the interest group theory of financial development in china openness and the role of interest groups the interest group theory of financial development predicts that the incumbents opposition to financial development will be weaker when an economy is open to both trade and capital flows based on regressions of financial development on trade and financial openness existing studies only provide indirect tests of the hypothesis and deliver mixed findings this paper proposes models for direct tests of interest group theory for china using chinese cross province data we define and measure interest groups based on the close tie between state owned enterprises and local government in china the empirical results show that the opposition from interest groups to financial development cannot be weakened in provinces with high trade or financial openness alone however the opposition is indeed weakened in provinces with high levels of both trade and financial openness these results provide robust support for interest group theory in accounting for cross province differences and time series variation in financial development in china

does trade credit boost firm performance abstractsome firms have achieved good performance in developing countries where the financial sector is far from established one explanation in the literature is that these firms benefit from trade credit a form of informal financing using a survey of firms in china conducted by the world bank in early 2003 this article examines whether trade credit indeed boosts firm performance our ordinary least squares results show that trade credit is significantly and positively correlated with firm performance however using the instrumental variable approach to address endogeneity we find that the statistical significance disappears the results are robust to a series of robustness checks casting doubt on the claim that trade credit boosts firm performance

a multiobjective approach to vendor selection abstract purchases from vendors involve significant costs for many firms decisions related to these purchases include the selection of vendors and the determination of order quantities to be placed with the selected vendors such decisions are frequently multiobjective in nature that is they are evaluated by more than one criterion at least 23 criteria for various vendor selection problems have been identified in this article we present a multiobjective approach to systematically analyze the inherent tradeoffs involved in multicriteria vendor selection problems the approach is motivated by and demonstrated with an actual purchasing problem facing a division of a fortune 500 company

joint economic procurement production delivery policy for multiple items in a single manufacturer multiple retailer system abstract this paper proposes an analytical model to effectively integrate and synchronize the procurement production and delivery activities in a supply chain consisting of a single raw material supplier a single manufacturer and multiple retailers the manufacturer produces multiple items on a single facility utilizing common raw material under a common rotation cycle policy of not incurring shortages at any retailers this problem is formulated as a variant of the classical economic lot scheduling problem the objective is to find the production sequence of multiple items the common production cycle length and the delivery frequencies and quantities that minimize the average total cost an efficient heuristic algorithm is presented to solve the proposed problem through numerical tests we show that the proposed heuristic gives quite satisfactory solutions

structural instability and the production smoothing model of inventories the production smoothing model of inventories implies that inventories labor inputs sales and factor input prices are cointegrated if sales and factor prices are i 1 with one cointegrating vector for each state variable held these propositions are tested in six nondurable goods industries all industries provide evidence of cointegration fewer quasi fixed factors are found than previous research often assumed estimates of cointegrating vectors provide implausible parameter estimates rank stability tests with fixed or seqentially chosen breakpoints indicate that the cointegrating matrix has unstable rank parameter estimates of cointegrating vectors do not provide much support for the production smoothing model of inventories

measuring noise in inventory models this paper has two purposes one is to assess different models of inventory behavior in terms of their ability to approximate the realized data we do this initially for the pure production smoothing model and then for a sequence of generalizations our analysis both performs specification tests as well as measures the deviations of the data from each null model through use of a noise ratio statistic a second purpose is to explore whether observed cost shocks in particular raw materials prices help explain inventory movements we find that the production smoothing model of inventories augmented by buffer stock motives stockout avoidance motives and observed cost shocks well approximates monthly data

evidence on the determinants of credit terms used in interfirm trade trade credit is created whenever a supplier offers terms that allow the buyer to delay payment in this paper we document the rich variation in interfirm credit terms and credit policies across industries we examine empirically the firm s basic credit policy choices whether to extend credit or to require cash payment and if credit is extended whether to adopt simple net terms or terms with discounts for prompt payment we also examine determinants of variations in two part terms results are supportive primarily of theories that explain credit terms as contractual solutions to information problems concerning product quality and buyer creditworthiness trade credit has important economic significance from both micro and macroeconomic perspectives during the 1990s vendor financing has accounted for an average 1 5 trillion of the book value of all assets of u s corporations and has represented approximately 2 5 times the combined value of all new public debt and primary equity issues during a given year as a component of the money supply trade credit in the form of accounts payable exceeds the primary money supply mi by a factor of 1 5 on average 1 clearly efforts to control economic growth through monetary policy can be confounded by aggregate decisions of businesses to increase or decrease reliance on trade credit financing several recent empirical studies examine determinants of firm reliance on trade credit 2 these studies model supply and demand for trade credit using financial statement data accounts receivable and payable 3 however many aspects of trade credit practice are unexplored most notably little is known about the types of credit terms e g net 30 2 10 net 30 and credit policies that are observed across firms and industries the only comprehensive doc

