the microfinance promise in the past decade microfinance programs have demonstrated that it is possible to lend to low income households while maintaining high repayment rates even without requiring collateral the programs promise a revolution in approaches to alleviating poverty and spreading financial services and millions of poor households are served globally a growing body of economic theory demonstrates how new contractual forms offer a key to microfinance success particularly the use of group lending contracts with joint liability for the most part however high repayment rates have not translated into profits and studies of impacts on poverty yield a mixed picture in describing emerging tensions the paper highlights the diversity of innovative mechanisms beyond group lending contracts the measurement of financial sustainability the estimation of economic and social impacts the costs and benefits of subsidization and the potential to reduce poverty through savings programs rather than just credit the promise of microfinance has pushed far ahead of the evidence and an agenda is put forward for addressing critical empirical gaps and sharpening the terms of policy discussion

overcoming institutional voids via arbitration extending the literature on institutional voids we introduce theory from law that highlights the ability of firms to choose the laws and enforcement mechanisms that govern their international joint ventures ijvs specifically firms may overcome institutional voids by borrowing institutions via binding international commercial arbitration bica rather than relying on host market institutions leveraging an institution based view we develop a theoretical framework to articulate the conditions under which ijv partners may choose bica as opposed to domestic courts to overcome institutional voids in host markets

vive la difference social banks and reciprocity in the credit market social banks are financial intermediaries paying attention to non economic i e social ethical and environmental criteria to investigate the behavior of social banks on the credit market this paper proposes both theory and empirics our theoretical model rationalizes the idea that reciprocity can generate better repayment performances based on a unique hand collected dataset released by a french social bank our empirical results are twofold first we show that the bank charges below market interest rates for social projects second regardless of their creditworthiness motivated borrowers respond to advantageous credit terms by significantly lowering their probability of default we interpret this outcome as the first evidence of reciprocity in the credit market

environmental protection rare disasters and discount rates the stern review s evaluation of environmental protection stresses low discount rates and uncertainty about environmental effects an appropriate model for analysing this uncertainty and the associated discount rates requires sufficient risk aversion and fat tailed uncertainty to account for the observed equity premium calibrations based on epstein zin preferences and existing analyses of rare macroeconomic disasters suggest that optimal environmental investment can be a significant share of gdp even with reasonable rates of time preference optimal environmental investment increases with risk aversion and the probability and typical size of environmental disasters but decreases with uncertainty about policy effectiveness

escaping the iron cage liabilities of origin and csr reporting of emerging market multinational enterprises this article examines the link between the condition of institutional voids in emerging markets and the use of the practice of corporate social responsibility csr reporting by emerging market multinational enterprises em mnes based on neo institutional theory and in light of the specificity of emerging markets we propose a positive relationship between institutional voids and csr reporting home country institutional voids push companies to internationalize as a way to escape the institutional constraints and inefficiencies in their own markets but at the same time create legitimacy challenges for these companies abroad in particular em mnes from less institutionally developed countries are likely to face liabilities of origin negative perceptions in host countries about these firms willingness and ability to conduct legitimate business csr reporting is an effective strategy to overcome such liabilities and barriers to legitimation as it conveys to host countries and global stakeholders alignment with global meta norms and expectations internationalization listing on developed country stock exchanges and time further magnify em mnes legitimacy challenges and thus the use of csr reporting to mitigate them our hypotheses are supported in a longitudinal study of 157 of the largest em mnes ranked by the united nations conference on trade and development unctad between 2004 and 2011

can foreign firms bond themselves effectively by renting u s securities laws abstract the study tests the functional convergence hypothesis which states that foreign firms can leapfrog their countries weak legal institutions by listing equities in new york and agreeing to follow u s securities law evidence shows that the sec and minority shareholders have not effectively enforced the law against cross listed foreign firms detailed evidence from mexico further shows that while some insiders exploited this weak legal enforcement with impunity others that issued a cross listing and passed through an economic downturn with a clean reputation went on to receive privileged long term access to outside finance as compared with legal bonding reputational bonding better explains the success of cross listings

s s inventory policies in general equilibrium we study the aggregate implications of s s inventory policies in a dynamic general equilibrium model with aggregate uncertainty firms in the model s retail sector face idiosyncratic demand risk and s s inventory policies are optimal because of fixed order costs the distribution of inventory holdings affects the aggregate outcome in two ways variation in the decision to order and variation in the rate of sale through the pricing decisions of retailers we find that both mechanisms must operate to reconcile observations that orders are more volatile than and inventory investment is positively correlated with sales while remaining consistent with other salient business cycle characteristics the model exhibits strong amplification for some shocks and persistence to a limited extent

