristic variables copyright 1989 by the university of chicago

convergence in energy consumption per capita among asean countries abstract we test for convergence in energy consumption per capita among asean countries over the period 1971 to 2011 using the panel kpss stationarity test and panel lagrange multiplier lm unit root test the results for the panel stationarity and unit root tests with structural breaks find support for energy convergence in asean

regulation and corporate investment policy in a previous paper it was shown that the traditional rule that the allowed return on the equity of a regulated firm should be set equal to its cost of equity capital was conceptually deficient 2 this deficiency arises because the cost of equity capital of a regulated firm depends upon its risk which depends in turn upon the regulatory policy that will be followed in the future including the allowed rate of return it was argued therefore that this traditional rule should be replaced by the requirement that the regulatory policy be consistent a consistent regulatory policy achieves what the traditional rule only attempts it ensures that at the time of a regulatory hearing the market value of the firm equity is equal to the equity financed portion of the rate base to devise a consistent regulatory policy it is necessary to have a valuation model which takes explicit account of regulatory policy such a model was developed in the above mentioned paper in this paper we generalize the earlier valuation model so that the investment policy of the regulated firm is determined by the value maximizing decisions of the management instead of being taken as exogenous to the extent that investment policy is discretionary its endogeneity must be taken into account in devising a consistent regulatory policy and this is made possible by the generalized model in reality it seems unclear to what extent the investment policies of regulated firms are predetermined by the requirement that they meet demand and to what extent they are discretionary since the model presented here easily accommodates constraints on the investment policy it is the more appropriate model so long as there exists any element of discretionary investment behaviour and permits a more adequate approach to the determination of consistent regulatory policies with discretionary investment policy an important consequence of any particular consistent regulatory policy is the investment policy it induces in section 4 we show how the value maximizing investment policy is affected by the choice of regulatory policy on the other hand regulated firms are wont to argue that their investments are in the main predetermined by demand and must be undertaken regardless of their profitability this putative lack of discretion it is maintained means that the appropriate allowed rate of return is higher than would otherwise be the case in section 4 also we evaluate the strength of this consideration by comparing the allowed rate of return under consistent regulatory policies when investment policy is and is not discretionary section 5 shows briefly how the analysis can be extended to account for the effect of debt in the capital structure

option valuation of claims on real assets the case of offshore petroleum leases this paper extends financial option theory by developing a methodology for the valuation of claims on a real asset an offshore petroleum lease several theoretical and practical problems not present in applying option pricing theory to financial assets are addressed most importantly we show the necessity of combining option pricing techniques with a model of equilibrium in the market for the underlying asset petroleum reserves the advantages of this approach over conventional discounted cash flow techniques are emphasized the methodological development provides important insights for both company behavior and government policy promising empirical results are reported

market power in banking countercyclical margins and the international transmission of business cycles abstract by introducing an imperfectly competitive banking sector into a standard two country two good rbc model with complete asset markets we study the international transmission of aggregate tfp shocks in an environment with noncompetitive financial intermediation in this model price cost margins in a global loan market are endogenous and countercyclical as a result a positive tfp shock in one country spills over to another through a reduction in the global cost of both credit and externally financed investment the quantitative analysis shows that countercyclical margins on loans play a key role in bringing the predictions of the theory closer to the observed cross country cyclical co movements of consumption employment investment and output recessions are deeper when the cost of credit rises during these economic downturns thus a financial accelerator arises in our framework unveiling the increased importance of stabilization policies in economies where margins in credit markets are countercyclical

internalization and experience japanese banks international expansion 1980 1998 we use an interdisciplinary approach to investigate multinational banks foreign activities we bridge core concepts from the stages theory of internationalization to internalization theory to extend the literature on the defensive expansion hypothesis unlike the primarily aggregate levels of analysis employed in previous research on multinational banking we utilize a firm level analysis of the internationalization experiences of 21 japanese banks in the period 1980 1998 we find that banks undertake foreign direct investment to secure internalization benefits by following their existing clients and to achieve economies of scale in the application of their intangible assets in international markets the magnitude of these relationships however is contingent upon the level of a bank s experience in the host countries consistent with predictions from internationalization theory we find that the motivations for international expansion can change over time

what lures cross border venture capital inflows the change in the business model of venture capitalists from investing locally towards investing across borders started to intensify in the late 1990s according to a dataset of european and north american countries we find that countries with higher expected growth and higher lagged stock market returns receive larger net cross border venture capital inflows thus portfolio companies located in high growth and high return countries receive more venture capital from foreign venture capitalists than these countries venture capitalists invest in foreign portfolio companies also countries with lower stock market capitalizations as well as those with poor tax and legal environments for venture capital intermediation exhibit larger net cross border inflows these findings offer important insights for policy makers since cross border venture capital inflows partly compensate for potential limits in the domestic venture capital supply

