government as a discriminating monopolist in the financial market the case of china abstract we show that the many unusual features of china s financial markets are consistent with a government choosing regulations to maximize a standard type of social welfare function under certain conditions these regulations are equivalent to imposing explicit taxes on business and interest income yet should be much easier to enforce the observed implicit tax rates are broadly in line with those observed in other countries the theory also forecasts however that china will face increasing incentives over time to shift to explicit taxes

control and performance of international joint ventures control is a critical concept for successful management and performance of international joint ventures ijvs this paper reviews and synthesizes prior studies addressing the conceptualization and operationalization of control within ijvs as well as the ijv control performance relationship the paper also presents a new conceptualization of ijv control as well as a conceptual frame work for studying control of ijvs

optimal liberalization of financial markets abstract as financial markets become completely liberalized countries gain from improved risk sharing but less wealthy countries can no longer profit from borrowing abroad at the lower rate and reinvesting at home at the higher rate with decreasing rather than constant returns to capital the gain from risk sharing is more likely to dominate the loss of the difference between the borrowing rate abroad and the decreasing reinvestment rate at home complete liberalization is likely to be optimal for less wealthy countries unless their labor endowment is large their productivity is large or holdings by foreigners are small as in china

creation adoption and diffusion of innovations by subsidiaries of multinational corporations this paper reports some of the findings of a multi phased and multi method study on the organizational attributes that facilitate creation adoption and diffusion of innovations by subsidiaries of multinational companies comparison of results obtained through case research in nine companies multiple respondent questionnaire surveys in three companies and a single respondent survey in 66 north american and european multinationals reveal unambiguous and positive impacts of normative integration through organizational socialization and dense intra and inter unit communication on an mnc subsidiary s ability to contribute to the different innovation tasks the findings are less consistent with regard to the effects of local resources and autonomy and it appears that the influences of these two attributes are strongly mediated by the levels of normative integration and organizational communication

the 2009 recovery act stimulus at the extensive and intensive labor margins abstract this paper studies the effect of government stimulus spending on a novel aspect of the labor market the differential impact of spending on the total wage bill versus employment we analyze the 2009 recovery act via instrumental variables using a new instrument the spending done by federal agencies that were not instructed to target funds towards harder hit regions we find a moderate positive effect on jobs created saved i e the extensive margin and also a significant increase in wage payments to workers whose job status was safe without recovery act funds i e the intensive margin our point estimates imply that roughly one half of the wage payments resulting from the act were paid at the intensive margin to provide a theoretical underpinning for the estimates we build a micro founded dynamic model in which a firm meets new government demand with a combination of new hiring and increasing existing workers average hours faced with hiring costs and an overtime premium the firm responds by increasing hours along both margins our model analysis also provides insight into how government spending policy should be structured to lower the cost of generating new jobs finally we catalogue survey evidence from recovery act fund recipients that reinforces the importance of the intensive labor margin

multinational parent companies influence over human resource decisions of affiliates u s firms in mexico this study provides empirical evidence for the relationship between the degree of influence u s parent companies have over the human resource decisions of their mexican affiliates and the affiliates resource dependencies on the parent company both wholly owned and joint venture affiliates are examined resource dependence was the factor most closely related to parent influence over affiliate human resource decisions the importance of an affiliate to a parent company the nationality of affiliate managers and the type of ownership arrangements were also found to affect parent influence but to lesser extents than resource dependencies

how successful was the new deal the microeconomic impact of new deal spending and lending policies in the 1930s the new deal during the 1930s was arguably the largest peace time expansion in federal government activity in american history until recently there had been very little quantitative testing of the microeconomic impact of the wide variety of new deal programs over the past decade scholars have developed new panel databases for counties cities and states and then used panel data methods on them to examine the impact of new deal spending and lending policies for the major new deal programs in most cases the identification of the effect comes from changes across time within the same geographic location after controlling for national shocks to the economy many of the studies also use instrumental variable methods to control for endogeneity the studies find that public works and relief spending had state income multipliers of around one increased consumption activity attracted internal migration reduced crime rates and lowered several types of mortality the farm programs typically aided large farm owners but eliminated opportunities for share croppers tenants and farm workers the home owners loan corporation s purchases and refinancing of troubled mortgages staved off drops in housing prices and home ownership rates at relatively low ex post cost to taxpayers the reconstruction finance corporation s loans to banks and railroads appear to have had little positive impact although the banks were aided when the rfc took ownership stakes

the market reaction to international cross listings evidence from depositary receipts abstract this paper examines the stock price impact of international dual listings the sample consists of 181 firms from 35 countries that instituted their first depositary receipt program over the period 1985 1995 the market reaction to a depositary receipt program is larger in magnitude and more pervasive than previously reported the stock price reaction is related to choice of exchange geographical location i e emerging or developed markets and avenues for raising equity capital i e public versus private offerings

endogenous federal grants and crowd out of state government spending theory and evidence from the federal highway aid program contrary to simple theoretical predictions existing evidence suggests that federal grants do not crowd out state government spending a legislative bargaining model with endogenous grants documents a positive correlation between grant receipts and preferences for public goods this correlation has likely biased existing work against measuring crowd out to correct for such endogeneity the model motivates instruments based on the political power of state congressional delegations exploiting this exogenous variation in grants the instrumental variables estimator reports crowd out that is statistically and economically significant this endogeneity may explain the flypaper effect a nonequivalence between grant receipts and private income jel d70 h40 h77

a joint test of market segmentation and exchange risk factor in international capital market market segmentation and exchange risk are two main factors that distinguish international financing and investment decisions from domestic ones existing studies of market segmentation have been conducted within a framework in which exchange risk is not explicitly recognized this paper performs a joint test of market segmentation and exchange risk pricing based on individual stock data from seven major countries outside of the u s for the period january 1981 to december 1989 the theoretical framework used is a multifactor model with domestic and world market factors and an exchange risk factor the maximum likelihood method is used to estimate risk premia and factor analysis is used to provide additional evidence on the pricing of risk factors the results indicate that a the factor structure of asset returns is internationally heterogeneous b many national capital markets can be described as partially segmented rather than the polar cases of complete segmentation or integration and c exchange risk is a significant factor affecting asset returns in addition to the domestic and world market risk factors

