credit market imperfections and economic development theory and evidence abstract a model of credit markets in which there is a costly state verification problem is integrated into a neoclassical growth model the presence of a credit market friction gives rise to credit rationing which in turn impacts on the growth path of an economy the model delivers predictions about the co movements between per capita income credit rationing interest rates and factor prices the implications of the model are generally empirically supported in u s and taiwanese data the model also makes predictions about the consequences of government regulation of credit markets which are supported by the taiwanese data

global strategies multinational subsidiary roles and economic impact in scotland young s hood n and dunlop s 1988 global strategies multinational subsidiary roles and economic impact in scotland reg studies 22 487 497 this paper considers in a preliminary way the influence of mne global strategies on foreign subsidiary roles in scotland and from this some of the economic effects on the scottish economy are highlighted the study is based on a postal survey of mne subsidiaries in scotland the responses being analysed using the statistical techniques of cluster analysis and discriminant analysis despite the weaknesses of the former technique in particular the preliminary findings suggest substantial benefits to the economy from the one third of affiliates in the strategic independent product specialist categories as compared with the conventional branch plants rationalized manufacturers and miniature replica subsidiaries young s hood n et dunlop s 1988 strategies globales role des filiales des societes multi nationales et impact economique en ecosse

economic effects of federal credit programs since 1980 the federal government has directly subsidized one third of all nonfederal borrowing this paper presents numerical estimates of the effects of federal lending existing credit subsidies appear to have important effects on the allocation of credit but little effect on aggregate investment efficiency costs are shown to be large approximately 1 3 percent of gnp government costs exceed fifty cents per dollar of incremental targeted lending interactions among programs can eliminate much or all of the original gain provided by a subsidy especially if borrowers are rationed the paper also examines the effects of several policy reforms copyright 1991 by american economic association

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

investment policy with time to build abstract most capital projects have an implementation lag we examine the effect of implementation lag on a levered firm s investment decision the main finding is that implementation lag can potentially have a substantial effect on a levered company s investment trigger and this effect can be significantly different from that of an unlevered company the exact relationship between lag and investment trigger depends on the level of debt used by the firm for an optimally levered firm a crucial determinant of the lag investment relationship is the fraction of investment cost that has to be incurred upfront if this fraction is small investment trigger is a decreasing function of implementation lag and the effect can be economically significant if this fraction is large investment trigger can be either increasing or decreasing in lag depending on parameter values but the magnitude of the effect is not large optimally levering a firm makes the implementation lag more investment friendly relative to an unlevered firm thus it is possible that the lag has a negative effect on investment if the firm is unlevered but a positive effect if the same firm is optimally levered for an optimally levered firm implementation lag generally has a non negative effect on investment

debt bargaining and credibility in firm supplier relationships abstract we examine optimal leverage for a downstream firm relying on implicit self enforcing contracts with a supplier performing a leveraged recapitalization prior to bargaining increases the firm s share of total surplus however the resulting debt overhang limits the range of credible bonuses resulting in low input quality optimal financial structure trades off bargaining benefits of debt with inefficiency resulting from overhang consistent with empirical evidence the model predicts that leverage increases with supplier bargaining power e g unionization rates and decreases with utilization of non verifiable inputs e g human capital

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

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

is there a relationship between a geocentric mind set and multinational strategy this paper operationalizes and tests relationships between a geocentric managerial mind set geographic scope and the structural and strategic characteristics of firms and industries relationships are tested using data from a survey of senior corporate international hrm managers of large u s based manufacturing multinationals an index of a geocentric mind set is found to correlate with geographic scope and various aspects of ihrm policy and practice however no relationship is found with measures of multinational strategy or organizational structure the paper concludes with a speculative hypothesis development of a geocentric mind set may relate to the information or knowledge intensity of the firm rather than its position on the strategic continuum

