politics growth and inequality in rural china does it pay to join the party abstract economic reform is often constrained because rank and file bureaucrats responsible for implementation have vested interests that oppose change drawing on an unusual longitudinal survey data set for a representative rural county in northern china we show an alternative positive scenario consistent with the presence of an implicit performance based incentive contract that ties the household incomes of local officials to market liberalization increases in consumer demand and the provision of local public goods the mechanisms appear to be tolerated as the fruits of growth are shared fairly equitably thus allowing implementation of a politically and economically self reinforcing reform process

banking panics information and rational expectations equilibrium this paper shows that bank runs can be modeled as an equilibrium phenomenon we demonstrate that some aspects of the intuitive story that bank runs start with fears of insolvency of banks can be rigorously modeled if individuals observe long lines at the bank they correctly infer that there is a possibility that the bank is about to fail and precipitate a bank run however bank runs occur even when no one has any adverse information extra market constraints such as suspension of convertibility can prevent bank runs and result in superior allocations banking panics were a recurrent phenomenon in the united states until the 1930s they have re emerged as a source of public concern and much theoretical research recently in this paper we provide an information theoretic rationale for bank runs the traditional story is that contagion is an important aspect of bank runs the idea seems to be that when the general public observes large withdrawals from the banking system fears of insolvency grow resulting in even larger withdrawals of deposits in our model some individuals withdraw because they get information that future returns are likely to be low uninformed individuals observing this also have an incentive to liquidate their investments in addition some individuals need to withdraw deposits for other than informationally based reasons thus if the random realization of such a group of individuals is unusually large then the uninformed individuals will be misled and will precipitate a run on the bank the technology is such that a large volume of withdrawals involves liquidation costs consequently runs on the bank do impose social costs a mechanism that may reduce these costs in our model is to suspend convertibility if withdrawals are high however those individuals who need to withdraw their assets for liquidity reasons are worse off ex post our model provides a rationalization for restrictions in demand deposits that were widespread prior to 1929 friedman and schwartz 7 suggest that restrictions of payments ensured

corporate philanthropic disaster response and ownership type evidence from chinese firms response to the sichuan earthquake this article examines whether the charitable giving amount and likelihood of firm response to catastrophic events relate to firms ownership type using a unique dataset of listed firms in china where state ownership is still prevalent based on the data of chinese firms response to the 2008 sichuan earthquake we find that the extent of corporate contributions for state owned firms following this disaster is less than that for private firms state owned firms are also less likely to respond in this disaster compared to private firms the results also reveal that firm size profitability geography cash resource available and leverage affect firms philanthropic disaster response behavior in china

on avoiding bank runs abstract can bank runs be avoided and should they be avoided i analyze a banking environment where bank runs can occur as a result of negative signals about the bank s investments in this environment banks can make sure that runs do not occur by designing the deposit contract appropriately i show that there are conditions under which it is profit maximizing for the bank to avoid runs and others under which occasional runs are part of optimal bank behavior i also compare the banking arrangement to an arrangement based on trading in equity

the hidden transformation the changing role of the state after the collapse of communism in central and eastern europe this article reviews the state s role in the transition economies of central and eastern europe among the countries poland is perceived as the leader because it was the first economy to emerge from the decline following the transition as well the only eu member state to survive the crisis without a recession this success is often attributed to the high quality of government however we show that this popular perception is false and that state malfunctions on numerous fronts may soon impede polish growth prospects in poland the only bright spot is the quality of the financial supervision which should serve as a role model for other countries we attribute the malfunctions to the eu accession period that resulted in an unchecked growth of the government and contributed to the weakening of political and legal institutions copyright 2011 oxford university press

commodity liquidity measurement and transaction costs we examine the performance of liquidity proxies in commodities the amihud measure has the largest correlation with liquidity benchmarks amivest and effective tick measures also perform well these proxies are useful for studies of commodity liquidity over a long time period and those that lack access to high frequency data we use various aspects of transaction costs such as spread depth immediacy and resiliency to give insight into the costs of different execution approaches transaction costs increase with volatility and exhibit mean reversion splitting trades over one hour can reduce trading costs by two thirds compared to an immediate execution 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