rank effects in bargaining evidence from government formation theories of multilateral bargaining and coalition formation applied to legislatures predict that parties seat shares determine their bargaining power we present findings that are difficult to reconcile with this prediction but consistent with a norm prescribing that the most voted party should form the government we first present case studies from several countries and regression discontinuity design based evidence from twenty eight national european parliaments we then focus on 2 898 spanish municipal elections in which two parties tie in the number of seats we find that the party with slightly more general election votes is substantially more likely to appoint the mayor since tied parties should on average have equal bargaining power this identifies the effect of being labeled the most voted this effect is comparable to that of obtaining an additional seat and is also present when a right wing party is the most voted and the second and third most voted parties are allied left wing parties who can form a combined majority a model where elections both aggregate information and discipline incumbents can rationalize our results and yields additional predictions we take to the data such as voters punishing second most voted parties that appoint mayors

autonomy and procedural justice a framework for evaluating subsidiary strategy using the well supported dimensions of autonomy and procedural justice a four quadrant model of subsidiary strategy is proposed and a four part typology hypothesized partner collaborator militant and vassal subsidiaries a clustering process is used to develop a four group taxonomy that corresponds with the induced model the four groups of subsidiaries are analysed across seven alternative strategic dimensions integration responsiveness coordination configuration market scope product scope and value added scope the external and internal validity of the framework is confirmed and its utility discussed in terms of subsidiary s movement from one strategy state to another

home bias in equity portfolios inflation hedging and international capital market equilibrium we test whether the home bias in equity portfolios is caused by investors trying to hedge inflation risk the empirical evidence is consistent with this motive only if investors have very high levels of risk tolerance and equity returns are negatively correlated with domestic inflation we then develop a model of international portfolio choice and equity market equilibrium that integrates inflation risk and deadweight costs using this model we estimate the levels of costs required to generate the observed home bias in portfolios consistent with different levels of risk aversion for a level of risk aversion consistent with standard estimates of the domestic equity market risk premium these costs are about a few percent per annum greater than observable costs such as withholding taxes thus the home bias cannot be explained by either inflation hedging or direct observable costs of international investment unless investors have very low levels of risk aversion article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

corporate control of investments and management styles this article describes how corporate managers of major swedish groups in different industries exert control over investment requests and the direction of the investments of their groups the study

the flypaper effect what happens to a state s spending when it receives an unconditional grant from the federal government the standard theoretical analysis predicts that the increase in spending will be the same as that generated by an equivalent increase in local incomes or roughly 5 10 percent for most states in contrast numerous empirical analyses have found that spending increases by much more with some estimates near 100 percent this result is known as the flypaper effect since the money appears to stick where it hits the authors review this evidence as well as other studies that find similar behavior in firms

stock prices and monetary variables the international evidence according to one explanation of the observed negative relation between u s stock returns and inflation a drop in stock prices signals a drop in economic activity which leads to a reduction in government revenues an increase in the budget deficit and an increase in the expected inflation rate the latter may or may not be accompanied by an increase in real interest rates depending upon whether or not the government borrows to finance the budget deficit evidence from nine major world stock markets seems to support this theory stock returns exhibit a strong negative correlation with changes in expected inflation as proxied by the short term interest rate a much weaker correlation with the level of inflation there also appears to be a significant although small real rate effect especially in those countries such as japan germany and switzerland that finance an unexpected deficit by borrowing other internationally oriented monetary variables appear to have little influence on equity returns despite increased international investing and the increase in exchange rate volatility since the advent of flexible rates changes in real exchange rates and in real interest rate differentials are only weakly correlated with stock returns and their influence is dwarfed by the effects of domestic interest rate changes

an intertemporal model of international capital market segmentation this paper develops an intertemporal model of international capital market segmentation within the model under various forms of segmentation integration the equilibrium asset prices and allocations the risk free interest rate and the intertemporal consumption behavior and welfares of two countries are derived and compared it is shown that the equilibrium interest rate is increased on integration and that integrating markets may be significantly welfare decreasing for one of the countries conditions that may lead to a decrease in welfare are investigated the conclusions as to the effects of segmentation on asset prices in the mean variance model of the existing finance segmentation literature are also shown to break down in an intertemporal model

further evidence on closed end country fund prices and international capital flows using cointegration analysis i establish a long run relationship between country fund premiums and international capital flows in six out of 10 emerging markets and in two out of seven developed markets examined this relationship is explored to derive an intuitive measure of capital market segmentation that accounts for investment barriers and does not rely on a specific asset pricing model i find that most emerging markets are segmented but some exhibit a clear trend toward integration whereas most developed countries exhibit no evidence of segmentation the segmentation measure reveals that the process toward integration is gradual and can be reversed

regional transfer multipliers a series of discontinuities in the allocation mechanism of federal transfers to municipal governments in brazil allow us to identify the causal effect of public spending on local labour markets using a fuzzy regression discontinuity design rdd our estimates imply a cost per job of about 8 000 us dollars per year and a local income multiplier around two the effect comes mostly from employment in services and is more pronounced among less financially developed municipalities

configurations of strategy and structure in subsidiaries of multinational corporations a three fold typology of subsidiary roles world mandate specialized contributor local implementer was induced from the literature and its empirical validity was confirmed adopting a configurational approach we then explored the ways in which subsidiary structural context varies across subsidiary role types structural context characteristics were determined through a discussion of the underlying principles of the hierarchy and heterarchy models of multinational organization the key findings were a higher strategic autonomy in world mandates than in local implementers b a more internationally configured value chain in world mandates and specialized contributors than local implementers c lower levels of internal product flows in world mandates than the other two types and d a significantly lower performance in specialized contributors implications for a configurational model of subsidiary management and for heterarchy as a higher level conceptualization are discussed

