the political economy of urban food security in sub saharan africa abstract sub saharan african cities in the late 1990s face a daunting set of problems including rapid growth increasing poverty deteriorating infrastructure and inadequate capacity for service provision even as a renewed debate is shaping up around issues of urban development there is little attention given to the question of urban food security whereas in the 1970s and 1980s urban food problems in africa commanded political attention the nature of urban food insecurity in the 1990s is such that it has tended to lose political importance this is largely because in the 1970s the problem was one of outright food shortages and rapid price changes that affected large portions of the urban population simultaneously the impact of structural adjustment continued rapid growth and an increase in poverty make urban food insecurity in the 1990s primarily a problem of access by the urban poor under circumstances where the urban poor spend a very large portion of their total income on food urban poverty rapidly translates into food insecurity the lack of formal safety nets and the shifting of responsibility for coping with food insecurity away from the state towards the individual and household level has tended to atomize and muffle any political response to this new urban food insecurity this paper briefly reviews urban food insecurity and generates a set of empirical questions for an analysis of food and livelihood security in contemporary urban sub saharan africa and then examines historical and contemporary evidence from kampala uganda and accra ghana to suggest some tentative conclusions

inheritance law and investment in family firms entrepreneurs may be legally bound to bequeath a minimal stake to noncontrolling heirs the size of this stake can reduce investment in family firms by reducing the future income they can pledge to external financiers using a purpose built indicator of the permissiveness of inheritance law and data for 10 004 firms from 38 countries in 1990 2006 we find that stricter inheritance law is associated with lower investment in family firms but does not affect investment in nonfamily firms moreover as the model predicts inheritance law affects investment only in family firms that experience a succession jel g31 g32

globalization and emerging markets with or without crash we analyze the effects of financial and trade globalization on the likelihood of financial crashes in emerging markets while trade globalization always makes crashes less likely financial globalization may make them more likely especially when trade costs are high pessimistic expectations can be self fulfilling and lead to a collapse in demand for goods and assets such a crash comes with a current account reversal and drops in income and investment lower income countries are more prone to such demand based financial crises a quantitative evaluation shows our model is consistent with the main stylized facts of financial crashes in emerging markets

the value of corporate voting rights and control a cross country analysis this paper measures the value of corporate voting rights specifically of the control block of votes in a sample of 661 dual class firms in 18 countries in 1997 a consistent measure across countries is proposed the measure is adjusted for takeover probability block holding costs and dividend and liquidity differences between the share classes the value of controlblock votes varies widely across countries it is close to half of firm market value in south korea andclose to zero in finland the value of control block votes is interpretedas a lower bound for actual private benefits of the controlling shareholder the legal environment law enforcement investor protection takeover regulations andpower concentrating corporate charter provisions explain 68 of the cross country variation in the value of control block votes

the real effects of financial integration abstract this paper shows how correlations in gdp fluctuations rise with financial integration finance serves to increase international correlations in both consumption and gdp fluctuations which explains the persistent gap between the two in the data a quantity puzzle the positive association between financial integration and gdp correlation constitutes a puzzle as theory suggests a negative relation if anything nevertheless it prevails in the data even after the effects of finance on trade and specialization are accounted for

lessons from the debt deflation theory of sudden stops this paper reports results for a class of dynamic stochastic general equilibrium models with credit constraints that can account for some of the empirical regularities of the sudden stop phenomenon of recent emerging markets crises in these models credit constraints set in motion irving fisher s debt deflation mechanism and they bind as an endogenous equilibrium outcome when agents are highly indebted the quantitative predictions of these models yield three key lessons 1 sudden stops can occur as an endogenous response to typical realizations of adverse shocks to fundamentals in environments in which agents plan their actions taking credit constraints and expectations of sudden stops into account 2 credit constraints cause output declines during sudden stops when collateral constraints limit debt to a fraction of the market value of capital when there are limits on access to working capital or when debt deflation lowers the value of the marginal product of factors of production 3 the debt deflation mechanism has significant quantitative effects in terms of the amplification asymmetry and persistence of the responses of macroeconomic aggregates to standard shocks and in the occurrence of sudden stops as infrequent events nested within regular business cycles precautionary saving rules out the largest sudden stops from the stochastic stationary state but sudden stops remain a positive probability event in the long run this abstract was borrowed from another version of this item