political connections and entrepreneurial investment evidence from china s transition economy abstract recent literature in entrepreneurship suggests that market and legal institutions matter for entrepreneurial investment yet prior studies have focused on the role of formal institutions building on new institutional theory and political connections literature this study aims to evaluate the role of political connections in entrepreneurial reinvestment in less developed and transition economies the purpose of this paper is threefold first it aims to demonstrate systematically how political connections affect entrepreneurial reinvestment second it applies this relationship to a subsample group i e small and medium enterprises smes in order to empirically test whether political connections are more beneficial for large firms or smes third it demonstrates that political connections substitute for rather than complement formal market and legal institutions the empirical test uses a nationally representative sample of entrepreneurial firms from china s transition economy

financial contagion and depositor monitoring this paper analyzes market discipline in a many bank economy where contagion and bank runs interact we present a model with differently informed depositors where those depositors that are more informed have incentives to monitor banks investments it is shown that when banks are undercapitalized and the probability of success of the risky asset is low depositors might prefer a contract that is subject to bank runs in the interim period to a contract that allows banks to gamble with their funds and maintain their investment the results of the paper emphasize the benefits of private monitoring of banks in order to promote market discipline

the skewness of commodity futures returns abstract this article studies the relation between the skewness of commodity futures returns and expected returns a trading strategy that takes long positions in commodity futures with the most negative skew and shorts those with the most positive skew generates significant excess returns that remain after controlling for exposure to well known risk factors a tradeable skewness factor explains the cross section of commodity futures returns beyond exposures to standard risk premia the impact that skewness has on future returns is explained by investors preferences for skewness under cumulative prospect theory and selective hedging practices

on the origins of property rights conflict and production in the state of nature i analyse the emergence of property rights in a model of conflict and production in the absence of institutions of enforcement the population of agents evolves dynamically through conflicts for possession of factor goods among pairs of randomly matched agents conflicts are incomplete information wars of attrition with an agent s type consisting of his or her independently drawn valuation of the prize and cost of competing for it i prove equilibrium existence and show that in the steady state of the game the population sorts into two stable groups resource haves and have nots in accordance with a known function of their primitive types

growth in post soviet russia a tale of two transitions abstract in the early stages of post soviet russia s economic transition small scale entrepreneurial activity appeared to be a strong engine of growth moreover striking regional variations in initial conditions and adopted policy reforms appeared useful in accounting statistically for observed regional variations in entrepreneurial activity here we investigate whether these relationships have persisted as russia s transition has continued to evolve and find that they have not we then document that the emergence of bank issued credit virtually non existent outside of moscow prior to 2000 has been an important engine of growth since 2000 thus to date russia s post soviet development appears as a tale of two distinct transition paths

entrepreneurship and economic theory this article discusses economic theories of entrepreneurship drawing principally on work conducted in labour economics microeconomics macroeconomics and financial economics the article explains how incentives and constraints of various kinds affect occupational choices and entrepreneurial innovation as well as how entrepreneurial decisions affect macroeconomic performance implications for public policy are drawn

why do firms hide bribes and unofficial activity after communism abstract our survey of private manufacturing firms finds the size of hidden unofficial activity to be much larger in russia and ukraine than in poland slovakia and romania a comparison of cross country averages shows that managers in russia and ukraine face higher effective tax rates worse bureaucratic corruption greater incidence of mafia protection and have less faith in the court system our firm level regressions for the three eastern european countries find that bureaucratic corruption is significantly associated with hiding output

unique equilibrium in a model of self fulfilling currency attacks even though self fulfilling currency attacks lead to multiple equilibria when fundamentals are common knowledge we demonstrate the uniqueness of equilibrium when speculators face a small amount of noise in their signals about the fundamentals this unique equilibrium depends not only on the fundamentals but also on financial variables such as the quantity of hot money in circulation and the costs of speculative trading in contrast to multiple equilibrium models our model allows analysis of policy proposals directed at curtailing currency attacks

should bank runs be prevented abstract this paper extends diamond and dybvig s model j political economy 91 1983 401 to a framework in which bank assets are risky there is aggregate uncertainty about the demand for liquidity in the population and some individuals receive a signal about bank asset quality others must then try to deduce from observed withdrawals whether an unfavorable signal was received by this group or whether liquidity needs happen to be high in this environment both information induced and pure panic runs will occur however banks can prevent them by designing the deposit contract appropriately it is shown that in some cases it is optimal for the bank to prevent runs but there are situations where the bank run allocation may be welfare superior