the economic effects of supply controls the simple analytics of the u s peanut program a gricultural commodity programs employ a wide variety of policy tools to regulate u s agriculture price supports are the most common form of intervention but rights to sell at the supported price are allocated very differently under different commodity programs under recent feed grain programs for example the right to sell at the supported price is linked to acreage set asides agreements not to produce on certain acres in other programs sales by individual farmers are controlled under marketing orders sponsored by the u s department of agriculture usda 2 a third method is through permanent maketing quotas that directly limit output only two major commodity programs those for tobacco and peanuts currently allocate the right to sell in this way the peanut program is the subject of this article 3

technical change and irreversible investment under risk abstract a stochastic dynamic model was constructed to analyze investment decisions of an individual farmer under risk in the presence of irreversibilities embedded technical change and indivisible capital an analytical solution was obtained and its local behavior studied by numerical methods optimal investment is obtained by regulating the difference between the desired and actual capital stocks between two barriers that define an inaction interval while the desired capital drifts between the barriers no action is taken if the desired capital touches the upper barrier the farmer invests pushing the average efficiency of the actual capital stock up this in turn raises the desired capital even higher and contracts the inaction interval if these effects are strong enough the farmer will invest again until the potential gains of the technological package are exhausted if the desired capital falls enough the farmer disinvests pushing down the average productivity and expanding the inaction interval disinvestment continues until it stops either because the inaction interval becomes so wide that it is no longer optimal to disinvest or because the actual capital stock is so small that it is no longer profitable to produce

emission permit banking pollution abatement and production inventory control of the firm abstract in this paper we present a dynamic model modified with emission permit banking and pollution abatement and investigate the effect of emission permit banking and pollution abatement on the production inventory strategy of the firm after introducing emission permit banking and pollution abatement the cost function consists of the inventory holding and production costs the cost of investment in abatement capital goods and the emission procurement selling cost furthermore the inventory holding costs are linear production costs are non decreasing and convex functions of the production level and the costs of investment in abatement capital goods are increasing and convex functions of the investment level we compare the optimal production inventory strategy before emission permit banking and pollution abatement and thereafter the mathematical investigation is based on the arrow karlin model

positive theories of multinational banking eclectic theory versus internalisation theory the choice of an appropriate paradigm to consider banks motivation to enter a new market and their subsequent performance is an important issue in multinational banking this paper discusses this issue within the context of two competing theories of the multinational enterprise and the special theories of banking as applied to the multinational enterprise the conclusion of this paper is that while it may not be possible to empirically distinguish between the propositions of eclectic theory and internalisation theory intemalisation theory offers a framework with greater internal consistency for the study of the multinational bank further any empirical studies must be conducted within the framework of the appropriate special theories consistent with internalisation theory these special theories have developed over time in an unstructured fashion and the application of internalisation theory provides a cohesive framework within which to analyse these theories

conglomerate entrenchment under optimal financial contracting we provide a formal analysis of the notion that conglomerates are more entrenched as they have deeper pockets using the financial contracting model of bolton and scharfstein 1990 we can isolate two effects that confirm this conjecture the pooling of cash flows which allows to smooth out repayments and the ability to obtain better credit terms for less profitable business segments the internal capital market operated in a conglomerate may however work in the opposite direction increasing the sensitivity of operations to own cash flows and increasing the likelihood of exit

the extension of international credit by us banks a disaggregated analysis 1988 1994 abstract we use simultaneous equation estimation techniques to analyze decisions made by 35 us banks with respect to credit extended domestically and to credit extended within 16 foreign countries 1988 1994 our results indicate that foreign credit extension by us banks follows the commercial expansion of us businesses abroad and is greater in countries with expanding economies they are inconsistent with the notion that banks trade off credit activities undertaken domestically and abroad

investment decisions in hog finishing an application of the real options approach in this paper option pricing theory is applied to an investment problem in hog production a stochastic simulation model capable of pricing american type options is developed this is achieved by recursive calculation of the exercise frontier the model is used to determine the investment trigger and the disinvestment trigger for a pig fattening barn under german market conditions it turns out that the investment trigger taking into account the value of waiting in an uncertain environment can be considerably higher compared to classical investment criteria such as the net present value this offers an explanation as to why farmers are indeed reluctant to invest in hog production another finding is the sensitivity of the option prices with respect to the stochastic process that is assumed for revenues and variable costs of the production activity

time to build option value and investment decisions abstract investment decisions and outlays are often made sequentially for example the rate at which construction proceeds is usually flexible and can be adjusted with the arrival of new information traditional discounted cash flow methods which treat the pattern of investment as fixed ignore this flexibility and understate the value of the project this paper uses contingent claims analysis to derive optimal decision rules and to value such investments we determine the effects of time to build opportunity cost and uncertainty on the investment decision for reasonable parameter values we show how a simple npv rule can lead to gross errors