foreign venture capitalists and the internationalization of entrepreneurial companies evidence from china we use a comprehensive database of venture capital backed companies from china to test whether and how foreign venture capitalists vcs can facilitate international initial public offerings of entrepreneurial companies foreign vcs increase the likelihood that a portfolio company will list on a foreign exchange and use a top lawyer banker or accountant when doing so the propensity to list overseas is moderated by the number of venture backers the fund s size and governance in the domestic market foreign vcs encourage foreign listings in domestic backed companies we take steps to address sample selection and endogeneity concerns overall we show that foreign vcs encourage internationalization in entrepreneurial companies

does economic structure determine financial structure abstract in this paper we examine the relationship between the structure of the real economy and a country s financial system we consider whether the development of the real economic structure can predict the direction of evolution of a country s financial structure using data for 108 countries we find a significant relationship between real economic structure and financial structure next we exploit shocks to the economies in india finland and sweden and south korea and show that changes in the economic structure of a country influence the evolution of its financial system this suggests that financial institutions and capital markets change in response to the structure of industries

adaptation and distress in the urban economy a study of kampala households abstract though uganda underwent fairly rapid economic growth after independence in 1962 the civil strife and external shocks of the 1970s and 1980s led to rapid decline the impacts on kampala households reflect in many ways those on the rest of the country and have led to extensive diversification of incomes mainly to reduce the risks perceived in today s unstable environment a decrease in the share of wages in total incomes compensated by allowances of various types increased engagement in informal sector activities and even farming in the urban sector the main tasks of economic management are twofold to stabilize wage employment and to ameliorate the social misery caused by the decline the limited resource base and the continued external disturbances make the prospects for sustained recovery precarious

estimating the effect of the age distribution on cyclical output volatility across the united states abstract i exploit the variation in demographic change across the united states to estimate the relationship between the age distribution in the population and the magnitude of cyclical output volatility according to panel regression estimates the relative supply of young workers or youth share has a statistically significant effect on the volatility of state by state gdp moreover changes to the age distribution can account for up to 58 of the recent reduction in business cycle fluctuations indicating a critical link between the youth share and output volatility

internal adjustments to falling civil service salaries insights from uganda abstract real basic salaries of civil servants in many developing countries have fallen during the past 15 years little is known however as to how the civil service personnel structure and pay system have responded to the salary cuts civil service basic salaries fell drastically in uganda during 1975 1988 the adaptive responses of the civil service are identified allowances have not increased to cushion the salary cuts as is alleged to have happened in many developing countries the adaptive responses have had negative effects on efficiency and equity within the civil service they have reversed the decline in the public wage bill the raison d etre for deep salary slashes in the first place

law finance and innovation the dark side of shareholder protection proponents of minority shareholder protection state that national legal institutions protecting small investors boost stock markets and in turn the long term performance of countries in this paper we empirically challenge this argument we perform three stage least squares estimation on a sample of 48 countries during 1993 2006 and find that countries with stronger shareholder protection tend to have larger market capitalisation but also lower innovative activity we cope with stock market endogeneity and industry heterogeneity and circumvent omitted variables bias so that this finding is unlikely to be driven by misspecification problems the estimation results are interpreted arguing that stronger shareholder protection may depress rather than encourage the most valuable corporate productions because it enables small and diversified shareholders to play opportunistic actions against undiversified stockholders after specific investments are undertaken by the company innovative activity largely based on specific investing is particularly exposed to this problem copyright oxford university press

variance properties of solow s productivity residual and their cyclical implications abstract for the united states economy 1960 1989 the correlation between the growth rates of the solow residual and the real price of energy government spending is 0 55 0 09 this study develops a model to see if it quantitatively captures the endogenous transmission mechanism underlying the observed solow residual correlations it does the transmission mechanism depends on endogenous capital utilization incorporating shocks to true technology energy prices and government spending the model economy accounts for 76 or 89 percent of u s output volatility and is generally consistent with features of u s business cycles