the invisible hand and the grabbing hand evidence from a survey of 105 shop owners in moscow and warsaw shows that the reliance on private protection as well as the burden of regulation and corruption are much greater in moscow the evidence suggests that the invisible hand model of government better fits the warsaw local government and the grabbing hand model is more appropriate for moscow the evidence implies that the singular focus on the speed of economic reforms to understand the success of transition is misplaced and that the quality of government may be as essential this abstract was borrowed from another version of this item

bank runs in emerging market economies evidence from turkey s special finance houses recent banking crises in emerging market countries have renewed debates about deposit insurance because insurance erodes banks incentives to manage risks prudently some argue that its elimination would improve bank stability yet eliminating insurance could be de stabilizing if it recreates risks of self fulfilling runs this paper examines dynamics of depositor behavior during a set of runs on turkey s special finance houses an uninsured sub sector of islamic banks detailed data on withdrawals are analyzed in a vector autoregressive framework that enables us to distinguish between informational and self fulfilling elements of runs we found that both types of dynamics were at work during the runs suggesting a role for deposit insurance judiciously used in ruling out expectational problems that fuel tendencies to run

is growth corrupted or bureaucratic panel evidence from the enlarged eu abstractthis article aims at analysing the issue of conditional convergence in the new enlarged european union eu over the period 1995 2012 by means of panel data techniques we examined the issue of conditional convergence in the enlarged eu giving particular attention to the effects of corruption and bureaucracy on growth controlling for a widely used set of explanatory variables such as investment domestic and foreign human capital formation inflation general government final consumption and trade openness furthermore we examine if growth responds differently to corruption and bureaucracy in the new eu members by means of two group specific interaction variables to capture possible different responses to corruption and bureaucracy the analysis reveals evidence of conditional convergence in the enlarged eu with investment share foreign direct investment human capital and country openness appearing as robust growth drivers in contrast inflation and government consumption rather hamper gro

what affects new and established firms expansion evidence from small firms in russia research on financial constraints of very small firms is scarce because it is difficult to observe and measure their transactions previous studies on small enterprises in post communist countries have focused either on the effect of financing constraints on business growth budina et al 2000 economics of transition8 2 453 475 bratkowski et al 2000 economics of transition8 1 101 116 or on the effect of property rights johnson et al 2002 american economic review92 5 1335 1357 this paper provides evidence on both it turns out that financing constraints and property rights considerations affects investment in firms of different age differently younger firms face higher information costs and their expansion is more dependent on the availability of internal funds than is the expansion of older firms this paper also finds that while the financial sector did not channel funds to the most successful businesses there is evidence that loans were given to firms that had more transparent transactions results also indicate that the security of property rights does not influence investment in young firms which is interpreted to mean that only the most efficient entrepreneurs entered the market in older small firms investment is negatively influenced by the index of security of property rights suggesting that these firms might have secured their property rights by bribes improvements in the security of property rights therefore would help more micro enterprises to be born as well as decrease transaction cost of established enterprises

corporate social responsibility ownership structure and political interference evidence from china prior research suggests that ownership structure is associated to corporate social responsibility csr in developed countries this article examines whether and how ownership structure affects csr in emerging markets using chinese firms social responsibility ranking our empirical evidences show that for non state owned firms corporate ownership dispersion is positively associated to csr however for state owned firms whose controlling shareholder is the state this relation is reversed we attribute the reversed relationship to political interferences and further test this hypothesis by demonstrating that regional economic development is negatively related to csr for state owned firms due to decreased political interference in more developed areas this study is the first to directly examine the relationship between the dispersion of corporate ownership and csr in emerging markets and our results depict that it is important to consider ownership type in assessing csr in emerging market where state ownership is still prevalent such as china the results also reveal that firm size profitability employee power leverage and growth opportunity affect csr in china

regional decentralization and fiscal incentives federalism chinese style abstract aligning the interests of local governments with market development is an important issue for developing and transition economies using a panel data set from china we investigate the relationship between provincial government s fiscal incentives and provincial market development we report three empirical findings first we find that during the period of fiscal contracting system the discrepancy between ex ante contracts and ex post implementation was relatively small suggesting that the fiscal contracts were credible second we find a much higher correlation about four times between the provincial government s budgetary revenue and its expenditure during 1980s and 1990s as compared to 1970s demonstrating that provincial governments faced much stronger ex post fiscal incentives after reform third we find that stronger ex ante fiscal incentives measured by the contractual marginal retention rate of the provincial government in its budgetary revenue are associated with faster development of the non state sector as well as more reforms in the state sector in the provincial economy this holds even when we control for the conventional measure of fiscal decentralization finally we compare federalism chinese style to federalism russian style