the global integration of business functions a study of multinational businesses in integrated global industries the way that multinational businesses in integrated global industries coordinate and control r d manufacturing and marketing functions across borders has significant implications for performance we propose that in such global industries certain integrating modes will be more effective than others in integrating a function globally we show that each function has a different combination of effective integrating modes for global r d integration people based and information based modes are more effective than formalization based and centralization based modes for manufacturing people information and formalization are more effective than centralization with respect to marketing information and centralization are more effective than people and formalization we also demonstrate that the co alignment between actual and ideal profiles configurations or patterns of integrating modes results in superior performance our results reveal that people based and information based modes are generally more effective than formalization based and centralization based modes in coordinating and controlling business functions worldwide

did the 2008 tax rebates stimulate spending in an effort to bolster economic performance in light of a looming downturn in economic activity on february 13 2008 president george w bush signed the economic stimulus act of 2008 more than two thirds of the 152 billion bill consisted of economic stimulus payments to be sent beginning in may to approximately 130 million households to qualify recipients had to have a valid social security number an income tax liability or at least 3 000 of qualifying income that included earned income and some benefits from social security veterans affairs or railroad retirement and have filed a 2007 federal tax return for the most part those who filed as single individuals received between 300 and 600 while those who filed jointly received between 600 and 1 200 additionally parents with children under 17 who were eligible for a child tax credit and had a social security number received an extra 300 per child the tax rebate phased out at higher levels of income as the payment was reduced by 5 percent of the amount of adjusted gross income over 75 000 for singles or over 150 000 for married couples the treasury remitted payments either by direct deposit mainly in the first half of may or by mail mainly from mid may through mid july the effect of these stimulus payments depends on how much was spent this paper reports new survey evidence on the propensity of consumers to spend the 2008 rebate it also relates the survey evidence to aggregate data and to evidence about spending from the 2001 tax rebate

international price discovery in finnish stock index futures and cash markets abstract this paper investigates empirically how the information of the world s stock markets is reflected in the thin finnish stock index futures and cash markets the world wide returns seem to have a significant leading ability for predicting finnish stock index futures returns however this kind of causal relation is not observed between the world wide and stock market returns the finnish stock index futures returns then show significant granger causality with finnish stock market returns the stock market being the lagging one the relationship is improved by allowing the association between markets to be different for positive and negative returns the findings of this study suggest short selling restrictions and other market frictions to be a significant factor leading to a delay in the pricing process in the stock market

foreign equity investment restrictions capital flight and shareholder wealth maximization theory and evidence this article provides a theory of foreign equity investment restrictions we consider a model where the demand function for domestic shares differs between domestic and foreign investors because of deadweight costs in holding domestic and foreign securities that depend on the country of residence of investors we show that domestic entrepreneurs maximize firm value by discriminating between domestic and foreign investors the model implies that countries benefitting from capital flight have binding ownership restrictions such that foreign investors pay a higher price for shares than domestic investors the empirical implications of this theory are supported by evidence from switzerland article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

equity markets and personal taxation the ex dividend day behaviour of finnish stock prices abstract this paper analyzes the ex dividend day behaviour of stock prices in the finnish stock market the tax structure in finland is strikingly similar to the new tax structure in the u s which was for the first time in effect during the fiscal year 1987 the results in this paper may thus also illuminate the ex dividend day behaviour in the u s stock markets under the new tax law our empirical data show that the average drop in the stock prices on their ex dividend days has been 90 of the amount of the dividend during the years of 1974 to 1985 this is shown to be consistent with the tax explanation taking into account the finnish tax laws it is especially shown that the marginal seller on the ex dividend days is an individual investor with a marginal tax rate of approximately 50

on the effects of barriers to international investment a simple model is presented in which it is costly for domestic investors to hold foreign assets the implications of the model for the composition of optimal portfolios at home and abroad are derived it is shown that all foreign assets with a beta larger than some beta plot on either one of two security market lines some foreign assets with a beta smaller than are not held by domestic investors even if their expected return is increased slightly while it is obviously not true that asset markets are completely segmented between countries there is evidence of barriers to international investment although reality seems to lie in that grey area between complete segmentation and no segmentation at all most international asset pricing models are concerned with the extreme case of no barriers to international investment no effort seems to have been made to study the effect on portfolio choice of such barriers which make it costly to hold foreign securities as opposed to domestic securities but which do not in general render international diversification so onerous that investors avoid foreign securities completely casual empiricism suggests that models without barriers to international investment should be suspect those models cannot explain why it appears that in every country investors on average hold more domestic securities than would be required if they held the world market portfolio 2 this paper constructs a model of international asset pricing in which there is a cost associated with holding either long or short risky foreign securities for the sake of simplicity in most of the paper we assume that while domestic investors face barriers to international investment foreign investors face no such barriers it turns out that nothing significant is lost with such an assumption the main conclusions of this paper for the case in which foreign investors face no barriers to international investment are 1 in the presence of barriers to international investment some risky foreign

explaining share price disparity with parameter uncertainty evidence from chinese a and h shares abstract the price disparity between the a and h share markets for dual listed firms in china is one of the most intriguing puzzles in the mainland and hong kong financial markets in this paper we revisit this price disparity puzzle using the channel of parameter uncertainty in the presence of information asymmetry and market segmentation investors have different views on a firm s asset volatility and hence different valuations of the same reference firm we estimate a structural model for equity pricing using a bayesian approach in which the uncertainty of investor model parameters is represented by the posterior standard deviation of the firm s asset volatility our regression analysis shows that in addition to other market based and macro factors parameter uncertainty explains variations in price disparity