demographic differences in cyclical employment variation demographic differences in patterns of employment variation over the business cycle are examined in this paper three primary conclusions emerge first both participation and unemployment must be considered in any analysis of cyclical changes in the labor market second young people bear a disproportionate share of cyclical employment variation third failure to consider participation has led to undue pessimism about the effect of aggregate demand policy on high unemployment groups if participation did not surge reduction in overall unemployment to its 1969 level would reduce the unemployment of almost all demographic groups to very low levels

national culture and corporate investment we explore the relation between individualism and horizons and types of corporate investment based on individualism s implications for risk taking we find that firms in individualistic countries invest more in long term risky than in short term safe assets moreover the effect of individualism on long term investment hinges on rd and 2 firms in individualistic countries invest more in r d because they have higher investment efficiency or pick less risky r d projects we further find that individualistic firms tend to employ excess cash to increase r d rather than increase dividends and r d decisions are less reliant on internal financing but more responsive to growth opportunities in individualistic countries

recent developments in quantitative models of sovereign default the current crisis and discussions in the euro area in particular show that sovereign debt crises defaults are no longer confined to developing economies following crises in many latin american countries the literature on quantitative dynamic macro models of sovereign default has been advancing rapidly current debate should take note of the findings of this literature an extensive overview of which has been provided in this paper this paper also discusses the inherent difficulties as well as possibilities of integrating this type of model into standard business cycle models rbc and dsge models this is likely to be particularly helpful when using models to analyse upcoming issues in the euro area such as a suitable sovereign insolvency law or the assumption of joint liability

the age distribution and business cycle volatility international evidence abstract we estimate the age distribution s effect on business cycle fluctuations across a large number of countries a 10 percentage point increase in the middle aged share of the population decreases output volatility by 15 percent for the average country

overcoming distrust how state owned enterprises adapt their foreign entries to institutional pressures abroad state owned so enterprises are subject to more complex institutional pressures in host countries than private firms these institutional pressures arise from a weak legitimacy of state ownership in some countries which arises from a combination of ideological conflicts perceived threats to national security and claimed unfair competitive advantage due to support by the home country government these institutional pressures directed specifically at so firms induce them to adapt their foreign entry strategies to reduce potential conflicts and to enhance their legitimacy testing hypotheses derived from this theoretical argument for subsidiaries of listed chinese firms we find that so firms adapt mode and control decisions differently from private firms to the conditions in host countries and these differences are larger where pressures for legitimacy on so firms are stronger these findings not only extend institutional theory to better explain differential effects on different entrants to an organizational field but demonstrate how foreign investors of idiosyncratic origins may proactively build legitimacy in host societies

information trading volume and international stock return comovements evidence from cross listed stocks we investigate the joint dynamics of returns and trading volume of 556 foreign stocks cross listed on u s markets heterogeneous agent trading models rationalize how trading volume reflects the quality of traders information signals and how it helps to disentangle whether returns are associated with portfolio rebalancing trades or information motivated trades based on these models we hypothesize that returns in the home u s market on high volume days are more likely to continue to spill over into the u s home market for those cross listed stocks subject to the risk of greater informed trading our empirical evidence provides support for these predictions which confirms the link between information trading volume and international stock return comovements that has eluded previous empirical investigations

disclosure venture capital and entrepreneurial spawning venture capital vc funds have been facing increasing regulatory scrutiny since the 2007 financial crisis particularly with respect to calls for increased disclosure requirements in this paper we examine the effect of more stringent securities regulation on the supply and performance of vc as well as on new business creation i e entrepreneurial spawning using country level and investment level data from 34 countries over the years 2000 2008 we find that more stringent securities regulation is positively associated with the supply and performance of vc around the world more stringent securities regulation is also positively associated with entrepreneurial spawning induced by vc among different forms of securities regulation disclosure stands out as having the most economically meaningful impact which casts doubt on the oft repeated objections to disclosure in vc that it would stifle the vc industry because secrets would have to be revealed to competitors and the public these findings are robust to numerous robustness checks for endogeneity the policy implications are clear however regardless of endogeneity concerns vc and entrepreneurship markets are enabled not curtailed in countries with better disclosure standards when one compares the existing differences in disclosure around the world and changes thereto over the 2000 2008 period