learning across geographic space pro market reforms multinationalization strategy and profitability building on economic geography and knowledge based theory i argue that pro market reforms augment the profitability of firms by increasing their competitiveness and market knowledge however i propose that this effect is greater for firms that operate internationally firms that operate in more advanced markets and firms that become multinationals before reforms are implemented this is because such firms acquire market knowledge abroad that they can use when responding to reforms at home giving them a head start advantage over other local firms the analyses of a panel of the largest 500 latin american companies from 1989 to 2008 provide support for these arguments

distinguishing panics and information based bank runs welfare and policy implications in this paper we contrast panics and information based bank runs in an effort to provide a robust and empirically plausible model of how bank runs are triggered the model of information based runs is characterized by two sided asymmetric information the bank cannot observe the true liquidity needs of the depositors while depositors are asymmetrically informed about bank asset quality we also examine the relative degrees of risk sharing provided by bank deposit contracts and traded equity contracts we show that the choice of deposit or equity depends on the attributes of and information about the underlying investment returns

enterprise reform and corporate governance in russia a quantitative survey the objective of this paper is to verify the range and depth of the study on corporate governance in russia through a comprehensive survey of 202 research works with regard to the internal structure of russian corporations a great deal of research has been conducted in a relatively short time since the collapse of the soviet union by many highly motivated researchers who have provided insightful perspectives these achievements however place too much emphasis on the empirical analysis of the interrelation between ownership structure and corporate restructuring leaving some critical themes open for further discussion as the 21st century begins a well balanced research base should be established in this field in order to identify the reality of russian corporations from a multifaceted perspective

bank runs as an equilibrium phenomenon a standard demand deposit contract in which individuals are entitled to their full deposit at any time provided the bank is solvent is analyzed in a context in which there are no exogenous events on which agents condition their behavior and a unique equilibrium involving a bank run with positive probability is shown to exist

state ownership and market liberalization evidence from china s domestic m a market abstract we study how state ownership affects the post merger performance of chinese acquirers and find that state owned acquirers soes experience a significantly larger long term performance improvement following mergers compared to their non state owned nsoe counterparts when partitioning the sample period into acquisitions made prior to and following china s split share reform of 2005 we find that the post merger performance improvement of soe acquirers is largely attributed to the post reform period in which controlling shareholders converted their non tradable shares into tradable status our results are consistent with the interpretation that state intervention in the form of capital market liberalization and alleviation of governance problems combined with political connections and privileged access to financing may have a positive effect on m a performance that outweighs the inefficiency cost of state ownership in china

organizational isomorphism and corruption in financial institutions empirical research in emerging countries the globalizations of capital markets in the last 20 years has led to a historic degree of financial integration in the world it is clear however that globalization is not conducive to a complete homogeneity of financial markets and institutions among others one element of diversity is the importance of the impact of corruption in emerging countries corruption decreases the credibility of financial institutions and markets scandals and unethical behavior in financial institutions erode confidence in such firms relying on neoinstitutional literature this article focuses on the link between corruption and organizational isomorphism in financial institutions in emerging countries therefore our aim is to examine the institutional reasons for corruption in financial institutions in emerging countries our structural equation model is based on empirical research in financial institutions in emerging countries a questionnaire was administrated to 70 top executives of financial institutions in 18 different emerging countries

statistical arbitrage pairs trading strategies review and outlook this survey reviews the growing literature on pairs trading frameworks i e relative value arbitrage strategies involving two or more securities research is categorized into five groups the distance approach uses nonparametric distance metrics to identify pairs trading opportunities the cointegration approach relies on formal cointegration testing to unveil stationary spread time series the time series approach focuses on finding optimal trading rules for mean reverting spreads the stochastic control approach aims at identifying optimal portfolio holdings in the legs of a pairs trade relative to other available securities the category other approaches contains further relevant pairs trading frameworks with only a limited set of supporting literature finally pairs trading profitability is reviewed in the light of market frictions drawing from a large set of research consisting of over 100 references an in depth assessment of each approach is performed ultimately revealing strengths and weaknesses relevant for further research and for implementation