decentralization and macroeconomic performance in china regional autonomy has its costs abstract we give an empirical examination of the impact of fiscal and economic decentralization in china on the country s economic growth and inflation using a vector autoregressive var model with latent variables our econometric investigation offers strong evidence that there is a connection between decentralization and macroeconomic performance in china economic decentralization appears to be positively related to growth in real output for the entire postwar period in china fiscal decentralization seems to have adverse implications for the rate of inflation especially after the late 1970s decentralization would therefore seem to be good for growth and bad for price stability

wage and price dynamics in china we study wage price dynamics in mainland china with a novel data set using province level data from 1994 to 2010 we find that the growth in labour costs in china is not passed through fully to final prices neither in the tradable goods sector nor in the economy as a whole this probably reflects the strong pressure on profit margins from a highly competitive environment especially in manufactured goods these findings have potential implications for global price developments given china s relevance in global supply chains

joint economic lot sizing problem for a three layer supply chain with stochastic demand abstract this paper considers the joint economic lot sizing problem jelp for multi layer supply chain with multi retailers and single manufacturer and supplier the paper extends the work of ben daya et al 2013 and relaxes the assumption of deterministic demand and constant holding and ordering costs the paper proposes modifying four computational intelligent algorithms to solve mixed integer problems and compares their performance for solving the problem at hand the paper further compares between adopting a centralized safety stock policy versus a decentralized policy results showed cuckoo search to outperform other tested algorithms and also favored adopting a centralized policy

a note on the econometric use of constant dollar inventory series abstract one dollar of finished goods inventories does not represent the same amount of physical goods as one dollar of sales when department of commerce constant dollar series are used this can cause seriously biased regression estimates

accounting for output fluctuations in manufacturing there is a substantial body of evidence to the effect that output is more volatile than sales among manufacturing industries numerous explanations have been advanced to account for this excess output volatility some examples are pro cyclical inventory movements induced by a stockout avoidance motive cost and technology shocks and decreasing marginal costs this article assesses the contribution of these different motives to output volatility for six different manufacturing industries linear quadratic models are estimated for each of the industries and then dynamic simulations are employed to determine the volatility of output when one or more of the factors are removed from the model technology shocks provide the most significant contribution to output volatility the stockout avoidance motive is also important cost shocks provide a very small contribution and marginal production costs are increasing at the margin and thus stabilize output it is also shown that output volatility declines when curre

financial development bank discrimination and trade credit non state owned firms in china grow tremendously with limited support from banks this provides a unique setting to test how firms in a country with poorly developed financial institutions fund their prosperous growth opportunities this paper compares the use of an important non formal financial channel trade credit between state and non state owned firms in china we find that compared to state owned firms non state owned firms use more trade credit we further show that this higher usage is primarily for financing rather than transactional purposes the results suggest that in a country with a poorly developed formal financial sector firms can support their growth through non formal financial channels that largely rely on implicit contractual relation

inventories and asymmetric business cycle fluctuations in the uk a structural approach this paper investigates the movement of manufacturing inventories and production over the business cycle to arrive at an asymmetric structural equilibrium correction model initially cross correlation coefficients and deepness and steepness tests for skewness are utilized to present descriptive statistics of the time series cointegration analysis is performed on each disaggregate inventory by stage of production finished goods work in progress and raw materials with a set of explantory variables restricted cointegration vectors are added to the symmetric and non symmetric specifications of the structural equilibrium correction model these are compared by parameter constancy tests and one step ahead forecasts