unemployment and female labour supply the definition of labour force participation in the standard labour supply model stands in sharp contrast to that used in compiling the labour force statistics in the labour supply models only those supplying positive hours of work are considered to be labour force participants on the other hand participation in the labour force statistics is often defined to include not only those supplying positive hours but also those actively searching for work this paper is an attempt to reconcile these concepts by allowing unemployed workers to enter a generalisation of the standard labour supply model this turns out to be a convenient way to enter demand side factors directly into the determination of an individual s labour market position the model is applied with some success to the working behaviour of married women in the uk family expenditure survey

regulating capital flows to emerging markets an externality view abstract we show that capital flows to emerging market economies create externalities that differ by an order of magnitude depending on the state contingent payoff profile of the flows those with pro cyclical payoffs such as foreign currency debt generate substantial negative pecuniary externalities because they lead to large repayments and contractionary exchange rate depreciations during financial crises conversely capital flows with an insurance component such as fdi or equity are largely benign we construct an externality pricing kernel and use sufficient statistics and dsge model simulations to quantify the externalities that materialized during past financial crises we find stark differences depending on the payoff profile justifying taxes of up to 3 for dollar debt but close to zero for fdi these findings contrast with the existing literature which has suggested that policymakers should focus on reducing over borrowing rather than changing the composition of external liabilities

do international investors enhance private firm value evidence from venture capital we examine the impact of international venture capital investors on private firm success spanning 81 countries over the years 1995 2010 the data examined indicate that relative to deals in which the investor base is purely domestic private firms that have an international investor base have a higher probability of exiting via an initial public offering ipo and higher ipo proceeds the evidence is consistent with the view that while the benefits of internationalization may be difficult and costly to manage for those firms that succeed in managing cross border coordination costs there is potential value for an ipo firm the benefits relative to the costs of internationalizing the investor base for private firms sold in acquisitions by contrast are much less pronounced the most important source of this benefit appears to be access to capital

sudden stops banking crises and investment collapses in emerging markets abstract we evaluate whether financial openness leaves emerging market economies vulnerable to the adverse effects of capital reversals sudden stops on domestic investment we investigate this claim in a broad sample of emerging markets during the period 1976 2002 if the banking sector does not experience a systemic crisis sudden stop events fail to have a significant impact on investment bank crises on the other hand have a significant negative effect on investment even in the absence of a contemporaneous sudden stop crisis we also find that openness to capital flows worsens the adverse impact of banking crises on investment our results provide statistical support for the policy view that a strong banking sector which can withstand the negative fallout of capital flight is essential for countries that open their economies to international financial flows

the antidirector rights index revisited the antidirector rights index has been used as a measure of shareholder protection in over a hundred articles since it was introduced by la porta et al law and finance 1998 journal of political economy 106 1113 55 a thorough reexamination of the legal data however leads to corrections for thirty three of the forty six countries analyzed the correlation between corrected and original values is only 0 53 consequently many empirical results established using the original index may not be replicable with corrected values in particular the corrected index fails to support three widely influential claims that shareholder protection is higher in common than in civil law countries that shareholder protection predicts stock market size or ownership dispersion and that weak corporate governance explains the extent of exchange rate depreciation during the asian financial crisis of 1997 1998 the author 2009 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oxfordjournals org oxford university press

a reconsideration of minsky s financial instability hypothesis the worst and longest depressions have tended to occur after periods of prolonged and reasonably stable prosperity this results in part from agents rationally updating their expectations during good times and hence becoming more optimistic about future economic prospects investors then increase their leverage and shift their portfolios towards projects that would previously have been considered too risky so when a downturn does eventually occur the financial crisis and the extent of default become more severe whereas a general appreciation of this syndrome dates back to minsky 1992 jerome levy economics institute wp 74 and even beyond to irving fisher 1933 econometrica 1 337 357 we model it formally in addition endogenous default introduces a pecuniary externality since investors do not factor in the impact of their decision to take risk and default on the borrowing cost we explore the relative advantages of alternative regulations in reducing financial fragility and suggest a novel criterion for improvement of aggregate welfare