the effect of changes in reserve requirements on bank stock prices abstract the present study re examines the tax burden effects of reserve requirements on bank profitability it differs from previous work in two ways 1 changes in stock prices rather than accounting data are used to measure profitability effects and 2 emphasis is placed on changes in reserve requirements as opposed to their level regarding the latter distinction two kinds of changes are considered 1 temporary changes in reserve requirements for the purpose of discretionary monetary policy and 2 more permanent changes in reserve requirement levels based on the event study methodology temporary changes were found to have little effect on security prices whereas more permanent changes had a stronger influence on bank stock prices reflecting a tax burden effect

a model of entry exit decisions and capacity choice under demand uncertainty abstract many investment decisions of agribusiness firms such as when to invest in an emerging market or whether to expand the capacity of the firm involve irreversible investment and uncertainty about demand cost or competition this paper uses an option value model to examine the factors affecting an agribusiness firm s decision whether and how much to invest in an emerging market under demand uncertainty demand uncertainty and irreversibility of investment make investment less desirable than the net present value npv rule indicates the inactive firm is more reluctant to enter the market when it takes into account demand uncertainty because it preserves the opportunity of making a better investment later the active firm is more reluctant to abandon the investment because there is an option value of keeping the operation alive there is a greater distance between the entry and exit thresholds under the option value approach than under the npv rule due to demand uncertainty the results have implications for agribusiness decision making

spillovers through banking centers a panel data analysis of bank flows abstract this paper presents evidence that spillovers through bank lending contributed to the transmission of currency crises during the recent episodes of financial instability in emerging markets the innovation of the paper is that it looks beyond aggregated measures of contagion into the structure of bank flows disaggregating by banking centers the main findings are that spillovers caused by banks exposures to a crisis country help predict flows in third countries after the mexican and asian crises but not after the russian crisis in the latter there is evidence of a generalized outflow from emerging markets the importance of spillovers through banking centers suggests that countries might reduce contagion risk by diversifying the sources of their financing and by carefully monitoring borrowing from creditors exposed to potential crisis countries

the mix of international banks foreign claims determinants and implications we analyze the cross country determinants and financial stability implications of the mix of international banks foreign claims we distinguish between local claims extended by host country affiliates and cross border claims booked outside the receiving country using data on italian spanish and us banks foreign claims we find that the share of local claims is driven by restrictions on banking sector openness and by local scale economies business opportunities the impact of limits on property rights entry requirements start up and informational costs is less robust finally foreign claim volatility is lower in countries with a larger share of local claims

additions to bank loan loss reserves good news or bad news abstract this paper examines the effects of citicorp s and succeeding banks loan loss reserve announcements in 1987 it was found that while the average effect on bank stock return portfolios was weak the effect on individual bank returns was heterogeneous tests were undertaken to determine which bank specific variables explained the latter result two significant variables were the size of a banks ldc debt exposure and its position in ldc rescheduling committees

evaluating natural resource investments notwithstanding impressive advances in the theory of finance over the past 2 decades practical procedures for capital budgeting have evolved only slowly the standard technique which has remained unchanged in essentials since it was originally proposed see dean 1951 bierman and smidt 1960 derives from a simple adaptation of the fisher 1907 model of valuation under certainty under this technique expected cash flows from an investment project are discounted at a rate deemed appropriate to their risk and the resulting present value is compared with the cost of the project this standard textbook technique reflects modern theoretical developments only insofar as estimates of the discount rate may be obtained from crude application of single period asset pricing theory but see brennan 1973 bogue and roll 1974 turnbull 1977 constantinides 1978 the inadequacy of this approach to capital budgeting is widely acknowledged although not widely discussed its obvious deficiency is its the evaluation of mining and other natural resource projects is made particularly difficult by the high degree of uncertainty attaching to output prices it is shown that the techniques of continuous time arbitrage and stochastic control theory may be used not only to value such projects but also to determine the optimal policies for developing managing and abandoning them the approach may be adapted to a wide variety of contexts outside the natural resource sector where uncertainty about future project revenues is a paramount concern

the debt equity choice when firms adjust their capital structures they tend to move toward a target debt ratio that is consistent with theories based on tradeoffs between the costs and benefits of debt in contrast to previous empirical work out tests explicitly account for the fact that firms may face impediments to movements toward their target ratio and that the target ratio may change over time as the firm s profitability and stock price change a separate analysis of the size of the issue and repurchase transactions suggests that the deviation between the actual and the target ratios plays a more important role in the repurchase decision than in the issuance decision

taking stock a critical assessment of recent research on inventories empirical and theoretical aspects of inventory behavior became hot topics in the 1950s and early 1960s no one seemed to notice the tension that was developing between the emerging macroeconomic and microeconomic views of inventories macroeconomists routinely thought of inventories as a destabilizing factor yet the prevailing micro theory viewed inventories as a stabilizing factor it was a fascinating question that was barely explored instead somewhat inexplicably interest in inventories dried up as if inventories were of minor economic significance and little intrinsic interest by the early 1980s then economists once again knew something they had known in the 1950s that inventory investment is of first order importance in business cycles but they were also beginning to realize that the standard production smoothing buffer stock model of inventories was in deep trouble this paper focuses on developments since that realization