how good are standard debt contracts stochastic versus nonstochastic monitoring in a costly state verification environment the authors investigate ex ante efficient contracts in an environment in which implementation is costless in this environment standard debt contracts will typically not be optimal optimal contracts may involve defaults even in states in which the borrower is fully able to repay the authors then examine the welfare costs of arbitrarily restricting the set of feasible contracts to standard debt contracts when model parameters are calibrated to realistic values the welfare loss from exogenously imposing this restriction is extremely small thus if implementation costs are actually nontrivial as seems likely standard debt contracts will be very close to optimal copyright 1994 by university of chicago press

costly monitoring financial intermediation and equilibrium credit rationing abstract this paper establishes a link between equilibrium credit rationing and financial intermediation in a model with asymmetrically informed lenders and borrowers costly monitoring and investment project indivisibilities intermediation is shown to dominate borrowing and lending between individuals and these financial intermediaries exhibit several of the important features of intermediaries as we know them equilibrium interest rates and the aggregate quantity of loans respond quite differently to changes in taste and technology parameters depending on whether or not there is rationing in equilibrium

human capital bankruptcy and capital structure we derive a firm s optimal capital structure and managerial compensation contract when employees are averse to bearing their own human capital risk while equity holders can diversify this risk away in the presence of corporate taxes our model delivers optimal debt levels consistent with those observed in practice it also makes a number of predictions for the cross sectional distribution of firm leverage consistent with existing empirical evidence it implies persistent idiosyncratic dierences in leverage across firms an important new empirical prediction of the model is that ceteris paribus firms with more leverage should pay higher wages

effectively conceiving and executing multinationals worldwide strategies this study addresses one of the most compelling questions in the field of international management how can a multinational simultaneously pursue the double ended objective of effectively conceiving and executing its worldwide strategy here we examine the ways in which the dynamics of the strategy making process between head office and subsidiary units influence the multinational s ability to achieve these two objectives specifically we introduce the concept of procedural justice the intellectual root of which is grounded in social psychology and law into the international management and explore the impact of process fairness on multinationals ability to conceive and execute effective worldwide strategies the results of this research are based on a two phase longitudinal study of the decision making dynamics of nineteen multinationals they provide support that the exercise of procedural justice is indeed a powerful way to organize the multinationals strategy making process procedural justice was found to significantly augment multinationals ability to achieve this double ended objective

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

sunk investment bargaining and choice of capital structure this paper shows how a firm might optimally choose debt to affect the outcome of bilateral bargaining with workers or other input suppliers it is shown that debt may alleviate the well known underinvestment problem associated with the inability to write precommitment contracts also in such circumstances debt could be pareto improving over complete equity financing the relationship between the optimal level of debt and asset specificity of investment and bargaining power of the firm vis a vis the workers is explored the williamson conjecture that higher asset specificity will lead to less debt is shown not to be valid in general

who is credit constrained in the u s economy an important assumption of the life cycle model of consumption is the postulate of perfect capital markets this hypothesis has recently been challenged by substantial empirical evidence hall and mishkin 1982 using the panel study of income dynamics estimate that 20 percent of united states families are liquidity constrained mariger 1986 derives a life cycle model with endogenous liquidity constraints and using a cross section estimates this fraction to be 19 4 percent hubbard and judd 1986 simulate a model with a constraint on net worth which shows that with reasonable assumptions about preferences 19 0 percent of united states consumers are liquidity constrained the emerging consensus points therefore to a fraction of approximately 20 percent of the population behaving in a manner that is inconsistent with the pure life cycle model in addition hayashi 1985 and zeldes 1989 investigate the correlation among consumption wealth and income for various population groups and infer that liquidity constraints are more important for younger families with low levels of wealth and saving the main limitation of these studies is that in their data sets constrained consumers are not observable and have to be identified via indirect evidence thus there is as yet little firm evidence about the characteristics of the consumers who are likely to be credit constrained this paper adopts an approach that differs from previous tests for liquidity constraints because it makes use of data where constrained consumers are observable and explicitly links their existence to credit market imperfections and personal characteristics the data drawn from the 1983 survey of consumer finances scf and described in section ii provide information on individuals whose request for credit has been rejected by financial intermediaries in section iii a model is developed in which consumers and lenders behavior jointly determines the probability that a consumer is rationed in the credit market this probability is then