quantitative implications of a debt deflation theory of sudden stops and asset prices abstract this paper shows that the quantitative predictions of an equilibrium asset pricing model with financial frictions are consistent with key features of the sudden stop phenomenon foreign traders incur costs in trading assets with domestic agents and a collateral constraint limits external debt to a fraction of the market value of domestic equity holdings when this constraint does not bind standard productivity shocks cause typical real business cycle effects when it binds the same shocks cause strikingly different effects depending on the leverage ratio and asset market liquidity with high leverage and a liquid market the shocks force fire sales of assets and fisher s debt deflation mechanism amplifies the responses of asset prices consumption and the current account precautionary saving makes these sudden stops infrequent in the long run

creditor rights claims enforcement and bond performance in mergers and acquisitions this article shows that country level differences in creditor protection affect bond performance around cross border m a announcements using eurobonds and a global sample of 1 100 cross border m as we find that the bondholders of bidding firms respond more positively to deals that expose their firm to a jurisdiction with stronger creditor rights and more efficient claims enforcement through courts positive creditor protection spillovers are enhanced by now global jurisdictional cooperation in multinational insolvencies and creditors ability to do insolvency arbitrage the spillover effects we observe are stronger for firms with higher asset risk longer maturity bonds and a higher likelihood of financial distress

is local bias a cross border phenomenon evidence from individual investors international asset allocation abstract extant literature consistently documents that investors tilt their domestic equity portfolios towards regionally close stocks local bias we hypothesize that individual investors local bias is not limited to the domestic sphere but instead also determines their international investment decisions our results confirm the presence of a cross border local bias specifically we show i that the stockholdings of individual investors living within regional proximity to a foreign country display a significantly lower foreign investment bias towards investment opportunities in that country and ii that this drop in foreign investment bias levels is disproportionately driven by investments in regionally close neighbor country companies the impact of cross border local bias on investors bilateral foreign equity investments is economically significant and holds even after controlling for previously identified explanations of international asset allocation

food production urban areas and policy responses summary a growing literature under the heading of urban agriculture extols the virtues for urban food security and poverty reduction of farming in urban areas of developing countries this paper critically examines this literature with particular reference to the spread of food production in and around sub saharan african cities and towns the paper sets out a disaggregated view of food production in urban areas emphasizing the analytical and policy importance of rural urban interactions in resource and output markets as well as in income transfers the scope and limits of useful policy intervention in this area are considered the paper concludes that food production in urban and periurban areas certainly has a role to play in the food security of a proportion of urban dwellers but its contribution to the welfare of the poor in developing countries should not be exaggerated nor therefore should its claims for scarce development resources 0 1998 elsevier science ltd all rights reserved

how legal environments affect the use of bond covenants we examine how country level legal and institutional investor protection shapes contractual creditor protection we examine debt covenant information from foreign corporate bonds issued in the us from more than 50 countries between 1991 and 2007 we find that bonds of firms incorporated in countries with stronger creditor rights use fewer covenants this finding suggests that creditor protection substitutes for covenants in reducing the agency cost of debt in contrast bonds of firms with stronger shareholder rights or firms with stronger firm level corporate governance use more covenants these findings support the notion that firms with stronger shareholder control may face an increase in the shareholder bondholder conflict and therefore prefer to use more covenants however greater shareholder rights are not associated with the use of more covenant restrictions on equity issuance as firms with greater minority shareholder protection are unlikely to suffer such equity dilution