activist fiscal policy during and after the great recession that began in december 2007 the u s federal government enacted several rounds of activist fiscal policy in this paper we review the recent evolution of thinking and evidence regarding the effectiveness of activist fiscal policy although fiscal interventions aimed at stimulating and stabilizing the economy have returned to common use their efficacy remains controversial we review the debate about the traditional types of fiscal policy interventions such as broad based tax cuts and spending increases as well as more targeted policies while there have been improvements in estimates of the effects of broad based policies much of what has been learned recently concerns how such multipliers might vary with respect to economic conditions such as the credit market disruptions and very low interest rates that were central features of the great recession the eclectic and innovative interventions by the federal reserve and other central banks during this period highlight the imprecise divisions between monetary and fiscal policy and the many channels through which fiscal policies can be implemented

a dynamic equilibrium model of imperfectly integrated financial markets abstract this paper analyzes the determination of global equity portfolios and stock returns in the context of imperfectly integrated stock markets we consider a continuous time two country endowment economy where the level of financial integration is captured by a proportional tax on foreign dividends despite the investor heterogeneity induced by this tax we obtain approximate closed form expressions for asset prices and characterize equity holdings and the joint process followed by country level stock returns in equilibrium our model is consistent with a broad range of empirical findings on international financial integration when the endogenous cross country return correlation is high small frictions in equity markets can generate a substantial home bias in portfolios in the baseline version of our model the cross country return correlation is driven by the fundamental correlation and portfolio rebalancing in a two good extension of the model the adjustment of relative good prices can generate a high stock return correlation even for a low level of fundamental correlation magnifying the impact of the financial friction on portfolios we assess the quantitative performance of the model in a calibration exercise using data from g7 countries

intraday market price integration for shares cross listed internationally this study investigates market price integration by testing per share trade execution price or cost tep c differentials for matched intraday trades for a sample of canadian shares cross listed in the u s the tse trade price advantage over the entire time period changed significantly after both the tse s own minimum quotation increment reduction and that of its u s competitors we show that the differential tep c is equivalent to the international effective spread differential and that market quality comparisons which benchmark using the national instead of the international bbo need to compare both national effective half spread and midspread differences our cross sectional regression results support our predictions that tep c differentials can be explained by differences in national midspreads and by ex ante proxies of national effective half spreads the tep c differentials vary inversely with increasing levels of our measure of signed market nonfragmentation

macroeconomic effects from government purchases and taxes for u s annual data that include world war ii the estimated multiplier for temporary defense spending is 0 4 0 5 contemporaneously and 0 6 0 7 over 2 years if the change in defense spending is permanent gauged by ramey s defense news variable the multipliers are higher by 0 1 0 2 since all estimated multipliers are significantly less than 1 greater spending crowds out other components of gdp particularly investment the lack of good instruments prevents estimation of reliable multipliers for nondefense purchases multipliers in the literature of two or more likely reflect reverse causation from gdp to nondefense purchases increases in average marginal income tax rates measured by a newly constructed time series have significantly negative effects on gdp when interpreted as a tax multiplier the magnitude is around 1 1 the combination of the estimated spending and tax multipliers implies that the balanced budget multiplier for defense spending is negative we have some evidence that tax changes affect gdp mainly through substitution effects rather than wealth effects

disentangling the effects of a banking crisis evidence from german firms and counties lending cuts by banks directly affect the firms borrowing from them but also indirectly depress economic activity in the regions in which they operate this paper moves beyond firm level studies by estimating the effects of an exogenous lending cut by a large german bank on firms and counties i construct an instrument for regional exposure to the lending cut based on a historic postwar breakup of the bank i present evidence that the lending cut affected firms independently of their banking relationships through lower aggregate demand and agglomeration spillovers in counties exposed to the lending cut output and employment remained persistently low even after bank lending had normalized innovation and productivity fell consistent with the persistent effects

the transfer of organizational culture overseas an approach to control in the multinational corporation organizational control has traditionally been described within the framework of the ideal type of weberian bureaucracy in which rules and regulations specify desired behavior and rewards are based on explicit performance measures this paper describes an alternative organizational ideal type that relies on an organizational culture for control in this type of system behavior is specified by the organizational culture and performance is maintained via mechanisms of social pressure an example of this letter type of control is found in the type z organization an american organizational form similar in many ways to the japanese form particularly interesting is the way in which a type z organization manages overseas subsidiaries by establishing the organizational culture in the subsidiary the process by which this is accomplished and by which control is maintained are described in a comparative empirical study of the headquarters and subsidiary of a firm representative of each control type the implications of this approach for management of the multinational firm and for the host country are also discussed

a cup runneth over fiscal policy spillovers from the 2009 recovery act this article studies the effects of interregional spillovers from the american recovery and reinvestment act of 2009 the recovery act using cross county commuting data we cluster us counties into local labour markets each of which we further partition into two subregions we then compare differential labour market outcomes and recovery act spending at the regional and subregional levels among pairs of subregions we find evidence of fiscal policy spillovers according to our benchmark specification 1 of recovery act spending in a subregion increases its own wage bill by 0 64 and increases the wage bill in its neighbouring subregion by 0 50 during the first two years following the act s passage the spillover effect occurs in the service sector whereas the direct effect occurs in both the services and goods producing sector

integration vs segmentation in the canadian stock market this paper examines the issue of integration versus segmentation of the canadian equity market relative to a global north american market we compare the international and domestic versions of the capm and find that integration or the mean variance efficiency of the global market index is rejected by the data segmentation is the preferred model based on a maximum likelihood procedure correcting for thin trading we further divide the sample into securities that are interlisted in canada and the u s and those that are not integration is rejected for both groups which indicates that the source of segmentation can be traced to legal barriers based on the nationality of issuing firms empirical studies of international capital markets have left the issue of segmentation versus integration largely unresolved yet the question of national or international pricing of assets has crucial implications for financial decisions if national stock markets are segmented then international portfolios should display superior risk adjusted performance because some of the priced domestic systematic risk is diversifiable also with segmentation many irrelevance propositions for corporate financial strategy break down home firms face optimal hedging decisions as well as optimal foreign versus home borrowing decisions finally criteria for capital budgeting decisions will be quite different under national and international pricing the purpose of this paper is to shed some light on this integration versus segmentation question for the canadian equity market vis a vis a global north american market in this paper integration is defined2 as a situation where investors earn the same risk adjusted expected return on similar financial instruments in different national markets the key problem of course is the pricing