global strategy implementation at the business unit level operational capabilities and administrative mechanisms the study examines the impact of internationally strategy on organizational design and the influence of the organizational design on effectiveness at the business unit level the empirical findings are based on survey responses from eighty two business units competing in global industries the findings are supportive of the contingency notion which suggests that business unit effectiveness is a function of the fit between the international strategy and the organizational design

interest rate management in ldc s the mckinnon argument that higher time deposit rates raise output and lower inflation in the short run and increase medium term growth by raising the savings rate are shown to depend crucially on the assumption that portfolio shifts into td s come out of an asset providing less intermediation than the banking system we show that if instead the shift is out of an asset providing more intermediation e g loans on a curbmarket raising td rates is contractionary in the short run may have negative impacts on growth and can lead to more rather than less inflation in the short run

the new structuralist critique of the monetarist theory of inflation the case of the philippines abstract developing economies may be characterized by long production lags advanced outlays to finance working capital needs will therefore assume primary importance with weak commodity and equity markets the financing is usually funded by credit either from the legal banking sector or from an underground curb market monetary and credit contraction espoused by monetarists as a key policy for controlling inflation will increase the cost of financing working capital needs this has an immediate short run stagflationary impact coming from the supply side of the economy the study uses a one sector macro model to test this hypothesis on the philippines with annual data from 1958 to 1980 the results give empirical support to the claim that the working capital cost push supply side effect is strong enough which means that austerity measures may require a heavy and costly recession before price inflation can be brought down

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

capital market imperfections international credit markets and nonconvergence abstract we consider a two country growth model with international capital markets these markets fund capital investment in both countries and operate subject to a costly state verification csv problem investors in each country require some external finance but also provide internal finance which mitigates the csv problem when two identical except for their initial capital stocks economies are closed they necessarily convergemonotonicallyto the same steady state output level unrestricted international financial tradeprecludesotherwise identical economies from converging and poor countries are necessarily net lenders to rich countries oscillation in real activity and international capital flows can occur journal of economic literatureclassification numbers e00 f00 f34 g14

good bye financial repression hello financial crash some unintended consequences of financial liberalization in latin america are analyzed in this paper intrinsic imperfectious in financial markets and the policy dilemmas they pose are reviewed first the stylized facts of southern cone experiments in financial liberization are then presented alternative ways of organlzing domestic capital markets under latin american conditions are discussed and an eclectic reform mongering program is proposed

financial market frictions monetary policy and capital accumulation in a small open economy abstract we consider a small open economy with a costly state verification problem and binding reserve requirements the presence of these frictions leads to the existence of two steady states with credit rationing an increase in the money growth rate the world interest rate or reserve requirements raises lowers gdp in the high low activity steady state however sufficiently large increases in money growth or the world interest rate can transform the high activity steady state from a sink to a source the model also delivers prescriptions for restoring the stability of this steady state in such an eventuality journal of economic literatureclassification numbers e5 f4

an empirical analysis of the integration responsiveness framework u s construction equipment industry firms in global competition in this study businesses competing as part of the global u s construction equipment industry were categorized into three subgroups according to the integration responsiveness framework i r in an attempt to further understand industry pressures confronting businesses that compete internationally the results show that three generic strategies suggested by the i r framework do appear in a single industry context globally integrated locally responsive and multifocal beyond providing additional insight into the nature of competition in a single global industry several broad extensions to the integration responsiveness framework are suggested

financial repression the new structuralists and stabilization policy in semi industrialized economies abstract this paper examines the short and long run effects of a variety of macroeconomic policies in a simple model where the curb market plays a pivotal role as the marginal supplier of loanable funds it is found that financial liberalization may fail in the short run and contrary to the claims of the new structuralists that the financial market repercussions of devaluation may be favorable in evaluating any policy the time horizon is critical short and long run multipliers may differ in sign in all cases save that of a contraction in the stock of bank credit

an empirical analysis of the integration responsiveness framework in global industries in this study businesses competing in global industries were categorized into three groups according to the integration responsiveness framework for conceptualizing industry pressures confronting business competing internationally using this framework contextual conditions associated with each group were examined competitive attributes distinguishing each group were then identified to clarify alternate business level strategies for competing within a global industry context beyond providing additional insight into the nature of competition in global industries several broad extensions to the integration responsiveness framework are suggested