doing more with less innovation input and output in family firms family firms are often portrayed as an important yet conservative form of organization that is reluctant to invest in innovation however simultaneously evidence has shown that family firms are flourishing and in fact constitute many of the world s most innovative firms our study contributes to disentangling this puzzling effect we argue that family firms owing to the family s high level of control over the firm wealth concentration and importance of nonfinancial goals invest less in innovation but have an increased conversion rate of innovation input into output and ultimately a higher innovation output than nonfamily firms empirical evidence from a meta analysis based on 108 primary studies from 42 countries supports our hypotheses we further argue and empirically show that the observed effects are even stronger when the ceo of the family firm is a later generation family member however when the ceo of the family firm is the firm s founder innovation input is higher and contrary to our initial expectations innovation output is lower than that in other firms we further show that the family firm innovation input output relationships depend on country level factors namely the level of minority shareholder protection and the education level of the workforce in the country

a new data set measuring income inequality this article presents a new data set on inequality in the distribution of income the authors explain the criteria they applied in selecting data on gini coefficients and on individual quintile groups income shares comparison of the new data set with existing compilations reveals that the data assembled here represent an improvement in quality and a significant expansion in coverage although differences in the definition of the underlying data might still affect inter temporal and international comparability based on this new data set the authors do not find a systematic link between growth and changes in aggregate inequality they do find a strong positive relationship between growth and reduction of poverty

what factors drive systemic risk during international financial crises abstract we analyze the determinants of the contribution of international banks to both global and local systemic risk during prominent financial crises we find no empirical evidence supporting conjectures that bank size leverage non interest income or the quality of the bank s credit portfolio are persistent determinants of systemic risk across financial crises in contrast our results show that global systemic risk in particular is predominantly driven by characteristics of the regulatory regime we also confirm for the subprime crisis that the banks contribution to moderately bad tail events in the past predicts the financial sector s crash risk

corporate donations and shareholder value do corporate donations enhance shareholder wealth or reflect agency problems we address this question for a global sample of firms whereby we distinguish between charitable and political donations as well as between donations in cash and in kind we find that charitable donations are positively related to financial performance and firm value which is consistent with the value enhancement hypothesis this positive effect on firm value is stronger for cash than in kind donations in contrast political donations do not appear to enhance shareholder value but rather tend to reflect agency problems as they are higher for firms with poor internal corporate governance and strong managerial entrenchment we address endogeneity concerns by using peer firms donations as an instrument in a two stage least squares 2sls setting and by conducting a difference in difference analysis around a general election

financial education investor protection and international portfolio diversification abstract this paper investigates the effect of financial education on foreign portfolio investment we show that higher investor financial education fosters international diversification and that its role is particularly pronounced where information problems and monitoring costs are likely to be more severe that is in countries where protection of minority shareholders rights is weaker we interpret this evidence as supportive of the conjecture that financial education lessens the informational constraints binding foreign investors

international financial shocks in emerging markets abstract the present paper investigates how an emerging market economy is affected when it suddenly faces a higher risk premium on international capital markets we study this question empirically for five latin american economies over the period 1994 2007 within a structural panel vector autoregression and analyze theoretically the transmission mechanism using a dynamic stochastic general equilibrium model dsge of a small open economy the financial shock is modeled by an unexpected increase in the risk premium of firms foreign currency debt in response the adverse shock is amplified by a feedback mechanism between currency depreciation adverse balance sheet and risk premium effects the theoretical model is used to study different monetary policy responses we find that an exchange rate targeting rule that strikes a balance between exchange rate and inflation targeting allows the monetary authority to stabilize inflation and output more effectively than under a pure inflation targeting rule

stock prices in the presence of liquidity crises the effect of creditor protection we develop a model predicting two channels through which creditor protection affects stock prices 1 the probability of a liquidity crisis leading to a binding investment finance constraint falls with better creditor protection 2 the stock prices under the investment constrained regime increase with better creditor protection we find evidence for both predictions using data on stock markets and creditor protection for 52 countries from 1980 to 2008 in particular better creditor protection is correlated with lower stock market volatility and lower frequency of crises moreover during crises stock prices and investment fall more in countries with poor creditor protection