control changes in multinational corporations adjusting control approaches in practice the issue of control in multinational corporations mncs is central to international business scholarship however prior literature tends to provide a static perspective offering few theoretical insights on control changes especially the practices that enable control adjustments adopting a practice theory perspective we consider control as in the making whereby adjustments emerge through a social accomplishment constituted and reconstituted as headquarters and subsidiaries engage in a co creating process using a longitudinal case study approach we had the rare opportunity to track and compare an unsuccessful and a successful attempt to adjust control in an mnc over time our main theoretical contribution is a model of adjusting control in mncs that details the practices that enable control changes this model offers theoretical implications for organizational control theory in mncs especially in relation to theorizing the subsidiary contribution in the design of control the reconciliation of raised tensions in headquarters subsidiary relationships and the nature of unintended consequences in the adjustment process our study also contributes to theories on mnc change as it details the construction of an ongoing strategy structure alignment for strategic flexibility

general revenue sharing and public sector unions abstract in this paper i find that in the context of a large intergovernmental general revenue sharing program implemented from 1972 to 1986 cities increased expenditures one for one with federal grants which is suggestive of a large flypaper effect furthermore i find that cities in states with pro union collective bargaining laws spent more than half of the transfers on increased wages while cities in states without such laws spent a greater fraction on increased government services these latter findings suggest that public sector unions play an important role in determining the usage and impact of intergovernmental grants

implementing global strategy characteristics of global subsidiary mandates implementing a global strategy requires coordinating subsidiary activities across country locations the assumption often made is that such coordination must be managed at headquarters however an alternate approach is decentralized centralized responsibilities in which different subsidiaries within the multinational are given worldwide mandates to manage specific products or products lines this study identifies subsidiary characteristics that are associated with receiving a global mandate by examining foreign subsidiaries located in france germany japan u k u s and canada

the american recovery and reinvestment act solely a government jobs program abstract this paper estimates the private and government sector employment effects of american recovery and reinvestment act arra spending via an instrumental variables strategy we argue that this aid was effectively fungible and states used it to offset declines in revenue this enables us to use exogenous variation in states budget positions to identify the act s employment effects we also exploit exogenous variation across states in arra highway funding according to our benchmark estimates average state and local government employment during the 24 months following the program s inception was between 156 000 and 563 000 persons greater as a result of arra spending 90 confidence interval the corresponding estimate for the private sector ranges from a loss of 182 000 to a gain of 1 1 million jobs our point estimate for the implied cost of creating a job lasting one year is 202 000 which is substantially larger than the corresponding estimate from the president s council of economic advisors

the pricing of emerging market country funds this paper provides an analysis of the equilibrium pricing of closed end country funds cecfs from emerging and nascent markets under the condition of segmented capital markets where an investment company acquires a set of eligible securities from the home country to form a cecf and issues shares to the residents of the host country the key findings are first a country fund will trade at its net asset value zero premium mimicking an open end status if the fund acquires as much of eligible securities as the differential substitution demand for them between the host and home country investors the differential substitution demand is shown to represent the equilibrium demand for eligible securities by the host country investors when they do not face supply restrictions second the fund will command a higher premium the more close a substitute the fund is for the market portfolio of the home country and the more risk averse the home country investors are collectively third the basic functional form of the fund premium is robust to the inclusion of freely tradable securities however the fund premium would additionally depend on the spanning ability of freely tradable securities

the aggregate effects of sectoral reallocations abstract can a one time permanent change in the fundamentals behind the sectoral composition of the economy prompt an aggregate downturn can this downturn be non negligible even if one uses us data to determine the relative size of gross vs net job flows and the importance of job creation costs can one consider the military build down of the 1990s as a plausible cause for the 1990 1991 recession do sectoral reallocations generate responses that are qualitatively similar to productivity shocks we use a variant of the mortensen pissarides 1994 review of economic studies 61 397 415 job creation destruction model calibrate it to us labor market data and run experiments that suggest one can answer yes to all these questions

the only game in town stock price consequences of local bias abstract theory suggests that in the presence of local bias the price of a stock should be decreasing in the ratio of the aggregate book value of firms in its region to the aggregate risk tolerance of investors in its region using data on u s states and census regions we find clear cut support for this proposition most of the variation in the ratio of interest comes from differences across regions in aggregate book value per capita regions with low population density e g the deep south are home to relatively few firms per capita which leads to higher stock prices via an only game in town effect

ten years after the financial crisis what have we learned from the renaissance in fiscal research author s ramey valerie a abstract this paper takes stock of what we have learned from the renaissance in fiscal research in the ten years since the financial crisis i first discuss the new innovations in methodology and various strengths and weaknesses of the main approaches to estimating fiscal multipliers reviewing the estimates i come to the surprising conclusion that the bulk of the estimates for average spending and tax change multipliers lie in a fairly narrow range 0 6 to 1 for spending multipliers and 2 to 3 for tax change multipliers however i identify economic circumstances in which multipliers lie outside those ranges finally i review the debate on whether multipliers were higher for the 2009 obama stimulus spending in the united states or for fiscal consolidations in europe