integrated safety stock optimization for multiple sourced stockpoints facing variable demand and lead time abstract the safety stock placement problem of a multi stage supply chain comprising multiple sourced stockpoints is addressed in this paper each stockpoint faces variability in its downstream demand and suppliers lead time the maximum among these suppliers lead time is determined by employing concepts of order statistics it is required to find the fill rate and safety stocks at each stockpoint that leads to satisfying the end customer service level at minimum safety stock placement cost hence the fill rates and the safety amounts are decided from a global supply chain perspective two models are proposed a decentralized safety stock placement model and a centralized consolidation model the decentralized model finds the safety amounts at each stockpoint required to face its underlying lead time demand variability the consolidation model finds the consolidated safety amounts that will be kept in the relevant consolidation center at each stage a benders decomposition technique is developed to handle the nonlinearity and binary restrictions involved in the safety stock consolidation model strategies proposed by the consolidation model achieve 45 2 62 reduction in safety amounts that results in a cost savings ranging between 22 2 44 2 as compared to the strategies proposed by the decentralized model

an incentive compatible solution for trade credit term incorporating default risk abstract this paper studies the optimal trade credit term decision in an extended economic ordering quantity eoq framework that incorporates a default risk component a principal agent bilevel programming model with costs minimization objectives is set up to derive the incentive compatible credit term the supplier determines the credit term as the leader in the first level programming by balancing her his financing capacity with the retailer s default risk order behavior and cost shifting at the second level the retailer makes decisions on ordering and payment time by reacting on the term offered by the supplier a first order condition solution procedure is derived for the bilevel programming when credit term is confined within the practically feasible interval two key results are obtained the condition to derive incentive compatible credit term and an equation system to derive threshold default risk criterion filtering retailers suitable for credit granting numerical experiments show that the capital cost of the supplier is the most important factor determining the credit term default risk acts like a filtering criterion for selecting retailers suitable for credit granting empirical evidence supporting our theoretical considerations is obtained by estimating three panel econometric models using a dataset from china s listed companies

bank credit and trade credit evidence from natural experiments abstract prior studies find mixed evidence about the substitution relation between bank credit and trade credit in this paper using two bank interest rate deregulations in china we revisit the substitution hypothesis by examining how exogenous increases in the availability of bank credit affect trade credit we find that firms with higher credit risk increased their use of bank credit and reduced their use of trade credit after the 2004 bank interest rate ceiling deregulation whereas firms with lower credit risk increased their use of bank credit and reduced their use of trade credit after the 2013 bank interest rate floor deregulation our results provide supportive evidence for the substitution hypothesis that firms reduce their use of trade credit after the relaxation of bank credit and suggest that bank credit is more favorable short term financing than trade credit

determining safety stock in the presence of stochastic lead time and demand we consider the problem of setting safety stock when both the demand in a period and the lead time are random variables there are two cases to consider in the first case the parameters of the demand and lead time distributions are known in the second case they are unknown and must be estimated for the case of known parameters a standard procedure is presented in the literature in this paper examples are used to show that this procedure can yield results that are far from the desired result a correct procedure is presented when the parameters are unknown it is assumed that a simple exponential smoothing model is used to generate estimates of demand in each period and that a discrete distribution of the lead time can be developed from historical data a correct procedure for setting safety stocks that is based on these two inputs is given for two popular demand models the approach is easily generalized to other models of demand safety stock calculation is simplified when certain normality assumptions are valid simulation results in the appendix indicate when these assumptions about normality are reasonable

the impact of regional financial depth on outbound cross border mergers and acquisitions abstract drawing on china s experience this study examines the role of source province credit conditions and its interplay with host country financial openness in determining the intensity of cross border mergers and acquisitions m as we first show that improved credit conditions in source provinces of china measured by the number of newly established bank branches boost the volume and frequency of their firms cross border m as the effect is stronger for deals where cash is mainly used as the payment method then we identify a complementary effect between the financial openness in host countries and the improved financial depth in source regions more importantly by defining the members of china s the belt and road initiative as countries with higher political openness to china we find that acquirers in china especially the firms affiliated to central government are more political oriented than market oriented when choosing target countries additionally we show that acquirers facing lower political uncertainty from source province benefit more from the enhanced bank access

bank discrimination holding bank ownership and economic consequences evidence from china abstract this paper finds that compared with chinese state owned firms non state owned firms have a greater propensity to hold significant ownership in commercial banks these results are consistent with the notion that because non state owned firms are more likely to suffer bank discrimination for political reasons they tend to address their financing disadvantages by building economic bonds with banks we also find that among non state owned firms those that hold significant bank ownership have lower interest expenses and are less likely to increase cash holdings but more likely to obtain short term loans when the government monetary policy is tight these results suggest that the firms building economic bonds with banks can enjoy benefits such as lower financial expenses and better lending terms during difficult times finally we find that non state owned firms with significant bank ownership have better operating performance overall we find that firms can reduce discrimination through holding bank ownership