economic development legality and the transplant effect abstract we analyze the determinants of effective legal institutions legality using data from 49 countries we show that the way the law was initially transplanted and received is a more important determinant than the supply of law from a particular legal family countries that have developed legal orders internally adapted the transplanted law and or had a population that was already familiar with basic principles of the transplanted law have more effective legality than countries that received foreign law without any similar predispositions the transplanting process has a strong indirect effect on economic development via its impact on legality while the impact of particular legal families is weaker and not robust to alternative legality measures

human capital and economic development abstract this paper develops a general equilibrium model of fertility and human capital investment with young adult mortality because young adult mortality is negatively related to average young adult human capital human capital accumulation lowers mortality inducing demographic transition and industrial revolution data confirm that young adult mortality is related negatively to schooling and the rate of return to schooling and positively to fertility the data indicate a negative relationship between tfp growth and schooling accumulation the model fits the data on country populations per capita incomes human capital total fertility rates infant mortality life expectancy and conditional life expectancy

law and finance common law and civil law countries compared an empirical critique the theory of law and finance argues that the common law system provides a better framework for financial development and economic growth than the civil law tradition this paper identifies a number of problems that cast doubt on the soundness of the empirical basis of this literature however this analysis supports the idea that the legal tradition is a major factor in shaping corporate law in particular while there is not much evidence that common law countries protect financial investors better than civil law countries i find support for the assumption that financial investors are treated differently across legal families

investor protection and corporate governance recent research has documented large differences among countries in ownership concentration in publicly traded firms in the breadth and depth of capital markets in dividend policies and in the access of firms to external finance a common element to the explanations of these differences is how well investors both shareholders and creditors are protected by law from expropriation by the managers and controlling shareholders of firms we describe the differences in laws and the effectiveness of their enforcement across countries discuss the possible origins of these differences summarize their consequences and assess potential strategies of corporate governance reform we argue that the legal approach is a more fruitful way to understand corporate governance and its reform than the conventional distinction between bank centered and market centered financial systems

the aggregate implications of changes in the labour force composition abstract labour composition by gender age and education has undergone dramatic changes over the last half century in the united states furthermore the volatility of total market hours differs systematically between genders age and education groups i develop a large scale business cycle model where these demographic patterns and their transitional dynamics are taken into account and find that demographic change accounts for 30 of the observed changes in aggregate volatility over this period of time additionally these demographic changes are responsible for a significant fraction of the gdp growth observed in the considered period of time

sudden stops and output drops in recent financial crises and in recent theoretical studies of them abrupt declines in capital inflows or sudden stops have been linked with large drops in output do sudden stops cause output drops no according to a standard equilibrium model in which sudden stops are generated by an abrupt tightening of a country s collateral constraint on foreign borrowing in this model in fact sudden stops lead to output increases not decreases an examination of the quantitative effects of a well known sudden stop in mexico in the mid 1990s confirms that a drop in output accompanying a sudden stop cannot be accounted for by the sudden stop alone to generate an output drop during a financial crisis as other studies have done the model must include other economic frictions which have negative effects on output large enough to overwhelm the positive effect of the sudden stop this abstract was borrowed from another version of this item

capital gains taxation and the cost of capital evidence from unanticipated cross border transfers of tax base abstract in a cross border takeover the tax base associated with future capital gains is transferred from target shareholders to acquirer shareholders cross country differences in capital gains tax rates enable us to estimate the discount in target valuation on account of future capital gains we estimate that a 1 percentage point increase in the capital gains tax rate reduces the value of equity by around 0 3 which suggests that the capital gains tax significantly raises firms cost of capital furthermore we find that the implied capital gains tax burden is higher at times of high economic growth and low stock market valuation

the impact of young workers on the aggregate labor market an increase in the share of youth in the working age population of one state or region relative to the rest of the united states causes a sharp reduction in that state s relative unemployment rate and a modest increase in its labor force participation rate this is inconsistent with many theories of the labor market but can be easily explained by a model of frictional unemployment with on the job search the theory makes strong predictions regarding the behavior of wages which are shown to be consistent with the data the paper also reconciles its findings with an existing body of apparently contradictory empirical evidence