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

resource allocation within firms and financial market dislocation evidence from diversified conglomerates we argue and demonstrate that resource allocation within firms internal capital markets provides an important force countervailing financial market dislocation we estimate a structural model of internal capital markets to separately identify and quantify the forces driving the reallocation decision and illustrate how these forces interact with external capital market stress the weaker stronger division obtains too much little capital as though it is 12 9 more less productive than it really is out of sample simulated data are consistent with the actual data showing that internal capital markets offset financial market stress during the recent financial crisis by 16 30

capital investment strategies under uncertain regulation this article presents a positive model of investment choices by regulated firms that offers rational explanations for electric utilities recent behavior of delaying investment and choosing smaller shorter lead time technologies the model assumes thatfirms capital investments require long lead times during which the value of the completed project is uncertain firms anticipate regulatory profit and loss restrictions but expectations about the value of a completed project change over time firms decisions are modelled using an option pricing approach that incorporates the value of flexibility to delay or abandon projects the article shows why rational firms invest in smaller shorter lead time plants or delay investment when faced with uncertain and asymmetric profit and loss restrictions it also looks at decisions to abandon partially completed plants and shows that the static result that a higher cost allowance on abandoned projects increases the incentive for investment is not generally true in a dynamic model

international banks as leaders or followers of international business an historical perspective abstract international banking and international trade have been partners since the beginning of world trade and world finance indeed the distinction between international trade and international finance as two separate functions and institutions is relatively recent banks and business firms are two parts of a world network therefore there is no easy answer to the question as to whether banks follow or lead international business it is probable that where banks are aggressive in building world networks and industries focus on single projects banks lead and industry follows but under the opposite conditions the roles will reverse there is no way to determine which of the two processes is dominant

a real options analysis of coffee planting in vietnam vietnam grew from an insignificant to the world s second largest coffee producer during the 1990s to understand this growth this article examines vietnamese coffee growers investment decisions using real options theory the study finds that producers with variable costs of 19 cents lb and total cost of 29 3 cents lb would enter coffee production at a coffee price of 47 cents lb and exit at a coffee price of 14 cents lb most vietnamese growers appear to be sufficiently efficient to continue producing coffee even at relatively depressed price levels

technology adoption decisions under irreversibility and uncertainty an ex ante appproach empirical results demonstrate that uncertainty about costs and requirements for environmental compliance is an important determinant of dairy producers investment behavior ex ante forecasting of how uncertainty and irreversibility are likely to affect producers responsiveness to agricultural technologies has implications for the design of environmental policies simulation modeling methods are described the empirical analysis focuses on texas producers propensity to adopt free stall dairy housing free stall investments offer advantages for both productivity augmentation and pollution abatement yet uncertainty and irreversibility are obstacles to adoption implications of this ex ante paradigm for policy design and implementation are discussed

learning by doing and dynamic regulation from experience regulated monopolists learn to employ cost reducing innovations we characterize the optimal regulation of an innovating monopolist with unknown costs regulatory policy is designed to minimize current costs of service while encouraging development of cost saving innovations we find that under optimal regulation i innovation is encouraged by light handed regulation allowing the monopolist to earn greater information rents while providing greater service ii innovation occurs in the absence of long term agreements when private information is recurring and iii innovation is more rapid in a durable franchise and the regulator prefers durable franchises for exploiting learning economies

valuation effects of the international banking act on foreign banks operating in the united states note this study empirically evaluates the daily stock price behavior of thirty one major foreign banks operating in the united states at the time of the passage of the international banking act of 1978 statistically insignificant abnormal returns are observed during the months of debate over this legislation however negative and statistically significant abnormal returns are found after the bill was signed by president carter the empirical results of this analysis taken together with those of previous research suggest that the international banking act was perceived at the time as having reduced the regulatory inequities between u s banks and foreign banks operating in the united states copyright 1991 by ohio state university press

optimal timing of technology adoption abstract in a dynamic programming framework this paper investigates the optimal timing of technology adoption by a competitive firm when technology choice is irreversible and the firm faces a stochastic innovation process with uncertainties about both the speed of the arrival and the degree of improvement of new technologies a numerical example illustrates how the optimal timing decision is affected by changes in parameter values reflecting market conditions the firm s initial technological attributes and the characteristics of the stochastic innovation process some of these effects turn out to be in sharp contrast to common intuition contrasting the optimal decision rule derived here with the rule obtained under the net present value shows that the former implies a slower pace of adoption than implied by the latter the optimal decision rule is generalized for the case of multiple technology switches and it is shown that for all the switching decisions except the last one the optimal rule satisfies the net present value criterion