foreign subsidiary csr as a buffer against parent firm reputation risk this study examines the influence of parent firm reputation risk on the level of corporate social responsibility activities of foreign subsidiaries we first argue that a strong reputation risk spillover occurs from parent firms to their foreign subsidiaries due to the high visibility of multinationals the control of parent firms over their subsidiaries and the liability of foreignness associated with foreign firms in host countries then we argue that subsidiaries may resort to csr in their host country to reduce the spillover effect thus we hypothesize a positive relationship between parent firm reputation risk and foreign subsidiary csr activities moreover we explore several contingency factors at both the parent firm and subsidiary levels that affect the extent of spillover and the need for subsidiaries to use csr as a buffer against parent firm reputation risk we find that the positive relationship between parent firm reputation risk and foreign subsidiary csr activities is weaker for foreign subsidiaries that directly report to the parent firm with longer operations in the host country and larger institutional distance between host and home countries using a unique sample of subsidiaries of large multinationals in china from 2009 to 2016 we find general support for our arguments

price differences between equity classes corporate control foreign ownership or liquidity abstract this paper is the first comprehensive study of price differences for dual class equity at the oslo stock exchange it analyzes the relative importance of corporate control foreign ownership restrictions and stock market liquidity for the price differences the norwegian market has the peculiar feature that in part of the sample period non voting shares were trading at a premium to voting shares i e what is usually termed the voting premium was negative this result can be rationalized by restrictions on foreign ownership in the later part of the period with no regulatory restrictions on foreign ownership the voting premium is positive and related to corporate governance and liquidity

international investment restrictions and closed end country fund prices some closed end country funds trade at large premiums relative to their net asset values this paper examines whether international investment restrictions raise country fund price net asset value ratios by segmenting international capital markets we test whether a relation exists between announcements of changes in investment restrictions and changes in these ratios using weekly data from may 1981 to january 1989 the results provide evidence that some foreign markets are at least partially segmented from the u s capital market

multinational corporations control systems and delegation issues the paper has 2 major objectives first to identify control and delegation issues confronting multinational corporation managers second to develop a conceptual model to assist multinational corporation managers in selecting appropriate control systems and determining the extent of delegation to be provided to subsidiary managers finally the paper suggests directions for future research

asset pricing in partially segmented markets evidence from the finnish market this paper analyzes asset pricing in a partially segmented market where citizens of a small country are allowed to hold only their domestic securities whereas the rest of the investors foreigners are essentially allowed to hold all securities in this market setting it may occur that the citizens of the small country are willing to pay less for their domestic securities than are the foreign investors the paper derives equilibrium required rates of return for different investors in this market setting which perfectly occurred in finland and tests this equilibrium model using data from the finnish stock market empirical results are consistent with the hypotheses derived from the model several studies see e g solnik 1974a and grauer and hakansson 1987 have shown that investors should diversify internationally as by so doing they can reduce the risk of their portfolio without lowering the expected return this implies that if the citizens of a certain country are by legal restrictions prohibited from holding foreign securities they may require a higher rate of return on the domestic securities than the foreign investors do this may happen because the domestic investors cannot diversify away the specific country risk in the same way that the foreign investors can thus if we could observe the prices which the foreign and domestic investors are willing to pay for these domestic securities we would expect them to differ because of this diversification effect the finnish law prohibited finnish investors from investing in foreign securities until 1986 while simultaneously allowing foreign investors to own up to 20 of the shares of any finnish company moreover since 1984 the helsinki stock exchange hse has separately quoted the prices for the unrestricted shares which can be owned both by foreign and domestic investors and for the restricted shares owned solely by domestic investors thus the market setting depicted in the previous paragraph occurred perfectly in finland during the years 1984 and 1985 in this paper our objective is to develop and test an asset pricing model which takes into account the legal restrictions in the finnish stock market in section i we specify the market structure in the finnish stock market in more detail by explaining the relevant legal restrictions affecting the market we also present some descriptive statistics on the prices of the restricted and the unrestricted on

partially segmented international capital markets and international capital budgeting abstract evidence suggests that international capital markets are neither fully integrated nor completely segmented there is however currently no general method available for computing the required return on corporate investments in such capital markets this paper uses a model of partially integrated international capital markets to derive optimal international capital budgeting rules we show how capital budgeting rules depend on the level of investor costs to cross border investment both directly and also indirectly through the portfolio specialization they induce we explain how required returns differ for different companies raising capital in such markets and how these costs of capital may be estimated we also explain how these differences in required returns can be consistent with general equilibrium and the effect they have on incentives for foreign direct investment

the efficiency of the finnish market for right issues abstract this paper analyzes the efficiency of the finnish market for right issues the rights traded on the helsinki stock exchange hse are similar instruments to warrants with some special features attached to them the paper first derives appropriate arbitrage conditions for these rights which must be satisfied in informationally efficient markets and then examines these conditions using both ex post and ex ante test procedures the ex post tests which jointly examine market efficiency and synchroneity of the rights and stock market show a staggering amount of violations against the arbitrage bounds however the ex ante tests reveal that high transaction costs prevent normal investors from benefitting from these violations stockbrokers themselves however seem to be able to earn arbitrage profits in the rights market

market seeking mnes in an emerging market how parent subsidiary links shape overseas success this study extends research on parent subsidiary links applying new theoretical perspectives those of resource dependence and dynamic capability to the new empirical setting of an emerging market we suggest that parent subsidiary links help to mitigate emerging market threats by reducing external dependence and help to capitalize on emerging market opportunities by enhancing local responsiveness

barriers to portfolio investments in emerging stock markets the authors examine to what extent features of the international tax system and indicators of transaction costs affect the required rates of return on emerging stock markets they show that the capital gains withholding tax levied on foreign portfolio investors increases required pre tax rates of return as countries generally do not index their capital gains taxes it follows that inflation increases the capital gains tax base as well as the required rate of return on equity dividend withholding taxes instead appear not to increase the required pre tax equity returns significantly the differing results for capital gains and dividend taxes reflect the fact that foreign investors generally can receive domestic tax credits only for foreign withholding taxes paid on dividends the return on equity is part of the issuing firm s cost of capital so capital gains withholding taxes imposed on nonresidents increase the cost of capital for domestic firms and discourage physical investment private investment levels have tended to be low in developing countries in the 1980 s the cost of equity finance in developing countries has gained in importance in the last decade as these countries access to international lending capital has been limited during most of the decade what do these findings imply for the design of tax policy in relation to foreign portfolio investment in developing countries the existence of foreign tax credits for dividend taxes paid suggest that a country should tax capital gains more lightly than repatriated dividends as do greece pakistan portugal and venezuela each of these countries has positive dividend withholding taxes but no capital gains taxes imposed on non residents colombia and india do the exact opposite they tax capital gains far more heavily than dividends despite what appears optimal the trend in developing countries is toward lower dividend withholding taxes with little change in the average level of capital gains taxation it appears desirable for developing countries to index their capital gains taxes to prevent them from being higher than anticipated