a social and environmental approach to microfinance credit scoring microfinance institutions provide loans to low income individuals their credit scoring systems if they exist are strictly financial although many institutions consider the social and environmental impact of their loans they do not incorporate formal systems to estimate these social and environmental impacts this paper proposes that their creditworthiness evaluations should be coherent with their social mission and accordingly should estimate the social and environmental impact of microcredit thus a decision support system to facilitate microcredit granting is proposed using a multicriteria evaluation the assessment of social impact is performed by calculating the social net present value the system captures credit officers experience and addresses incomplete and intangible information the model has been tested in a microfinance institution the paper shows how a small institution can include social and environmental issues in its decision making systems to evaluate credit applications a gap in the preferences was found between members of the board who are socially driven and managers and credit officers who are financially drifted this mission drift was corrected the approach followed contributed to creating a culture of social and environmental assessment within the institution especially among credit officers thereby translating microfinance institutions social mission into numbers

how to lend like mad and make a profit a micro credit paradigm versus the start up fund in south africa in current debates about micro credit joint liability schemes are often viewed as the only viable way to non collateralised lending and are thus seen as almost synonymous with micro credit this article reports about an alternative non participatory approach to micro credit prompted by the apparent inability of group credit schemes to reign in lending costs the article sets out the institutional requirements for cheap mass produced credit it argues that such credit can be viable if mechanisms are in place enforcing the self selection of potential borrowers and self motivation of existing borrowers the analysis of a mass minimalist micro credit institution from south africa supports the argument

social multi criteria evaluation methodological foundations and operational consequences in order to address contemporary issues economics and decision sciences need to expand their empirical relevance by introducing more and more realistic thus more complex assumptions in their models one of the most interesting research directions in the field of public economics is the attempt to introduce political constraints interest groups and collusion effects explicitly j j laffont incentives and political economy 2000 the main argument developed here is the proposal of the concept of social multi criteria evaluation smce as a possible useful framework for the application of social choice to the difficult policy problems of our millennium where as stated by funtowicz and ravetz facts are uncertain values in dispute stakes high and decisions urgent this paper starts from the following main questions 1 why social multi criteria evaluation 2 how should such an approach be developed the foundations of smce are set up by referring to concepts from complex system theory and philosophy such as reflexive complexity post normal science and incommensurability to give some operational guidelines on the application of smce basic questions to be answered are 1 how is it possible to deal with technical incommensurability 2 how can we deal with the issue of social incommensurability to answer these questions using theoretical considerations and lessons learned from real world case studies is the main objective of the present article

international corporate governance a review and opportunities for future research we review four decades of research about the corporate governance of multinational corporations mncs which we label international corporate governance icg we identify and discuss three main streams of research that draw on different conceptualizations and theoretical lenses of corporate governance after synthesizing their respective findings we propose several avenues for future research that integrate these three streams of research with the goal of developing a more nuanced understanding of icg we hope this review article will inspire international business scholars to continue examining how corporate governance can be an effective tool for mnc success

microfinance in times of crisis the effects of competition rising indebtedness and economic crisis on repayment behavior this paper analyzes repayment determinants for loans from caja los andes a bolivian mi crolender the analysis focuses on the influence of recent changes in the bolivian microfinance market in particular we examine the effects of the rapidly growing supply of funds for micro loans the increasing competition a rising level of indebtedness among micro entrepreneurs and the recent economic crisis our results show a two fold influence structure of competition and indebtedness firstly clients with loans from multiple sources at the same time are found to be more likely to default than others secondly clients with given characteristics have an overall better repayment behaviour in areas with higher competition and a higher supply of micro loans

financial performance and outreach a global analysis of leading microbanks microfinance contracts have proven able to secure high rates of loan repayment in the face of limited liability and information asymmetries but high repayment rates have not translated easily into profits for most microbanks profitability though is at the heart of the promise that microfinance can deliver poverty reduction while not relying on ongoing subsidy the authors examine why this promise remains unmet for most institutions using a data set with unusually high quality financial information on 124 institutions in 49 countries they explore the patterns of profitability loan repayment and cost reduction the authors find that institutional design and orientation matter substantially lenders that do not use group based methods to overcome incentive problems experience weaker portfolio quality and lower profit rates when interest rates are raised substantially for these individual based lenders one key to achieving profitability is investing more heavily in staff costs a finding consistent with the economics of information but contrary to the conventional wisdom that profitability is largely a function of minimizing cost