the production and inventory behavior of the american automobile industry understanding inventory movements is central to an understanding of business cycles this paper presents an empirical study of the behavior of inventories in the automobile industry it finds that inventory behavior is well explained by the assumption of intertemporal optimization with rational expectations the underlying cost structure appears to have substantial costs of changing production as well as substantial costs of being away from target inventory thelatter being a function of current sales given this cost structure whether inventory behavior is stabilizing or destabilizing depends on the characteristics of the demand process in the automobile industry inventory behavior is destabilizing the variance of production is larger than the variance of sales

the normalization of deviant organizational practices the non performing loans problem in china research on deviant organizational practices has demonstrated that normative and cognitive institutional forces contribute to making deviance acceptable data from a survey of 3 751 chinese firms were applied to test the idea that a clearly articulated alternative identity is necessary if a firm is to resist the normalization of deviance widespread acceptance of delinquency in repaying loans was shown to make it more likely that a firm adopts that practice but this normalization process is less likely for firms with a stronger anti deviance identity

safety stock optimization in multi stage inventory systems abstract determining appropriate safety stocks in stochastic multi state production distribution systems is a very difficult task approaches for optimal determination of safety stocks regarding cost objectives and service level restrictions which are suitable for practical applications can only be found for a very limited class of multi stage inventory problems like problems of strictly serial structure or special two stage production distribution systems in this paper a procedure for determining the optimal size and distribution of safety stocks in a general serial or divergent production distribution process ruled by a base stock control policy is presented this approach especially allows for taking into account the impact of end item demand correlation on distribution and size of safety stocks by using risk pooling effects in divergent systems a powerful dynamic programming algorithm for solving the safety stock optimization problem is developed and impacts of problem parameter variations on the optimal solution are discussed

a bilinear goal programming model and a modified benders decomposition algorithm for supply chain reconfiguration and supplier selection abstract the problem addressed in this paper is related to an aerospace company seeking to change its outsourcing strategies in order to meet the expected demand increase and customer satisfaction requirements regarding delivery dates and amounts a bilinear goal programming model is developed to achieve the company s objectives a modified benders decomposition method is successfully applied to handle bilinear goal programming models in which the complicating binary variables affect the values of the deviational variables of goals attainment this influence leads to formulate the master and the sub problem as two goal programming models with different objective function decompositions as compared to the classical benders one computational experiments show that the modified benders algorithm outperforms a generic linearization method by reaching the optimal solution for larger problem with about 75 reduction in computation time

trade credit and the bank lending channel the bank lending channel theory posits that during monetary contractions banks restrict some firms loans thus reducing their desired investment independently of interest rates previous research finds small firms reduce while large firms accelerate loan growth we find that small firms increase trade credit a substitute credit indicating a strong loan demand it supports the bank lending channel they do not voluntarily cut bank loans since they increase a less desirable alternative using trade credit is propitious since unlike commercial paper investigated by previous researchers it is widely used by the small firms suffering the loan decline surprisingly we also find large firms increase trade credit a puzzle since they are typically assumed to have wide access to other credit using individual manufacturing firm data we find the reasons large firms use trade credit are financial in nature those without a bond rating increase trade credit that is without access to open market credit as relatively few firms have this mark of quality it implies that more firms are affected by credit constraints than previously believed

supplier selection order allocation a two stage multiple criteria dynamic programming approach this paper proposes a two stage multiple criteria dynamic programming approach for two of the most critical tasks in supply chain management namely supplier selection and order allocation in the first stage to address multiple decision criteria in supplier ranking the analytic hierarchy process ahp is employed in the second stage supplier ranks are fed into an order allocation model that aims at maximizing a utility function for the firm as well as minimizing the total supply chain costs subject to constraints on demand capacity and inventory levels a dynamic programming approach is crafted to solve the proposed bi objective model

inventories sticky prices and the persistence of output and inflation post war business cycle fluctuations of output and inflation are remarkably persistent many recent sticky price models however grossly underpredict this persistence we assess whether adding inventories to a standard sticky price model raises the persistence of output and inflation for this addition we consider a shopping cost model in the model consumers find shopping activities costly and the cost of shopping depends on the stock of goods available in this context producers manage inventories to smooth production and to affect the cost of shopping we find that the shopping cost model generates a persistence for output and inflation that matches the persistence observed in the post 1985 us data