does having a cadre parent pay evidence from the first job offers of chinese college graduates abstract we estimate the wage premium associated with having a cadre parent in china using a recent survey of college graduates carried out by the authors the wage premium of having a cadre parent is 15 and this premium cannot be explained by other observables such as college entrance exam scores quality of colleges and majors a full set of college human capital attributes and job characteristics these results suggest that the remaining premium could be the true wage premium of having a cadre parent

optimal financial crises empirical evidence suggests that banking panics are related to the business cycle and are not simply the result of sunspots panics occur when depositors perceive that the returns on bank assets are going to be unusually low we develop a simple model of this in this setting bank runs can be first best efficient they allow efficient risk sharing between early and late withdrawing depositors and they allow banks to hold efficient portfolios however if costly runs or markets for risky assets are introduced central bank intervention of the right kind can lead to a pareto improvement in welfare from the earliest times banks have been plagued by the problem of bank runs in which many or all of the bank s depositors attempt to withdraw their funds simultaneously because banks issue liquid liabilities in the form of deposit contracts but invest in illiquid assets in the form of loans they are vulnerable to runs that can lead to closure and liquidation a financial crisis or banking panic occurs when depositors at many or all of the banks in a region or a country attempt to withdraw their funds simultaneously prior to the twentieth century banking panics occurred frequently in europe and the united states panics were generally regarded as a bad thing and the development of central banks to eliminate panics and ensure financial stability has been an important feature of the history of financial systems it has been a long and involved process the first cerntral bank the bank of sweden was established more than 300 years ago the bank of england played an especially important role in the development of effective stabilization policies in the eighteenth and nineteenth centuries by the end of the nineteenth century banking panics had been eliminated in europe the last true panic in england was the overend gurney company crisis of 1866

currency elasticity and banking panics theory and evidence existing models of banking panics contain no role for monetary factors and fail to explain why some banking systems experienced panics while others did not a monetary model is constructed where seasonal variations in the demand for liquidity and credit play a critical role in generating banking panics these panics occur when there are restrictions on the issue of currency in private banks but they do not occur if banks are unrestricted empirical evidence from canada and the united states for the period 1880 1910 is largely consistent with the predictions of the model

federalism as a commitment to reserving market incentives the authors advance a new perspective in the study of federalism their approach views federalism as a governance solution of the state to credibly preserving market incentives market incentives are preserved if the state is credibly prevented from compromising on future economic success and from bailing out future failures the salient features of federalism decentralization of information and authority and interjurisdictional competition help provide credible commitment or these purposes in addition the authors suggest that some federalism are self sustaining

pairs trading performance of a relative value arbitrage rule we test a wall street investment strategy pairs trading with daily data over 1962 2002 stocks are matched into pairs with minimum distance between normalized historical prices a simple trading rule yields average annualized excess returns of up to 11 for self financing portfolios of pairs the profits typically exceed conservative transaction cost estimates bootstrap results suggest that the pairs effect differs from previously documented reversal profits robustness of the excess returns indicates that pairs trading profits from temporary mispricing of close substitutes we link the profitability to the presence of a common factor in the returns different from conventional risk measures wall street has long been interested in quantitative methods of speculation one popular short term speculation strategy is known as pairs trading the strategy has at least a 20 year history on wall street and is among the proprietary statistical arbitrage tools currently used by hedge funds as well as investment banks the concept of pairs trading is disarmingly simple find two stocks whose prices have moved together historically when the spread between them widens short the winner and buy the loser if history repeats itself prices will converge and the arbi

liquidity provision banking and the allocation of interest rate risk abstract the paper studies the efficient allocation of technology induced interest rate risk and the implications of such risk for efficient liquidity provision complete immunization against interest rate risk is shown to be undesirable as it precludes the exploitation of favourable reinvestment opportunities under the assumptions of diamond dybvig 1983 interest induced valuation risks of long term assets should be born by early withdrawers reinvestment opportunity risks of short term assets by late withdrawers efficient liquidity provision thus entails no shifting of interest rate risk in the absence of additional moral hazard second best allocations can be implemented through unregulated competition among banks

non linear dependence modelling with bivariate copulas statistical arbitrage pairs trading on the s p 100 abstractwe develop a copula based pairs trading framework and apply it to the sp the top 5 momentum pairs yield 7 22 per year standard deviations are low leading to annualized sharpe ratios of 1 52 top 5 mean reversion and 1 33 top 5 momentum respectively