macroeconomic impacts of the korean financial crisis comparison with the cross country patterns this paper analyzes the macroeconomic adjustment process of the korean financial crisis in a broad international perspective in particular the impacts of the crisis on gdp growth inflation current account balance and employment are analyzed using a cross country data set which compiled 150 financial crisis episodes from all developing countries that have received conditional financial assistance from the imf over the period from 1973 to 1994 the cross country patterns show that gdp growth rates sharply drop with the eruption of a crisis but then recover quickly to the pre crisis level in two or three years showing a v pattern of adjustment inflation and current account deficit exhibit an inverse v pattern but they do not improve to the level of non program period employment growth is most sluggish in the recovery process compared with other macroeconomic variables we find that the korean case is in general consistent with these stylized patterns however the degree of initial contraction and following recovery has been far greater in korea than what the cross country evidence predicts cross country comparison indicates that both the export oriented structure and the swift adjustment of macroeconomic policies contributed to the speedy adjustment of the korean economy this abstract was borrowed from another version of this item

credit rating initiation and accounting quality for emerging market firms we examine whether certification by an internationally recognized information intermediary helps emerging market firms overcome the liability of foreignness in capital markets specifically we ask whether securing a credit rating from standard poor s s p enables these firms to certify their financial reporting quality we hypothesize that the unique information demands of lenders motivate firms to provide more conservative financial statements upon securing an s p rating we find evidence consistent with this conjecture moreover the rating appears to be part of an international expansion strategy for these firms and is followed by increased international activity in capital and product markets

estimating the performance effects of business groups in emerging markets business groups confederations of legally independent firms are ubiquitous in emerging economies yet very little is known about their effects on the performance of affiliated firms we conceive of business groups as responses to market failures and high transaction costs in doing so we develop hypotheses about the effects of group affiliation on firm profitability affiliation could either boost or depress firm profitability and members of a group are likely to earn rates of return similar to other members of the same group using a unique data set compiled largely from local sources we test for these effects in 14 emerging markets argentina brazil chile india indonesia israel mexico peru the philippines south africa south korea taiwan thailand and turkey we find evidence that business groups indeed affect the broad patterns of economic performance in 12 of the markets we examine group affiliation appears to have as profound an effect on profitability as does industry membership yet strategy scholars have a much clearer grasp of industries than of groups moreover membership in a group raises the profitability of the average group member in several of the markets we examine this runs contrary to the wisdom conventional in advanced economies that unrelated diversification depresses profitability overall our findings suggest that the roots of sustained differences in profitability may vary across institutional contexts conclusions drawn in one context may well not apply to another copyright 2001 john wiley sons ltd

filling institutional voids in emerging economies the impact of capital market development and business groups on m a deal abandonment business groups may fill institutional voids in emerging economies but empirical research is lacking as to when and how institutional voids affect economic behavior of individual firms we examine the effect of institutional voids in capital markets on individual transactions in emerging economies focusing on m a deals that were abandoned after being publicly announced m a deals may fall through when unexpected information is brought to light or financing difficulties arise at the country level capital market development can lower the probability of m a deal abandonment by facilitating the flow of information and capital at the firm level when acquirers are affiliated with business groups development of internal capital markets can also lower this probability facilitating completion of the transaction and the flow of information this effect of business groups however decreases as the external capital market the institution replaced by their internal markets develops and its benefits become widely available to non business groups the results of our empirical analyses on m a transactions in nine emerging economies over 21 years support our arguments

country level institutions firm value and the role of corporate social responsibility initiatives drawing on transaction cost theories and the resource based view of a firm we posit that the value of corporate social responsibility csr initiatives is greater in countries where an absence of market supporting institutions increases transaction costs and limits access to resources using a large sample of 11 672 firm year observations representing 2445 unique firms from 53 countries during 2003 2010 and controlling for firm level unobservable heterogeneity we find supportive evidence that csr is more positively related to firm value in countries with weaker market institutions we also provide evidence on the channels through which csr initiatives reduce transaction costs we find that csr is associated with improved access to financing in countries with weaker equity and credit markets greater investment and lower default risk in countries with more limited business freedom and longer trade credit period and higher future sales growth in countries with weaker legal institutions our findings provide new insights on non market mechanisms such as csr through which firms can compensate for institutional voids