demand uncertainty and the regulated firm in this paper we investigate the impact of demand uncertainty on the choice of plant capacity by a regulated firm over the past few years demand uncertainty has become a major element in the decision making of utilities and particularly in their decision making with respect to capacity choices in a recent study by sri 1977 it was reported that to maximize expected consumers surplus more generating capacity was required for the electric utility industry when operating under demand uncertainty than under demand certainty 1 this finding raises the question whether the structure of rate regulation of electric utilities provides the appropriate incentives for them to invest in more capacity under demand uncertainty then under certainty the present paper addresses such questions the model of the regulated firm that is employed in this paper derives from the work of joskow 1974 concerning the recent history of rate regulation in the electric utility industry briefly joskow reported that during the 1960s and the early 1970s the impetus for rate reviews in the electric utility industry came mainly from the utilities and not from the public utility commissions puc s joskow s findings are corroborated by data for the period 1948 1978 a study of all rate cases involving electric utilities in the u s for that period shows that of a total of 363 cases 350 of these were instances of utility initiated rate reviews and only 13 were cases of puc initiated reviews 2 from the point of view of the formal theory of the regulated firm this strongly suggests that the averch johnson model of a firm operating at or near an allowed rate of return constraint with the allowed rate of return being in excess of the cost of capital to the firm should be replaced by a model of price regulation in which attention is shifted to the non negativity of profits constraint or at least this should be done with respect to the electric utility industry with some elaborations this is basically what we do in this paper building on the approach adopted in a recent paper on a related topic 3

the determinants of us banking activity abroad abstract the banking industry provides an excellent example of the internationalization of world business and economic interdependencies across countries analysis of the past growth of international banking operations can also prove useful to banks interested in augmenting their current business or expanding their international coverage and to banks who anticipated future competition in their markets from new or strengthened foreign competitors this study provides the most comprehensive examination of the development of us bank branches in other countries is presented and tested in order to facilitate the understanding of the expansion of international banking

the case for a real options approach to ex ante cost benefit analyses of agricultural research projects the united states agency for international development usaid like many other development agencies and donors increasingly emphasizes evidence based programming this requires assessments of project performance at all stages of implementation comprising ex ante impact assessment monitoring and evaluation and ex post attribution of outcomes ex ante impact assessment in particular involves performing cost benefit analysis cba to determine the expected net present value enpv of the project in question unfortunately the traditional enpv approach has proven inadequate for dealing with uncertainty in the timing of investments and flexibility in future decision making this is especially relevant for research and development r d projects which require several stages of product development and multiple rounds of testing prior to releasing final products as a consequence the real options approach to cba has increasingly been used to evaluate private sector r d projects this paper advocates for the adoption of the real options approach in the evaluation of public investments in agricultural research and illustrates its practical utility with an assessment conducted by usaid to determine the economic viability of a proposed project to develop improved varieties of critical food security crops in uganda

returns on investments in energy saving technologies under energy price uncertainty in dutch greenhouse horticulture conventional net presentvalue calculations evaluating the profitabilityof investments in energy saving technologies indutch horticultural outlays predict a muchhigher rate of adoption of these technologiesthan is actually observed this paper tries toexplain this gap by applying a real optionsframework hurdle rates for investments in twotypes of energy saving technology are estimatedusing simulated future revenue streams givenuncertainty regarding energy prices and energytax policies hurdle rates found in this wayare on average about 1 76 times the hurdlerates that result from net present valuecalculations furthermore this paper tests thepredictive value of the theory by estimating alogit model this model relates the incidenceof having invested in an energy savingtechnology to the difference between the returnon investment and the hurdle rate thepredictive power turns out to be encouraging as the statistical tests indicate that higherhurdle rates tend to reduce rates of technologyadoption

co firing coal with wood pellets for u s electricity generation a real options analysis abstract in contrast to eu u s electric utilities are not employing the bioenergy technology of co firing wood pellets with coal this difference in employment patterns is explored within a real options analysis roa for possible u s utilization of wood pellets considering fuel price series from 2009 to 2014 for analysis these series are divided into two sub periods based on different market conditions infancy 2009 2011 and substitution 2012 2014 roa indicates co firing wood pellets with coal is feasible considering adoption during wood pellets infancy under low discount rates and long power plant lifespans a portfolio effect of employing multiple fuels underlies this result however co firing is not currently economically feasible the different adoption decisions are likely a consequence of recent cheap and abundant u s natural gas for co fired wood pellets to be feasible government incentives and or a market increase in natural gas prices appear necessary

conglomerate investment under various capital market conditions abstract this paper studies the investment of diversified and focused firms under various capital market conditions when external capital becomes more costly at the aggregate level investment declines in focused firms but remains unchanged in diversified firms this investment advantage enjoyed by diversified firms could attribute to both their easy access to external capital and their ability to substitute internal capital markets for costly external markets consistent with the internal capital market argument our findings show that the investment advantage exists for diversified firms even after we control for their easy access to external markets we also find that the role of internal markets in financing investment is more important for diversified firms that are more financially constrained in external markets finally we find that the segment level investment becomes more efficient in conglomerates internal capital markets under depressed external capital market conditions overall our findings suggest that internal capital allocation functions as a valuable and efficient substitute for diversified firms in a tightened external capital market