multi objective models for lot sizing with supplier selection abstract in this paper two multi objective mixed integer non linear models are developed for multi period lot sizing problems involving multiple products and multiple suppliers each model is constructed on the basis of three objective functions cost quality and service level and a set of constraints the total costs consist of purchasing ordering holding and backordering and transportation costs ordering cost is seen as an ordering frequency dependent function whereas total quality and service level are seen as time dependent functions the first model represents this problem in situations where shortage is not allowed while in the second model all the demand during the stock out period is backordered considering the complexity of these models on the one hand and the ability of genetic algorithms to obtain a set of pareto optimal solutions we apply a genetic algorithm in an innovative approach to solve the models comparison results indicate that in a backordering situation buyers are better able to optimize their objectives compared to situations where there is no shortage if we take ordering frequency into account the total costs are reduced significantly

trade credit in economic fluctuations and its impact on corporate performance a panel data analysis from china trade credit is an important auxiliary measure to complete transactions in supply chains and it is also an important source of short term financing for companies this paper uses panel data for ch

optimal safety stock levels of subassemblies and manufacturing components abstract in order to control the time to market and manufacturing costs companies produce and purchase many parts and components before receiving customer orders consequently demand forecasting is a critical decision process using modular product design and super bills of materials are two effective strategies for developing a reliable demand forecasting process they reduce the probability of stockouts in diversified production contexts furthermore managing and controlling safety stocks for pre assembled modules provide an effective solution to the problem of minimizing the effects of forecast errors this paper develops evaluates and applies innovative cost based analytical models so that the optimal safety stock of modular subassemblies and components in assembly to order and manufacturing to order systems respectively can be rapidly quantified the implementation of the proposed models in two industrial case applications demonstrates that they significantly reduce the safety stock inventory levels and the global logistical cost

does religion matter to informal finance evidence from trade credit in china informal finance plays an important role in transitional economies with weak legal institutions such as china as a major informal finance instrument trade credit relies on informal institutions

who gets credit the behavior of bureaucrats and state banks in allocating credit to chinese state owned enterprises abstract using a sample of chinese state owned enterprises spanning 1980 to 1994 we investigate the factors that determine the sources of finance for firm level fixed investment including retained earnings bank finance and government transfers direct government transfers were not significantly associated with profitability throughout the period in contrast bank finance was positively linked to both profitability and some types of reform reforms that enabled managers to self select and thus expose themselves and their employees to greater risk were positively associated with acquiring bank finance the association between bank finance and profitability weakened in the 1990s as banks increasingly assumed bailout responsibility

joint liability lending and the rise and fall of china s township and village enterprises abstract we present a new explanation for the rise and fall of collectively owned enterprises based on the changing lending preferences of banks until the mid 1990s bank loans to collective firms exhibited the key features of joint liability lending supported by the sanctioning ability of local government leaders however subsequent changes in collateral firm performance interest rates and financial competition led banks to prefer individual lending to private firms this explanation is supported by empirical analysis of the determinants of bank lending preferences the involvement of township leaders in lending and the ability of firms to obtain loans

soft budget constraint and inflation cycles a positive model of the macro dynamics in china during transition abstract in this paper we develop a positive general equilibrium model consistent with china s institutional and political environment to explain the growth and inflation cycles during transition central to our explanation is the government s use of the monetary and financial system to support the state sector and the growing tension between a long running commitment to the sector and economic decentralization given this commitment we show how the cycles emerge as a product of the government s imperfect control over credit allocation under decentralization and the high costs of implementing administrative credit control

banking structure and industrial growth evidence from china abstract the debate on the puzzling relationship between financial development and economic growth in china has remained inconclusive because the effects of banking ownership structure and size structure are highly intertwined in the existing studies this paper addresses this problem by specifying an empirical model to disentangle the two structural effects the analysis uses a data set that includes the banking sector and 28 manufacturing industries across 30 chinese provinces over the period 1999 2007 in order to identify the channel through which banking structure affects industrial growth two interactive variables are constructed to capture the interaction of the prevailing banking structure with labor intensity and the share of non state owned enterprises in each industry respectively the regression results are robust and make the case for the ongoing banking reforms to reduce state ownership and promote small banking institutions