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

optimal capital structure bargaining and the supplier market structure abstract this paper studies the relationship between firm leverage and supplier market structure we find that firm leverage decreases with the degree of competition between suppliers specifically leverage decreases with the elasticity of substitution between suppliers leverage also decreases with the number of suppliers when the elasticity of substitution is high and increases with the number of suppliers when the elasticity is low we also provide empirical evidence that is consistent with the model predictions

on the sign of the investment uncertainty relationship understanding the effects of uncertainty over any decision variable has fascinated economists for a long time risk aversion and incomplete markets are likely to make the investment uncertainty relationship negative e g roger craine 1989 joseph zeira 1989 what happens in the absence of risk aversion and incomplete markets is however ambiguous richard hartman 1972 and andrew b abel 1983 1984 1985 found that in the presence of symmetric convex costs of adjustment mean preserving increases in price uncertainty raise investment of a competitive firm as long as the profit function is convex in prices on the other hand the recent literature on irreversible investment e g robert s pindyck 1988 giuseppe bertola 1988 has shown that increases in uncertainty lower investment all these results have been derived under either risk neutrality or complete markets intuition suggests that the explanation for such a difference lies with the asymmetric nature of adjustment costs in the irreversible investment case as compared with the symmetry of the adjustment cost mechanisms proposed by abel and hartman although this intuition is confirmed in this paper asymmetric adjustment costs are shown not to be sufficient to explain why the results differ in fact a more hidden but at least as important difference between these two literatures is that the former assumes perfect competition and constant returns to scale whereas the latter assumes either imperfect competition or decreasing returns to scale or both 2 the purpose of this paper is to highlight the role of the decreasing marginal return to capital assumption due to either imperfect competition or decreasing returns to scale or both in determining the effects of adjustment cost asymmetries on the sign of the response of investment to changes in uncertainty under risk neutrality for this the paper develops a simple model with a cost of adjustment mechanism general enough to consider both symmetric convexity and irreversibility as special cases one of the most important findings is the lack of robustness of the negative relationship between investment and uncertainty under asymmetric adjustment costs3 to changes in the degree of competition in fact when firms are nearly competitive the conclusion of hartman and of abel holds no matter how asymmetric adjustment costs are studying adjustment cost mechanisms has a central role in understanding the dynamics of investment and its business cycle implications but conclusive results about the sign of the instantaneous relationship between uncertainty and investment should not be department of economics columbia university new york ny 10027 i am grateful to giuseppe bertola prajit dutta glen hubbard anil kashyap richard lyons and the referees for their useful comments 1the financial literature on investment has considered risk aversion through a premium in the discount rate determined by the capm capital asset pricing model intertemporal capm or consumption capm however often this discount rate is left unchanged when studying the response of investment to uncertainty changes e g pindyck 1988 pp 974 5 thereby omitting the effect of changes in uncertainty on investment due to risk aversion and incomplete markets 2in the typical version of the irreversible investment problem there is no cost of upward adjustments thus imperfect competition and or decreasing returns to scale are required to bound the size of the firm 3in this paper asymmetric adjustment cost refers to the case in which it is more expensive to adjust downward than upward certainly the opposite case is a trivial extension of the case studied in this paper

international configuration and coordination archetypes for medium sized firms in global industries the purpose of this study is to determine the basic configuration and coordination patterns for medium sized firms competing in global industries analyzing 126 businesses competing in nine different global industries five distinct archetypes are identified the results suggest that selective globalization in which the firm defines its global strategy around a narrow subset of the value chain may lead to the most effective outcomes

costly monitoring loan contracts and equilibrium credit rationing this paper develops a model with asymmetrically informed agents and costly monitoring of loan contracts where an equilibrium can exhibit credit rationing borrowers are identical ex ante but some receive loans and others do not in contrast to existing credit rationing theories rationing does not occur here due to inflexible prices adverse selection or moral hazard optimizing behaviour produces a standard debt contract in equilibrium the aggregate quantity of loans and equilibrium interest rates respond differently depending on whether there is rationing in equilibrium