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

effects of the 1970 bank holding company act evidence from capital markets this study measures the effects of the 1970 amendment to the bank holding company bhc act on the profitability and risk of bhcs using capital market data differences in abnormal returns and risk among three portfolios of bank shares which differ in their regulatory status are examined in various periods preceding and following the enactment no significant differences in performance and no change in the relative risk of any pair of portfolios were observed thus the null hypothesis that the nonbank expansion provisions of the 1970 amendment had no effect on bhcs risk and profitability cannot be rejected the growth of bank holding companies and their expansion into nonbank activities following the 1970 amendment to the bank holding company bhc act of 1956 produced striking structural changes in the banking industry the nonbank expansion provisions of the statute triggered a continuing debate about the costs and benefits of these provisions black miller and posner 2 consider the amendment to be an important innovation that can increase the efficiency and hence the profitability of financial intermediaries other writers however suggest that nonbank activities of bank holding companies may increase the risk of bank failure thereby increasing the regulatory involvement silverberg 14 orgler and wolkowitz 13 and mayne 10 2 this study analyzes the effects of the 1970 amendment to the bank holding company act on the profitability and riskiness of bank holding companies capital market data are used to measure risk and return fama 6

marketing quotas and random yields marginal effects of inframarginal subsidies on peanut supply the u s peanut program restricts domestic sales with poundage quota but allows surplus production to be exported or crushed empirical analysis of north carolina peanut production reveals that the marginal and lower price received by production above quota that is the world price is far more important in determining acreage than is the inframarginal subsidy of the quota support price

holding on for too long an experimental study on inertia in entrepreneurs and non entrepreneurs disinvestment choices abstract disinvestment in the sense of project termination and liquidation of assets including the cession of a venture is an important realm of entrepreneurial decision making this study presents the results of an experimental investigation modeling the choice to disinvest as a dynamic problem of optimal stopping in which the patterns of decisions are analyzed with entrepreneurs and non entrepreneurs our experimental results reject the standard net present value approach as an account of observed behavior instead most individuals seem to understand the value of waiting their choices are weakly related to the disinvestment triggers derived from a formal optimal stopping benchmark consistent with real options reasoning we also observe a pronounced psychological inertia i e most individuals hold on to a losing project for even longer than real options reasoning would predict the study provides evidence for entrepreneurs and non entrepreneurs being quite similar in their behavior

the decision to establish a foreign bank branch or subsidiary an application of binary classification procedures this paper has two purposes first we model a key decision for inter national banks using data on the foreign direct investment fdi behavior of foreign banks in japan and california second we examine the utility of linear discriminant analysis and maximum likelihood logit analysis as statistical techniques for relating a qualitative dependent variable to a vector of inde pendent variables we apply these techniques to the decision by parent banks as to whether or not to have a subsidiary branch in california japan we treat the deci sion as a binary choice based on a consideration of various relevant factors the population for each of the countries consists of those foreign to the host country banks that already have a presence in the country the research ques tion then becomes given that a foreign bank is in the country does the extent of the parent bank s experience internationally and in the host country affect the probability that it will deepen its presence the choice of statis tical tools by which to examine this question gives rise to our methodological concerns

technology choice under changing peanut policies the effect of marketing quotas and price supports on technology adoption are examined for peanut production in the southeastern united states using a real options model of investment with output price and yield uncertainty the optimal choice of peanut production technology dryland versus irrigated in the southeast is shown to depend on price supports and how they change the manner in which price supports change will have an effect on the choice and rates of abandonment or adoption of production technologies

acreage decisions under marketing quotas and yield uncertainty a conceptual model examines how quotas and yield uncertainty affect acreage decisions production in excess of a quota can occur if the price for quota production is large relative to marginal costs increasing risk aversion increases expected production further if the risk of forfeiting quota revenue is given greater weight than avoiding production risk allowing quota carryover decreases production levels simulations indicate the most important factors determining expected production levels are a the existence of a carryover provision b the price differential given to quota production relative to nonquota production and c the level of marginal costs relative to the quota price