weaving together the normative and regulative roles of government how the norwegian sovereign wealth fund s responsible conduct is shaping firms cross border investments based on institutional theory i extend research on the regulative role of national government in society and suggest that government exerts important influences on firms actions through the diffusion of norms i suggest that the norwegian government by instituting an ethical council that publicly censors and certifies the cross border investments of the norwegian sovereign wealth fund government pension fund global contributes to the professionalization of responsible investment principles and thus plays a normative role in shaping firms investments employing a quasi natural experiment i find that focal norwegian firms are more likely to make responsible cross border investments following the formation of the council on ethics in 2004 and its associated censorship announcements further i find that the normative pressure for responsible investments is mediated by firms imitation or overlap with the norwegian sovereign wealth fund s investments however the mediated effect of normative pressure on responsible investments becomes weaker for government owned firms these findings highlight the importance of normative mechanisms through which government can influence firms behavior especially in contexts where regulatory authority may not hold moreover these findings reveal the interplay among the normative mimetic and regulative pressures and the heterogeneity in the extent to which firms within the same country demonstrate institutional isomorphism

constitutions politics and economics a review essay on persson and tabellini s the economic effects of constitutions in this essay i review the new book by torsten persson and guido tabellini the economic effects of constitutions which investigates the policy and economic consequences of different forms of government and electoral rules i also take advantage of this opportunity to discuss the advantages and disadvantages of a number of popular empirical strategies in the newly emerging field of comparative political economy

do countries matter for voluntary disclosure evidence from cross listed firms in the us this paper explores the likelihood and consequences of voluntary disclosure proxied by management earnings forecasts for a sample of 1005 cross listed firms in the us from 40 countries over the period 1996 2005 our study is grounded in a three tiered conceptual framework that relies on insights from and implications of institutional theory agency theory and bonding theory to explain the costs and benefits associated with voluntary disclosure consistent with institutional theory and agency theory our results indicate that disclosure likelihood increases with the strength of cross listed firms home country legal institutions and is also influenced by us listing type product market internationalization and ownership structure further our results show that voluntarily committing to us disclosure practice is associated with lower information asymmetry which supports reputational bonding theory overall our study provides a costs and benefits framework to understand voluntary disclosure practices in an international context our work also presents evidence that home country institutions still matter when foreign firms migrate into the us financial market which highlights the importance of country level institution development

knowledge acquisition from foreign parents in international joint ventures an empirical examination in the hungarian context in this paper we examine organizational characteristics structural mechanisms and contextual factors that influence knowledge acquisition from the foreign parent in international joint ventures ijvs we in turn relate assessments of knowledge acquisition to ijv performance the data come from a survey of ijvs in the hungarian context where learning and knowledge acquisition from the foreign parent is thought to be particularly critical adaptation mechanisms such as capacity to learn articulated goals and structural mechanisms such as the provision of training technology and managerial assistance by foreign parents all were positively associated with the degree to which ijvs reported acquiring knowledge from their foreign parents we also found limited support for the belief that cultural conflicts can impede knowledge acquisition but only for two party joint ventures with 50 50 equity arrangements we also looked at the relationship between knowledge acquisition and different dimensions for evaluating ijv performance the relationship between knowledge acquisition and performance was significant for all indicators of performance through knowledge acquisition from the foreign parent and the organizational characteristics hypothesized to enhance ijv knowledge acquisition affected assessments of some dimensions of performance more than others our findings contribute to advancing knowledge about the relationship between organizational characteristics and organizational knowledge acquisition in ijvs as well as the relationships between knowledge acquisition and different dimensions of ijv performance

repayment performance in group based credit programs in bangladesh an empirical analysis abstract this paper analyzes the repayment rates of 128 credit groups belonging to three group based credit programs in bangladesh the association for social advancement asa the bangladesh rural advancement committee brac and the rangpur dinajpur rural service rdrs using tobit analysis specific tests are performed on the following hypothesized determinants group size size of loans degree of loan rationing enterprise mix within groups demographic characteristics social ties and status and occurrence of idiosyncratic shocks the paper concludes that if basic principles of prudential banking are adhered to repayment rates can be good even in poor and remote communities the important thing for financial institutions is to tailor services such that it becomes worthwhile for the poor to establish a profitable long term association in addition more freedom to members in the process of group formation is recommended