lessons from a collapse of a financial system the paper draws lessons from the collapse of iceland s banking system in october 2008 the rapid expansion of the banking system following its privatization in the early 2000s is explained as well as the inherent fragility due to the size of the banking system relative to the domestic economy and the central bank s reserves market manipulation enabling bank capital to expand rapidly and the weak and understaffed public institutions most of iceland s banking system was traditionally in state hands but was privatized and sold to politically favoured entities at the turn of the century with laws and regulations subsequently changed to facilitate the expansion of the banking system political connections and the tacit support of the authorities enabled senior bank managers and key shareholders to extract significant private benefits while shifting risk to domestic and foreign taxpayers and foreign creditors these problems were exacerbated by symptoms of what the paper terms the small country syndrome the size of the banking sector made the central bank incapable of serving as the lender of last resort the domestic supervisor the central bank and the ministries in charge of economic affairs were understaffed and lacking in experience in how to manage a large financial sector the rapid growth was also ultimately unsustainable due to high levels of leverage and a weak capital base due to both the rapid expansion of balance sheets and lending to finance investment in own shares the episode demonstrates the importance of closely monitoring rapidly growing financial institutions and even possibly slowing growth when institutions are systemically important one lesson to be drawn from the crisis relates to the role of politics in a financial crisis the icelandic authorities as a matter of policy encouraged the creation of an international banking centre this involved the privatization and deregulation of the banking system rules and regulations being relaxed and the neglect of financial supervision another lesson is that floating exchange rates can be hazardous in the presence of large capital flows the central bank raised interest rates during the boom years in order to meet an inflation target this created an interest rate differential with other countries that encourages a large volume of carry trades and incentivized domestic agents to borrow in foreign currency both conspired to create an asset price bubble excessive currency appreciation and counter intuitively high inflation the result was that monetary policy as conducted was ineffective at curbing domestic demand the eventual large depreciation of the currency made a large section of the economy insolvent finally there are lessons about the european passport system in financial services and the common market the icelandic banks had the right to set up branches in the european union by means of the passport on the explicit assumption that home regulators were exercising adequate controls the collapse of the banks left the united kingdom and the netherlands with significant costs demonstrating the inherent weakness in the passport when one member country can undercut the supervisory standards of other member countries for the passport system to work the home supervisor must be trustworthy sigridur benediktsdottir jon danielsson and gylfi zoega

political determinants of intergovernmental transfers in a regionally decentralized authoritarian regime evidence from china this article examines the political determinants of the allocation of intergovernmental transfers in the context of china in a regionally decentralized authoritarian regime a government marked by political centralization and fiscal decentralization intergovernmental transfers are employed by politicians as instruments to achieve political goals using china s provincial data from 1994 to 2009 we find that the officials political power is an important factor in the distribution process a party secretary s replacement facilitates an increase in transfers especially if the replacement comes from the central government if a party secretary is a member of the central politburo the province receives more conditional transfers than others the central government allocates the transfers in such a way that the province with a high proportion of the minority population receives more transfers than others

effective property rights conflict and growth abstract this paper shows how the interaction between conflict and growth can give rise to a nonmonotone relationship between property rights and social welfare this interaction is illustrated in a model of endogenous growth in which equilibrium diversion of resources is the cost of securing effective property rights a symmetric equilibrium allocation associated with more secure property rights and faster growth can be pareto dominated by one associated with poorer property rights and slower growth faster growth can exacerbate the problem of diversion whenever property rights are sufficiently poor these results call for caution before a society decides to pursue economic growth independently of the institutional structure of property rights furthermore if this structure is inappropriate piecemeal reform might not be in the interest of society and a substantial reform might be necessary if it is to be welfare improving

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

dictators and oligarchs a dynamic theory of contested property rights in an economy with weak economic and political institutions the major institutional choices are made strategically by oligarchs and dictators the conventional wisdom presumes that as rent seeking is harmful for oligarchs themselves institutions such as enforcement of the property rights will emerge eventually we explicitly model a dynamic game between oligarchs and a dictator who can contain rent seeking the oligarchs choose either a weak dictator who can be overthrown by an individual oligarch or a strong dictator who can only be replaced via a consensus of oligarchs in equilibrium no dictator can commit to both i protecting the oligarchs property rights from the other oligarchs and ii not expropriating oligarchs himself we show that a weak dictator does not limit rent seeking a strong dictator does reduce rent seeking but also expropriates individual oligarchs we show that even though eliminating rent seeking is pareto optimal weak dictators do get appointed in equilibrium and rent seeking continues this outcome is especially likely when economic environment is highly volatile