determination of paths to vendor market efficiency using parallel coordinates representation a negotiation tool for buyers abstract this study demonstrates the use of data envelopment analysis for measuring vendor performance and efficiency an algorithm by inselberg is employed for determining points of vendor efficiency on multiple criteria this study then demonstrates how parallel coordinates graphical representation can be used to display the efficiency of vendors on multiple criteria and in so doing visually identify benchmark values on these criteria for negotiating with inefficient vendors an example of a firm purchasing in a jit manufacturing environment is used to illustrate this approach the results of this approach point to its flexibility for use in vendor negotiations

gauging the performance of the linear quadratic inventory model the explanatory and predictive abilities of the infinite horizon linear quadratic inventory model are gauged using the flexible accelerator model as a baseline tests of explanatory power for six nondurables industries indicate that the flexible accelerator has superior explanatory power for inventories and output in the majority of industries tests of predictive ability during the late 1990s also support the superiority of the flexible accelerator model

local financial development and the trade credit policy of italian smes we investigate the relation between local financial development and trade credit in an integrated financial market our results suggest that trade credit complements the formal finance of small and medium sized enterprises smes at the local level provincial banking development in italy increases the provision of trade credit by smes and stimulates the redistribution of loans via trade credit however cooperative banking reduces the use of trade credit at the local level evidence shows that lower levels of provincial banking development are linked with a stronger decline in trade credit at the start of the global financial crisis we also find that smes in provinces with industrial districts use more trade credit our results confirm that local differences in banking development and the trade credit policy of smes within countries matter adding to earlier findings that the provision of trade credit is complementary to the development of financial institutions at the country level

a panel data study on spanish firms inventory investment this paper raises several questions about inventory investment of a sample of 172 big nonfinancial spanish companies inventory investment has been usually explained by two alternative theories the production smoothing model and the s s model first we provide a descriptive analysis based on industry level data to show some shortcomings of the first model then we test a flexible accelerator model using firm level data the results seem to show that inventory investment previous period inventories and sales are closely and significantly related this evidence although not conclusive rejects both the pure production smoothing model and the s s model at the same time our results confirm the view of a target inventory level and the plausibility of the so called stock adjustment model so that the optimal inventory holding buffers sales volatility

financing constraints and inventory investment a comparative study with high frequency panel data this study provides new evidence of the importance of financing constraints for explaining the dramatic cycles in inventory investment we compare the empirical performance of different financial variables coverage ratio cash stocks and cash flow used in previous research to test for the presence of financing constraints the comparison is undertaken in a common framework with an identical sample and high frequency quarterly firm panel data cash flow is much more successful than cash stocks or coverage in explaining the facts about inventory investment across firm size different inventory cycles and different manufacturing sectors

redistribution in a decentralized economy growth and inflation in china under reform despite expanding at an annual rate of nearly 9 percent china s economy has exhibited a marked cyclical pattern periods of rapid growth accompanied by accelerating inflation are followed by contractions during which both growth and inflation fall a widening gap also emerged between the output contribution of the state sector and its share of investment and employment in this paper we offer a consistent explanation for this behavior that reflects several key institutional features of china s economic reform i economic decentralization ii the government s commitment to the state sector and iii the credit plan and credit control

sole versus dual sourcing in stochastic lead time s q inventory models when supply lead times are uncertain the simultaneous procurement from two sources offers savings in inventory holding and shortage costs economies are achieved if these savings outweigh the increase in ordering costs in this paper we analyze dual sourcing in the context of the reorder point order quantity inventory model with constant demand and stochastic lead times and compare it with single sourcing two cases are studied using the uniform and the exponential distributions which may be thought of as two extreme ways of representing stochastic lead times in our two vendor model the order quantity is split equally between the two vendors and the split orders are placed simultaneously when the inventory position reaches the reorder level a comparison of the total expected costs suggests that when the uncertainty in the lead times is high and the ordering costs are low dual sourcing could be cost effective

counter cyclical substitution between trade credit and bank credit abstract this paper explores the substitution relationship between trade credit and bank credit and its counter cyclic dynamic pattern through economic cycles we propose a new theoretical model using a mechanism design method which predicts the substitution between the two credits and its counter cyclic behavior subject to the condition of technological efficiency not less than one this model also helps explain the somewhat contradictory evidence in the literature on the relationship between the two credits we present empirical evidence on the substitution effect and its counter cyclic behavior by using a balanced panel data set of 284 listed chinese companies for the period 1998 2006 we further find that the substitution behaves counter cyclically with respect to the coincident macroeconomic indicator namely gdp our empirical analysis also has some new features such as treating endogeneity carefully and incorporating the lag effect of trade credit coherently