the international transmission of financial shocks the case of japan one of the more dramatic financial events of the late 1980s and early 1990s was the surge in japanese stock prices that was immediately followed by a very sharp decline of more than 50 percent while the unprecedented fluctuations in japanese stock prices were domestic financial shocks the unique institutional characteristics of the japanese economy produce a framework that is particularly suited to the transmission of such shocks to other countries through the behavior of the japanese banking system the large size of japanese bank lending operations in the united states enables us to use u s banking data to investigate the extent to which this domestic japanese financial shock was transmitted to the united states as well as to identify a supply shock to u s bank lending that is independent of u s loan demand we find that binding risk based capital requirements associated with the decline in the japanese stock market resulted in a decline in commercial lending by japanese banks in the united states that was both economically and statistically significant this finding has added importance given the severe real estate loan problems currently faced by japanese banks how japanese bank regulators decide to resolve these problems will have significant implications for credit availability in the united states as well as in other countries with a significant japanese bank presence

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

irrigation technology adoption and its implication for water conservation in the texas high plains a real options approach water shortage has been a significant issue for several decades in the texas high plains agriculture has been identified as the main activity contributing to this shortage to address this issue many efforts have been focused on the possible adoption of sophisticated irrigation systems with high levels of water application efficiency in this study the entry and exit thresholds for the low energy precision application lepa system are analyzed simultaneously in cotton farming in the texas high plains using a real options approach the results show that the lepa system is profitable only when cotton price is set above 1 59 kg the exit entry threshold is consistently low high over a range of values for parameter changes including investment cost exit cost variable cost risk adjusted discount rate and volatility rate so it is unlikely that farmers with irrigation systems in place would leave them easily this implies that to attain the goal of saving water lubbock county needs to focus on convincing current farmers to replace old irrigation systems with new ones

investment under uncertainty and dynamic adjustment in the finnish pork industry bykyosti s pietola and robert j myersmay 1998paper prepared for a selected paper session at the annual meeting of the american agriculturaleconomics association salt lake city utah august 1998 this research was financed jointly byagricultural economics research institute in finland the academy of finland and the finnishcultural foundation we also knowledge the michigan agricultural experiment station for itssupport of this research authors are agricultural economist agricultural economics research institute helsinki finland and associate professor department of agricultural economics michigan state university eastlansing copyright 1998 by kyosti s pietola and robert j myers all rights reserved readers may makeverbatim copies of this document for non commercial purposes by any means provided that thiscopyright notice appears on all such copies

international lending patterns of u s commercial banks the international lending behavior of the u s commercial banks depends upon economic links between countries much of the difference between the international loan portfolios of u s banks and those of the non u s banks may be explained by the patterns of trade flows and investments by nonfinancial corporations these trade flows and investment patterns explain most of the variations in the bank lending patterns for 70 80 percent of the countries the analysis points to an increasing influence of economic ties on the lending process over time

an option valuation analysis of investment choices by a regulated firm this paper analyzes a utility power plant construction project using an option pricing model of the value of the capital investment it includes descriptive factors frequently ignored in the valuation of capital investments by regulated firms including lead time lumpy and sequential cost outlays irreversibility of expenditures and uncertainty about regulatory outcomes for completed projects the analysis shows the value of shorter lead time technologies the value of flexibility to delay or abandon construction the incentive to delay construction under uncertain regulation and how cost recovery policies such as possible disallowance of allow for funds used during construction afudc create incentives to invest less but to complete construction quickly the analysis may also apply in unregulated contexts where the value of a completed project is affected by taxation the possibility of nationalization or possible competitors actions that create uncertain restrictions on potential profits

the diffusion of clean technologies a review with suggestions for future diffusion analysis abstract this article gives an overview of the literature on clean technology diffusion followed by suggestions for future analysis findings from diffusion analysis are presented in the form of 10 stylised facts helping the reader to see the forest for the trees the overall conclusion is that the diffusion of clean technology same as the diffusion of normal innovations is governed by endogenous mechanism epidemic learning and learning economies and by exogenous mechanisms policy is important for clean technology diffusion but other factors are important too the characteristics of the clean technology absorptive capacities of potential adopters and the age structure of capital it is often overlooked that companies have a choice they can choose between an end of pipe solution a process change adaptation and a change of process substitution this means that the diffusion and evolution of one clean technology will be at the expense of the diffusion of another clean technology something overlooked in studies on clean technology diffusion further research is needed on the influence of public policy on clean technology choice expectations about learning economies and prices adjustment costs network externalities and complementary innovations on clean technology adoption choices

the structure of international banking abstract this paper investigates the factors that determine the number and form of foreign banking operations from 60 foreign countries in the united states our equilibrium model of three banking forms representative offices agencies and branches and three explanatory variables export activity merchant banking activity and capital market development explains more than 74 per cent of the variation in numbers of offices across the 60 different foreign countries in addition we identify the equilibrium model of competition among the types of operations that is most consistent with the empirical results jel f33