mafia and public spending evidence on the fiscal multiplier from a quasi experiment a law issued to combat political corruption and mafia infiltration of city councils in italy has resulted in episodes of large unanticipated temporary contractions in local public spending using these episodes as instruments we estimate the output multiplier of spending cuts at provincial level controlling for national monetary and fiscal policy and holding the tax burden of local residents constant to be 1 5 assuming that lagged spending is exogenous to current output brings the estimate of the overall multiplier up to 1 9 these results suggest that local spending adjustment may be quite consequential for local activity jel d72 e62 h71 k42 the widespread resort to fiscal stimulus at the onset of the global crisis and more recently the emerging need to consolidate deficits in response to rising fiscal imbalances have revitalized the empirical debate on the transmission of fiscal policy the multiplier while the literature has mostly focused on aggregate effects at a national level several recent contributions reviewed below have called attention to the local dimension this shift in focus is motivated by specific policy questions combined with the opportunity to exploit institutional information to address econometric issues in identification 1

interdependencies among the nordic and u s stock markets using the concept of granger causality interdependencies among the stock market indices for four nordic countries and the u s are examined the vector autoregressive model results indicate that the u s market affected only the danish but not the norwegian finnish or swedish markets the swedish market was causally prior to both the norwegian and finnish markets the norwegian danish and finnish markets did not granger cause any other market the results indicate that the nordic stock markets are less than fully integrated

the evolution of research on coordination mechanisms in multinational corporations the mechanisms of coordination used by multinational corporations mncs are studied through an exhaustive literature review a pattern of evolution is found as time has passed researchers have concentrated more on subtler and informal mechanisms abandoning their unidimensional focus on structural issues it is suggested that the increase in the study of those mechanisms may be due among other reasons to the fact that mncs are indeed making more use of them that could be explained by changes in the international competitive environment which force firms to adjust their strategies requiring ever more multidimensional coordination

risk reduction by diversification in the nordic stock markets empirical examination of the ex post potential gains of risk reduction through international portfolio diversification started with grubel 1968 levy and sarnat 1970 solnik 1974 and lessard 1974 in their survey of international finance adler and dumas 1983 p 938 summed up the results the potential for international diversification to reduce risk seems unquestionable in the wake of increasing liberalization for international portfolio investment more recent contributions include jorion 1985 1989 grauer and hakansson 1987 and levy and lerman 1988 the results of the pioneers have been corroborated by contemporary research and according to jorion 1989 p 54 international diversification extolled by grubel as early as 1968 seems to have delivered on its promises despite the long tradition of studies in international portfolio diversification there has been no such work regarding the nordic markets this paper fills the gap through an analysis of potential gains from international diversification for different nordic investors danish finnish norwegian and swedish if they invest in all the nordic equity markets until the beginning of the 1980s nordic investors particularly in finland and sweden faced legal restrictions on investment abroad see nordiska radet 1987 adler and dumas 1983 have pointed out that such restrictions would lead to partially or fully segmented markets and hietala 1989 has shown the existence of premiums in the finnish stock market in our study we do not make any direct test of whether the nordic equity markets have been segmented or integrated but our results might provide some indirect evidence the nordic countries are generally viewed as fairly homogeneous from a social political and economic point of view while international diversifi

foreign currency denominated debt an empirical examination we examine the determinants of debt issuance in 10 major currencies by large u s firms using the fraction of foreign subsidiaries and tests exploiting the disaggregated nature of our data we find strong evidence that firms issue foreign currency debt to hedge their exposure both at the aggregate and the individual currency levels we also find some evidence that firms choose currencies in which information asymmetry between domestic and foreign investors is low we find no evidence that tax arbitrage liquidity of underlying debt markets or legal regimes influence the decision to issue debt in foreign currency

the challenge of autonomy and dependence in franchised channels of distribution abstract an enduring challenge for franchise management involves the reconciliation of 1 the franchisor s desire for standardization consistency and control for the preservation of its goodwill and brand equity and 2 the franchisee s quest for autonomy especially because franchises are frequently sold on the platform of be your own boss and have historically attracted would be franchisees with self employment histories and strong streaks of independence and autonomy building on arguments derived from agency theory resource dependence theory the locus of control argument and the countervailing power premise the present study attempts to evaluate 1 the interrelationships between the concepts of autonomy and dependence and 2 the influence of competition success experience and multi unit ownership as determinants of the various autonomy dependence perceptions it is suggested that contrary to the dominant perspective nested in the markets versus hierarchy dichotomy which portrays the sentiments of dependence and autonomy as opposing theoretical variables i e they are envisioned to exist only in high low combinations of these two constructs even their high high and low low combinations can emerge within a franchise setting and that these diverse behavioral settings entail unique management challenges the empirical portion of the study utilizes data drawn from the franchised channel of fastfood restaurants the results support the emergence of all four combinations of dependence and autonomy i e the traditional high low combinations as well as the high high and low low combinations suggesting that behavioral settings of franchises are indeed richer than hitherto imagined it appears that because franchisee franchisor relationships encompass several domains they each feel dependent on the other party in certain domains and simultaneously autonomous in other domains the environmental factor of competition the relationship factor of business success experienced in the franchise system and the structural factor of multi unit ownership emerged as significant predictors of dependence and autonomy notably however the countervailing power argument was not supported by the data the multi unit ownership effects were especially strong and provided a more direct test of the alignment of goals and incentives envisioned by agency theory we conclude by identifying four categories of franchisees with distinct gestalts that franchisors would do well to learn to manage in the spirit of portfolio management