political connections and firm value in china an event study on 19 october 2013 the chinese government issued the opinions on further regulation on party and political leaders and cadres working part time holding office in enterprises also known as the 18th decree to regulate government officials employment with businesses the 18th decree is widely perceived as having had a significant impact on the use of independent directors with political backgrounds by firms given the prevalence of this business practice this paper examines the market reaction to the 18th decree to ascertain the value effect of political connections in china we note a negative relationship between the political connections of independent directors and market reaction we also note that the negative relationship between political connections and market reaction is moderated by ownership type and state of regional development specifically we find that the negative relationship holds only for private firms in less developed regions these results support our prediction that political connections add value to chinese firms and that the value effect of political connection is contingent on institutional factors

are they efficient in the middle using propensity score estimation for modeling middlemen in indian corporate corruption corrupt regulatory environment encourages firms to deploy middlemen for speedy and assured acquisition of different services from regulatory agencies using a world bank dataset of 2210 indian manufacturing firms this article examines how firms with middlemen deal with corrupt governmental agencies for its operational efficiency our results demonstrate that deployment of middlemen by the firms is often accompanied by a substantial increase in operational delay relatively trigger more consumption of senior management s time on regulatory disentanglement enhance the likelihood tendency to pay bribe and likely to face more court cases as a means of restitution of legal rights as firm specific attributes may contaminate our preliminary results we utilized the propensity score framework to examine relationships among variables of interests our study contributes to the inconspicuous part of the corruption literature by attempting to present a comprehensive but indirect assessment of the functions of middlemen that predominantly remained unattended except some scattered descriptive case based anecdotal presentations

institutional determinants of new firm entry in russia a cross regional analysis we investigate how the regional institutional environment in particular the political environment affects russian new firm entry across regions industries firm size classes and time we find that entry rates in russia are explained by natural entry rates and the institutional environment industries that are characterized by low entry barriers in developed market economies are found to have lower entry rates in regions subject to greater political fluidity as in the case of gubernatorial change we also find that higher levels of political fluidity and democracy increase relative entry rates for small sized firms but reduce them for medium sized or large ones

organizational isomorphism and corruption an empirical research in russia based on neo institutional literature this article aims to show the influence of organizational isomorphism on corruption the focus is institutional explanations of corruption our model is based on empirical research in russia at the end of the 1990s a face to face questionnaire was conducted with 552 top executives in private firms across various economic sectors we used the structural equation model partial least squares pls technique to test our hypotheses the developed model provides an integrated approach to the study of the relationship between corruption and organizational isomorphism our empirical data from firms in russia allowed us to test various theoretical hypotheses concerning the influence of organizational isomorphism on corruption our emphasis is on the influence of competitive and institutional isomorphism on corruption

bank failure contagion in historical perspective abstract bank failures are contagious due to the lack of bank specific information depositors who lack financial information on individual banks make withdrawal decisions based on the condition of the banking system as a whole a high ratio of bank failures then signals an adverse condition within the banking sector and triggers systemwide bank runs this paper looks at bank panics in u s history and shows the importance of solvency information specific to individual banks the major empirical finding is that the government or banks stopped bank panics mainly by providing financial information on banks

connectedness and sme financing in post communist economies evidence from uzbekistan this paper investigates effects of interpersonal links with bureaucrats on sme access to formal finance a survey of 502 smes in post communist uzbekistan shows fewer smes with government connections express a need for external finance but success rates of applications are higher than for smes without connections econometric models show government connected smes receive more formal credit than their counterparts the small share of sme credit available is thus distributed in favour of those capitalising on bureaucratic links with consequent resource misallocation findings imply that greater sme credit flows need supplementing with capacity building that improves bank transparency and efficiency

the unequal enforcement of liberalization evidence from russia s reform of business regulation we document the unequal enforcement of liberalization reform of business regulation across russian regions with different governance institutions which leads to unequal effects of liberalization national liberalization laws were enforced more effectively in subnational regions with more transparent government a more informed population a higher concentration of industry and stronger fiscal autonomy as a result liberalization had a substantial positive effect on the performance of small firms and the growth of the official small business sector in regions with stronger governance institutions in contrast in regions with weaker governance institutions we observe no effect of reform and in some cases even a negative effect