culture openness and finance abstract differences in culture proxied by differences in religion and language cannot be ignored when examining why investor protection differs across countries we show that a country s principal religion predicts the cross sectional variation in creditor rights better than a country s natural openness to international trade its language its income per capita or the origin of its legal system catholic countries protect the rights of creditors less well than protestant countries a country s natural openness to international trade mitigates the influence of religion on creditor rights culture proxies are also helpful in understanding how investor rights are enforced across countries

trade openness financial openness and financial development in china abstract this paper investigates the impact of trade and financial openness on financial development in china we use three sets of indicators of financial development to distinguish size efficiency and competition as aspects of financial development the empirical results using dynamic panel estimation techniques suggest that both trade and financial openness are statistically significant determinants of financial efficiency and competition but that openness has a negative impact on the size of financial development our results also suggest that the marginal effects of openness on financial efficiency and competition are positive for the most open provinces but negative for the least open regions while the marginal effects of openness on the size of financial development are generally negative for most provinces in the sample the results reflect a mismatch problem between the distribution in the types of trading companies and the distribution of financial resources and also indicate that local incumbents may be strong impediments to financial development in china

can the production smoothing model of inventory behavior be saved the production smoothing model of inventory behavior has a long and venerable history and theoretical foundations that seem very strong yet certain overwhelming facts seem not only to defy explanation within the production smoothing framework but actually to argue that the basic idea of production smoothing is all wrong most prominent among these is the fact that the variance of detrended production exceeds the variance of detrended sales this paper first documents the stylized facts then it derives the production smoothing model rigorously and explains how the model can be amended to make it consistent with the facts finally it reviews the theoretical and empirical evidence and tries to draw some tentative conclusions

trust and the provision of trade credit abstract state controlled listed firms in china receive preferential treatment when borrowing from commercial banks in contrast private controlled firms rely on informal finance and on trade credit we argue for and find evidence that private firms located in higher social trust regions use more trade credit from suppliers extend more trade credit to customers and collect receivables and pay payables more quickly these findings are enhanced for firms located in provinces with weak protection of property rights our results are robust to different measures of social trust legal environment and endogeneity overall our results show that social trust helps private firms overcome institutional difficulties in financing their activities

a multi objective supplier selection model under stochastic demand conditions abstract supplier selection is a typical multi criteria decision problem attracting great attention recently cost quality delivery and flexibility are generally involved in the supplier selection decision making in this paper a measurement of supplier flexibility is extended to consider demand quantity and timing uncertainties comprehensively a multi objective supplier selection model is developed under stochastic demand conditions stochastic supplier selection is determined with simultaneous consideration of the total cost the quality rejection rate the late delivery rate and the flexibility rate involving constraints of demand satisfaction and capacity using a problem specific genetic algorithm computational results are presented

corporate trade credit and inventories new evidence of a trade off from accounts payable and receivable abstract trade credit is an important source of finance for firms and has been well researched but the focus has been on financial trade offs in this paper we consider the trade offs with inventories and develop a simple model that recognizes the incentives a firm faces to offer and receive trade credit our model identifies the response of accounts payable and accounts receivable to changes in the cost of inventories profitability risk and liquidity and importantly this influence operates through a production channel our results support the model and complement many existing studies focused on explaining the financial terms of trade credit

zhu rongji might be right understanding the mechanism of fast economic development in china understanding the facilitating role of regional governments and the source of regional competition is the key to demystifying the success of china s fast economic development since the 1990s this paper as the product of the lecture the author delivered at the world economy china annual lecture on 3 november 2011 at university of nottingham provides a framework that better illustrates the mechanism that motivates china s economic growth over the past 20 years it shows that the current growth mechanism in china is largely the result of institutional reforms and fiscal recentralisation that occurred in 1994 under the leadership of premier zhu rongji being allowed to have their own source of tax revenue under the new fiscal reform chinese regional governments are motivated to pursue the goal of economic growth through fast capital formation and industrialisation the newly designed intergovernmental fiscal relationship as the most important reform programme in china has also helped create a growth incentive that is compatible between central and local governments and resulted in a tibout type regional competition in the sense that inefficient use of resources including public land would be substantially eliminated by the strategic behaviour of regional governments being more attractive to external direct investment such regional competition makes the regional governments preserve and use the markets rather than replace them and has generated consistent and powerful development momentum for the post 1994 economy of china