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

on financial innovations and credit market evolution abstract this paper examines the role of financial innovations in the economic development process it discusses the place of policy intervention in the financial development of developing countries and through a case study of an innovative bank illustrates the nature and characteristics of the financial innovations necessary for financing small enterprises and mobilizing resources from low and middle income groups such financial innovations are shown to reduce transaction costs and risk and as a result to bring about widening deeping and intergration of capital markets this process accelerates economic development through a favorable impact on savings investment and output

credit rationing and capital accumulation this paper develops a dynamic partial equilibrium analysis of how financial policy affects capital accumulation when bank loans are rationed and subsidized the underlying specification of intertemporal behavior is critical loan policy often has qualitatively different effects on capital accumulation in overlapping generations and infinite horizon models it is also shown that in the infinite horizon case the results are extremely sensitive to the timing of private sector expectations policies that promote reduce capital accumulation when unanticipated induce capital decumulation accumulation when anticipated copyright 1991 by the london school of economics and political science

competition imitation and growth with step by step innovation is more intense product market competition and imitation good or bad for growth this question is addressed in the context of an endogenous growth model with step by step innovations in which technological laggards must first catch up with the leading edge technology before battling for technological leadership in the future in contrast to earlier schumpeterian models in which innovations are always made by outsider firms who earn no rents if they fail to innovate and become monopolies if they do innovate here we find first that the usual schumpeterian effect of more intense product market competition pmc is almost always outweighed by the increased incentive for firms to innovate in order to escape competition so that pmc has a positive effect on growth second that a little imitation is almost always growth enhancing as it promotes more frequent neck and neck competition but too much imitation is unambiguously growth reducing the model thus points to complementary roles for competition anti trust policy and patent policy

customer concentration and over investment this paper investigates the impact of customer concentration on a supplier firm s over investment behaviour based on a large sample analysis on the us market we find that a supplier firm with hig

macro economic effects of changes in bank interest rates simulation results for south korea abstract we use an empirical macro econometric model of korea to simulate the impact of bank interest rate changes this model includes a very detailed sub model of the financial sector plus in addition to the usual demand side transmission channels of monetary policy a link between the financial sector and the supply side of the real part of the economy via the cost of financing working capital cavallo effect increases in time deposit rate are shown to be contractionary in the short run because the portfolio shifts they trigger tighten credit conditions and cause higher costs of financing working capital people shift out of the curbmarket rather than out of cash the higher cost of financing working capital also pushes up inflation in the first quarter after the change making the increase in td rates stagflationary this effect dies out quickly however the persistence of the loss in output is shown to depend on whether the commercial banks are allowed to play their intermediary role or not if credit limits prevent the passing through into bank loans of the influx of time deposits caused by the higher rates substantial and persistent real output losses and decreased private investment were shown to result

national and international aspects of financial policies in ldcs a prologue after a period of animated controversy between keynesians advocating policies of low interest rates and monetary expansion and monetarists who insisted on the importance of the distinction between nominal and real interest rates economists have now almost reached a consensus on the role of money in the development process this consensus has arisen because it was increasingly felt that what was called for was not new concepts so much as new ways of looking at them in ldcs money s role need be neither denigrated nor exaggerated money s traditional functions as a medium of exchange and a store of value remain important in ldcs but its function as a conduit of resources from savers to investors is more central to an inderstanding of its contributions to development coats and khatkhate 1980 p 3 the body of the consensus derives from the framework set up by mckinnon and shaw fleshed out by the earlier work of goldsmith and patrick goldsmith 1969 patrick 1966 and extended by the theoretical and empirical output of a large number of younger economists fry 1981 this analysis attached central importance to financial policies of higher real interest rates which were supposed to encourage the build up of real money balances increased financial intermediation and unification of financial markets eventually such a policy would lead to the efficient utilization of resources and particularly of scarce capital this new paradigm has contributed to an improved understanding and perception of the economies of ldcs their problems and how these problems are accentuated by distortions arising from interventionist policies for a while it was believed that the programme contained the secret of how to reconcile stabilization objectives with those of development roe 1982 however the accumulation of empirical evidence on several developing countries where the prescribed set of policies was adopted has raised doubts about the validity of this conclusion in the presence of distortions in the financial markets it is no doubt a sensible policy to raise real interest rates the problematic issue is how far to go raising real interest rates without any regard for the rates of return on investment may run counter to the requirements of development to argue that once funds are generated through the accumulation of real balances investment can take care of itself ignores the very dynamics of development thus the hiatus between stabilization and development has not really been bridged this is evident from the recent concern with supply side policies rather than demand management policies a dichotomy which parallels the distinction between the stabilization and development problems it is this dual distinction which provides the theme of this special issue of world development