long and short term dynamic causal transmission amongst international stock markets abstract this paper investigates the dynamic causal linkages amongst nine major international stock price indexes in order to gauge the causal transmission patterns we employ very recent methods of i vector error correction modeling and ii level var modeling with possibly integrated and cointegrated processes advocated by i toda and phillips econometrica 61 1993 1367 and ii toda and yamamoto j econometrics 66 1995 225 respectively the paper illustrates how such methods may be appropriately augmented in a compatible fashion to unearth previously unfounded linkage properties inherent amongst a system of stock price indexes in particular we demonstrate that previous research by using ordinary difference vars ignored an important component of linkages displayed purely over the long run this untapped evidence essentially provides robust and very useful information to international financial analysts and investors at a substantive level results of this study tend to support the contention offered by several studies in the literature of significant interdependencies between the established oecd and the asian markets and also the leadership of the us and uk markets over the short and long run the levels var however illustrate the japanese market s influence as an additional long run leader findings seem to be plausible given that these three markets us uk and japan have consistently contributed over 75 of global stock market capitalization over the major part of the sample under consideration at a methodological level this analysis also provides a primer for the wealth of applied financial econometric research focusing on dynamic causal inference which involve systems containing possibly integrated and cointegrated processes

local and aggregate fiscal policy multipliers abstract using a newly constructed panel of state level defense contracts this paper studies the effect of defense spending on the u s macroeconomy summing observations across states we estimate aggregate income and employment multipliers comparing these to local multipliers estimated with the panel provides evidence that local multiplier estimates may be reliable indicators of fiscal policy s aggregate effects furthermore evidence of small positive spillovers is found across several specifications we estimate income and employment multipliers between zero and 0 5 this result is reconciled with the greater than one multipliers found in nakamura and steinsson 2014 by analyzing the korean war years impact on the estimation

nationality cultural distance and expatriate status effects on the managerial network in a multinational enterprise we study the role of three characteristics of international managers nationality cultural distance and expatriate status for their network ties a network analysis of cross subsidiary interactions among 457 managers in an mne demonstrates that managers form strong expressive ties with peers with smaller cultural distance and from the same status group however managers form strong instrumental ties with peers who are different on these background characteristics the implications for international management theory and practice are discussed

the use of process and output controls in foreign markets this study builds upon previous control research to propose a model of formal controls used in managing activities performed in foreign markets theoretically derived contingency relationships are also proposed to assess the performance consequences of different formal control types the findings support the importance of internal and external sources of uncertainty in determining the type of control used partial support was also found for the premise that the fit between the type of control used and the type of uncertainty perceived will contribute to superior performance

more cops less crime abstract i exploit a natural experiment to estimate the causal effect of police on crime the american recovery and reinvestment act increased funding for the community oriented policing services cops hiring grant program from less than 20 million over 2005 2008 to 1 billion in 2009 hiring grants distributed in 2009 were allocated according to an application score cutoff rule and i leverage quasi random variation in grant receipt by comparing the change over time in police and crimes for cities above and below the threshold in a difference in differences framework relative to low scoring cities those above the cutoff experience increases in police of about 3 2 and declines in victimization cost weighted crime of about 3 5 following the distribution of hiring grants the effects are driven by large and statistically significant effects of police on robbery larceny and auto theft with suggestive evidence that police reduce murders as well crime reductions associated with additional police were more pronounced in areas most affected by the great recession the results highlight that fiscal support to local governments for crime prevention may offer large returns especially during bad macroeconomic times

the economic efficiency of backward vertical integration in the international petroleum refining industry a benefit of backward vertical integration in the petroleum refining industry is reduced uncertainly in the supply of crude oil for refining however there is no a priori reason to believe that refiners are more skilful in managing combined refining and crude oil production operations than are specialists in these functions using the concept of frontier production functions efficiency differences between firms with differing degrees of backward vertical integration are estimated backward vertical integration improves scale efficieny and reduces business risk significantly but it reduces both technical and overall economic efficiency this is the first comprehensive empirical test of the efficiency of vertical integration in the literature

international human resource strategy and its determinants the case of subsidiaries in taiwan this paper explores how the tension between global integration and local responsiveness affects the dimensions and determinants of international human resource ihr strategy to accomplish this jarillo and martinez s 1990 business strategy framework for parents and their subsidiaries was recast in an ihr strategy setting then the relationships between the two dimensions of ihr strategy that emerged global integration and local responsiveness and a set of interorganizational interdependency variables were explored several new and informative associations between the interorganizational interdependency variables subsidiaries dependence on parent s resources local resources and hot institutions and ihr strategy were observed in a sample of one hundred subsidiaries of japanese u s and european mncs operating in taiwan

international investment barriers in general equilibrium abstract this paper examines quantitative international investment barriers in a general equilibrium model the constraints force otherwise similar agents to hold different portfolios of risky assets we show that this induces lending and borrowing this in turn instroduces a hedging motive against shifts in the interest rate the factors affecting agents portfolio choice the allocation of capital across countries as well as the interest rate are charcterized we conjure that the equilibrium world interest rate will be lower in the constrained situations than with free capital flows

gains from international diversification 1968 85 returns on portfolios of stocks and bonds this paper applies the multi period investment model to a universe of international securities on the basis of the simple probability assessment approach our principal findings are 1 the gains from including non u s asset categories in the universe were remarkably large in some cases statistically significant especially for the highly risk averse strategies 2 the gains from removing the no leverage constraint were more substantial than they were in the absence of non u s securities and 3 there is strong evidence of market segmentation in that the optimal levels of investment in u s securities were mostly zero in the presence of the non u s asset categories