is there a better commitment mechanism than cross listings for emerging economy firms evidence from mexico the last decade of work in corporate governance has shown that weak legal institutions at the country level hinder firms in emerging economies from accessing finance and technology affordably to attract outside resources these firms must often use external commitments for repayment research suggests that a common commitment mechanism is to borrow us securities laws which involves listing the emerging economy firm s shares on a us exchange this paper uses a quasi natural experiment from mexico to examine the conditions under which forming a strategic alliance with a foreign multinational firm is actually a superior mechanism for ensuring good corporate governance

foreign direct investment in hungary resource acquisition and domestic competitive advantage this paper examines the impact of foreign direct investment on the marketing resources and capabilities of firms in hungary foreign direct investment into hungary has been substantial in recent years and is credited as a major factor in leading the transition towards a market led economy while the motives of foreign investors to invest and of governments to attract investment have been extensively addressed in the literature there has been little research on the reasons why individual host firms seek to attract investment this paper develops a theoretical explanation of host firm motives through the resource based theory of the firm proposing that host firms seek resources from their investors that can then be deployed to create competitive advantage over rivals in the domestic market a series of specific propositions are developed and tested empirically on a large sample of hungarian enterprises

to steal or not to steal firm attributes legal environment and valuation data on corporate governance and disclosure practices reveal wide within country variation that decreases with the strength of investors legal protection a simple model identifies three firm attributes related to that variation investment opportunities external financing and ownership structure using firm level governance and transparency data from 27 countries we find that all three firm attributes are related to the quality of governance and disclosure practices and firms with higher governance and transparency rankings are valued higher in stock markets all relations are stronger in less investor friendly countries demonstrating that firms adapt to poor legal environments to establish efficient governance practices

green entrepreneurship in transition economies a case study of bosnia and herzegovina abstract the countries with transition economies are under pressure to increase entrepreneurial activities that will enable fast growth with minimum impact on natural resources despite specific challenges the economies in transition face development of sustainable entrepreneurship has not been in focus of the academic research this leaves some open questions such as those concerning the role and mode of operation of public policies level of risk and its influence on entrepreneurship creativity role of knowledge in diffusing entrepreneurial values and fostering aspirations externalities created for the society and the connection between sustainability and entrepreneurship this paper aims to introduce a discussion on sustainable entrepreneurship in countries with economies in transition the research carried out included i review of literature and statistical data on entrepreneurial environment ii structured interviews with representatives of government civil society business sector and academia to understand the society s perception of green entrepreneurship and iii analysis of case studies on green entrepreneurs it can be concluded that entrepreneurs in economies in transition do not seem to be ready to respond to the challenges or to take any risks by investing in green business but also that the government and educational institutions do not recognize their own role and fail to support the development of green entrepreneurship for those green oriented businesses the key sociological constructs are personal motivation and mission locality and a forward thinking orientation in terms of sustainability all businesses managed to achieve the economic environmental and social value creation without any support from the government

finance and the sources of growth the authors evaluate whether the level of development in the banking sector exerts a causal impact on economic growth and its sources total factor productivity growth physical capital accumulation and private saving they use 1 a pure cross country instrumental variable estimator to extract the exogenous component of banking development and 2 a new panel technique that controls for country specific effects and endogeneity they find that banks do exert a large causal impact on total factor productivity growth which feeds through to overall gdp gross domestic product growth the long run links between banking development and both capital growth and private savings are more tenuous

international business responses to institutional voids for nearly two decades scholars in international business and management have explored the implications of institutional voids for firm strategy and structure although institutional voids offer both opportunities and challenges they have largely been associated with firms efforts to avoid or mitigate institutional deficiencies and reduce the transaction costs associated with operating in settings subject to those institutional shortcomings the goal of this special issue is to advance scholarship on this topic by a exploring institutional voids that are new to the literature b providing a deeper assessment of the different ways in which firms respond to these voids and c utilizing diverse disciplines and theoretical approaches to do so in this introduction we first review and synthesize extant research on institutional voids tracking the evolution of institutional void scholarship since the inception of the concept khanna palepu journal of economic literature 45 2 331 372 1997 and providing our perspective on its contributions and limitations we then summarize the contributions of the articles included in this special issue in addition to identifying an array of institutional voids economic and social the articles highlight four different strategies for responding to them internalization substitution borrowing and signaling drawing on these we develop new insights on the implications of institutional voids for firm behavior we conclude with suggestions for future research