the state led transition to liberal capitalism neoliberal organizational world systems and social structural explanations of poland s economic success neoliberals argue that rapid liberalization and privatization can transform postcommunist economies into western style capitalist systems organizational sociologists argue that these policies produce a unique variety of capitalism while world systems theorists argue that they lead to underdevelopment this article advances a social structural alternative in a crucial case poland s relative economic success resulted from prolonged state ownership and an interventionist state employing various industrial policy tools that facilitated efficiency enhancing market oriented restructuring before ushering in beneficial foreign direct investment the resulting capitalist system closely resembles the typical pattern found in most late industrializers

on the international harmonization of bank regulation this paper offers a three way typology of bank regulation and examines the question of international harmonization for each category for economic regulation the danger is that harmonization could support and preserve domestic protectionist regulatory regimes but it could instead be a beneficial guise for lowering protectionist barriers the latter efforts should be encouraged for prudential regulation national regulation should be adequate to handle the extra stresses of international banking harmonization efforts e g the basle accord may offer only modest help but the accord may offer indirect help by limiting national governments competitive efforts implicitly to subsidize their banks risk taking activities finally for information regulation national regulation appears to be adequate and international harmonization does not appear to be necessary copyright 1994 by oxford university press

are financial development and corruption control substitutes in promoting growth abstract while financial development and corruption control have been studied extensively their interaction has not we develop a simple model in which low corruption and financial development both facilitate the undertaking of productive projects but act as substitutes in doing so the substitutability arises because corruption raises the need for liquidity and thus makes financial improvements more potent conversely financial underdevelopment makes corruption more onerous and thus raises the gains from reducing it we test this substitutability by predicting growth of countries and industries using measures of financial development lack of corruption and a key interaction term both approaches point to positive effects from improving either factor as well as to a substitutability between them the growth gain associated with moving from the 25th to the 75th percentile in one factor is 0 63 1 68 percentage points higher if the second factor is at the 25th percentile rather than the 75th the results show robustness to different measures of corruption and financial development and do not appear to be driven by outliers omitted variables or other theories of growth and convergence

credible commitment and property rights evidence from russia most managers said that state arbitration courts did not work badly in disputes with other businesses but few expected these courts to protect their rights in disputes with state officials more importantly managers who expressed confidence that state arbitration courts could constrain state officials invested at higher rates even controlling for the perceived effectiveness of state institutions thus tightening constraints on state agents can increase the security of property and bolster state capacity these results generate insights into debates on the role of state in the economy the origins of secure property rights the nature of state capacity the importance of informal institutions and the process of legal reform

government in transition abstract the speed of economic reforms is not the only important determinant of the success of the transition to a market economy the transition of government from a communist state to an institution supporting a market economy is as critical survey evidence shows that russia lags significantly behind poland in the transition of its government which may account for its inferior economic performance despite adopting similar economic reforms i argue that the lack of turnover of old communist politicians and the creation of inappropriate electoral and fiscal incentives for these politicians may account for the poor performance of the russian government and suggest some strategies for improving the situation

pairs trading of chinese and international commodities we investigate the profitability of a pairs trading strategy using chinese and international commodity futures contracts covering the period january 2004 to february 2018 we use a time series appr

why do entrepreneurs enter politics evidence from china this article examines the determinants of the entrepreneur s political participation by employing a unique matched firm institution data set from china we find that the likelihood of an entrepreneur s participation can be explained by the underdevelopment of markets and market supporting institutions according to our estimates the probability of entering politics decreases by 8 20 from the mean when the institutional indices improve by one standard deviation our findings support the view that the institutional environment shapes the private entrepreneur s motivation to participate in politics they also provide an example of how private entrepreneurs respond to state market failure in developing and transition countries jel g1 h00 o10 p2 p3

institutional polycentrism entrepreneurs social networks and new venture growth what is the interrelationship among formal institutions social networks and new venture growth drawing on the theory of institutional polycentrism and social network theory we examine this question using data on 637 entrepreneurs from four different countries we find the confluence of weak and inefficient formal institutions to be associated with a larger number of structural holes in entrepreneurial social networks while the effect of this institutional order on the revenue growth of new ventures is negative a network s structural holes have a positive effect on revenue growth furthermore the positive effect of structural holes on revenue growth is stronger in an environment with a more adverse institutional order i e weaker and more inefficient institutions the contributions and implications of these findings are discussed abstract from author