inconsistent regulators evidence from banking we find that regulators can implement identical rules inconsistently due to differences in their institutional design and incentives and this behavior may adversely impact the effectiveness with which regulation is implemented we study supervisory decisions of u s banking regulators and exploit a legally determined rotation policy that assigns federal and state supervisors to the same bank at exogenously set time intervals comparing federal and state regulator supervisory ratings within the same bank we find that federal regulators are systematically tougher downgrading supervisory ratings almost twice as frequently as do state supervisors state regulators counteract these downgrades to some degree by upgrading more frequently under federal regulators banks report worse asset quality higher regulatory capital ratios and lower return on assets leniency of state regulators relative to their federal counterparts is related to costly outcomes such as higher failure rates and lower repayment rates of government assistance funds the discrepancy in regulator behavior is related to different weights given by regulators to local economic conditions and to some extent differences in regulatory resources we find no support for regulator self interest which includes revolving doors

credit ratings and stock liquidity we analyze contemporaneous and predictive relations between credit ratings and measures of equity market liquidity and find that common measures of adverse selection which reflect a portion of the uncertainty about future firm value are larger when credit ratings are poorer we also show that future rating changes can be predicted using current levels of adverse selection collectively our results validate widely used microstructure measures of adverse selection and offer new insights into the value of credit ratings and the specific nature of the information they contain copyright 2006 oxford university press

the effects of the international banking act on domestic bank profitability and risk the passage of the international banking act of 1978 was the first major step towards imposing consistent and uniform federal regulations on the growing number of foreign banks entering the united states prior to this date foreign banks had been subject to a patchwork of state laws of varying degrees of stringency covering their entry expansion and portfolio behavior see white 1982 and walker 1983 the net result of this patchwork of state regulation was that by 1978 foreign banks had developed certain competitive advantages over domestic banks these advantages emanated from the fact that foreign bank branches and agencies i were not required to meet federal reserve determined reserve requirements on liabilities such as large cds and ii they were not subject to federal laws governing interstate banking the 1927 mcfadden act and activity diversification the 1933 glass steagall act and the 1956 bank holding company act including its 1970 amendments however foreign banks were also subject to certain disadvantages compared to domestic banks in particular they were inhibited from entering into retail banking markets by being ineligible for fdic insurance and being denied access to fed services such as check collection and the discount window to eliminate these discrepancies in relative regulation the international banking act iba was introduced in the house of representatives in february 1978 re

pricing exit and location decisions of firms evidence on the role of debt and operating efficiency abstract we compare pricing and exit decisions of discounters across the business cycle cities containing high debt and or low efficiency firms display higher prices during non recession years during recessions prices increase in cities with less efficient incumbents but decrease in cities with a mix of high and low debt firms high debt firms are more likely to exit cities with lower prices and high debt exiting firms are more likely to be efficient apparently low debt firms strategically lower prices during recessions to force exit of efficient financially constrained rivals weaker competitors face another cost new entrants locate closer

can real option values explain apparent storage at a loss since decisions to sell grain are irreversible waiting to sell grain can have a real option value this real option value may explain why producers appear to store too long a new seasonal mean reversion model is estimated that allows prices to be a random walk with drift within a season but mean reverting across crop years unless prices are extremely low selling before mean reversion begins is optimal thus the real option value of waiting does not explain why some producers seem to store at a loss in the latter part of crop years

institutional uncertainty and the maturity of international loans abstract this paper shows that non economic uncertainty in foreign countries contributes to a bias toward short term maturity in international lending frequent government changes and weak institutions explain why some countries find it difficult to obtain long term financing debt maturity is also explained by the level of economic and financial development of a country the composition of loan portfolios in terms of the type of borrowers and debt restructuring programs among other variables the results are obtained using data on international lending by three groups of u s banks large medium sized and small small banks shorten the maturity of their international loans in response to uncertainty to a greater extent compared to large banks

an application of the theory of foreign direct investment to multinational banking in ldcs for assessing the determinants of mnbs expansion into ldcs a model that incorporates both supply and demand factors is constructed a reduced form of the model is tested by using pooled data over the period 1975 1982 for a sample of twenty three ldcs the results of the study indicate that market size the presence of multinational corporations from the home country the extent of economic development and the balance of payments are all significant determinants of the growth of mnbs in ldcs

determinants of the performance of japanese financial institutions in australia 1987 1992 this paper constructs a model that attempts to explain the performance of japanese financial institutions in australia in general the model proposed performs well for size measures but comparatively poorly for measures of profitability size as measured by home country equity was found to increase both australian assets and australian profitability institutional features in both australia and japan were found to have their greatest impact upon size measures net interest margin differences were found to have no significant relationship with any performance measure used however the results are not sufficiently conclusive to produce a definitive model to explain the performance of foreign owned banks in australia

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