some consequences of credit rationing in an endogenous growth model an endogenous growth model is developed where all investment is financed via credit extension there is also an adverse selection problem in loan markets so that in equilibrium credit rationing arises endogenously the result is that equilibrium levels of credit rationing and real growth rates are jointly determined in this context several changes in the environment can have unusual consequences for instance improvements in the technology for producing capital can reduce growth because of their adverse impacts on credit rationing for similar reasons various government investment subsidies can be growth reducing this phenomenon is often observed empirically

intermediation and the equilibrium allocation of investment capital implications for economic development abstract we investigate several common assertions about intermediation and how it affects the allocation of investment capital we use a model with adverse selection and costly state verification in which both debt contracts and credit rationing are observed intermediaries arise due to a comparative advantage in information acquisition relative to the situation absent intermediation intermediaries reduce credit rationing and inefficient interest rate differentials the model also shows how large interest rate differentials can be observed when financial markets are not integrated and how the volume of intermediation is affected by changes in the environment

anatomy of financial retardation in a less developed country the case of sri lanka 1951 1976 abstract an attempt is made in this paper to analyse the experience of sri lanka during 1951 1976 particularly in relation to its financial sector development it is shown that the interventionist regime held the key to the pace and pattern of the economy s development whether it was the skimpy growth of the financial system the faltering progression of gnp the precarious foreign exchange position or the persistence of inflationary pressure they were all traceable to the impact on the financial system of a particular set of policies pursued the year 1977 however marked a watershed in sri lanka s long quest for economic development the government began to unwind the entire paraphernalia of administered controls on consumption investment and foreign exchange most of the price controls were removed subsidies phased out and public corporations were allowed greater autonomy in their pricing and distribution policies it is necessary to contrast this situation with what existed prior to 1977 in order to assess its impact on the real economy of sri lanka only then can the cost of financial retardation be measured

equilibrium credit rationing of small farm agriculture it is often argued that externally imposed contractual restrictions lead to inequitable credit rationing this paper argues that unrestricted laissez faire markets may also inequitably ration credit a formal model which grants borrowers autonomy in credit application and use demonstrates that adverse incentive and selection effects may cause banks to endogenously impose interest rate restrictions and ration small farms out of the credit market consequently liberalization of financial markets may be insufficient to guarantee small farms access to credit

coordination demands of international strategies a study of fifty subsidiaries of multinational corporations shows a connection between their strategy and their use of different mechanisms of coordination the main finding is that subsidiaries pursuing strategies with a high degree of integration with their corporate parent make a much more extensive use of both formal and subtle coordination mechanisms than other firms in the sample these results are borne out in both static and dynamic tests they confirm previous literature on coordination mechanisms in organizations in general and apply that literature to the field of multinational corporations which are some of today s more important and complex business organizations

centralization in headquarters subsidiary relationships research to date on centralization in mncs has produced many inconsistent findings the present study attempts to add clarity to the situation by re testing many of the existing hypotheses with data from a recent study of centralization in 50 large us uk and european mncs it examines how the degree of centralization inherent in the headquarters foreign subsidiary relationship varies in response to a variety of company wide and subsidiary level conditions the influence of company wide conditions on centralization appears to be much clearer than the influence of subsidiary level conditions the study also identifies several new contingency patterns that appear to be at work in mncs today