domestic liquidity and cross listing in the united states abstract this study examines changes in domestic liquidity after cross listing in the united states our liquidity measures are based on intraday data from domestic markets for a large sample of firms that cross list in the united states and for a matched sample of firms that do not cross list we find that unadjusted liquidity significantly improves after cross listing however after controlling for contemporaneous changes in liquidity for a matched sample of firms that do not cross list there is no evidence of improvements in domestic liquidity due to cross listing our results offer no support for the bonding hypothesis or for the hypothesis that cross listing improves domestic liquidity because of increased intermarket competition and additional order flow

on the political origin of corporate governance species although economies business practices and living standards have converged since wwii corporate structures continue to differ among the advanced economies of the world looking at the diversity of corporate structures of large sized firms around the world and over time would fascinate charles darwin this work develops a critical review of the literature on political determinants of corporate governance through the darwinian theory including some lamarckian aspects as darwin in his work on the origin of species explicates the diversity of species of tortoises finches and iguanas of the galapagos islands so darwinism may contribute in understanding the origin and the persistence of corporate diversity in particular this article takes into account politics driven variations their inheritances and the subsequent selection of advantageous corporate attributes

cross listed bonds information asymmetry and conservatism in credit ratings we propose information asymmetry as an additional explanation for rating conservatism because information asymmetry is likely higher for cross listed bonds than for u s bonds we expect and find that cross listed bonds are rated more conservatively than u s domestic bonds at issuance further cross listed bonds receive less frequent upgrades and take longer to be upgraded after issuance because lower ratings might also reflect higher default risk based on agencies private information we conduct additional tests to discriminate between the rating conservatism and private information explanations the results are consistent with ratings conservatism and inconsistent with the private information explanation

taxation and the cash flow sensitivity of dividends abstract this paper investigates tax reasons for cross sectional deviations from the general consensus in literature that a firm s cash flow has a positive effect on dividend payout we use a large multinational panel data set to show that the positive cash flow sensitivity of dividends is decreasing in dividend taxes

high frequency trading and end of day price dislocation abstract we show that the presence of high frequency trading hft has significantly mitigated the frequency and severity of end of day price dislocation the effect of hft is more pronounced on days when end of day price dislocation is more likely to be the result of market manipulation moreover the effect of hft is more pronounced than the role of trading rules surveillance enforcement and legal conditions in curtailing the frequency and severity of end of day price dislocation we show our findings are robust to different proxies of the start of hft by trade size cancellation of orders and co location

systemic risk and bank consolidation international evidence abstract this paper analyzes the systemic risk effects of bank mergers to test the concentration fragility hypothesis we use the marginal expected shortfall as well as the lower tail dependence between a bank s stock returns and a relevant bank sector index to capture the merger related change in an acquirer s contribution to systemic risk in our empirical analysis of a dataset of international domestic and cross border mergers we find clear evidence for a significant increase in the merging banks the combined banks as well as their competitors contribution to systemic risk following mergers thus confirming the concentration fragility hypothesis

creditor rights and the corporate bond market this study examines whether investor protection affects capital markets specifically the development of corporate bond markets versus equity markets using a dataset of 42 countries we show that countries with strong creditor rights have more developed corporate bond markets than equity markets however we find only weak evidence that countries with stronger shareholder protection have more developed equity markets than corporate bond markets additionally we find that the effect of financial reforms on capital markets is strongly dependent on the strength of investor protection and on the associated information disclosure in a given country

law finance and the international mobility of corporate governance we introduce the topic of this special issue on the role of financial and legal institutions in international governance with a particular emphasis on a notion of international mobility of corporate governance our discussion places the special issue at the intersection of law finance and international business with a focus on the contexts of foreign investors and directors country level legal and regulatory institutions facilitate foreign ownership foreign directors raising external financial capital and international m a activity the interplay between the impact of foreign ownership and foreign directors on firm governance and performance depends on international differences in formal regulatory institutions in addition to legal conditions informal institutions such as political connections also shape the economic value of foreign ownership and foreign directors we highlight key papers in the literature provide an overview of the new papers in this special issue and offer suggestions for future research

legal efficiency and consistency abstract we analyze the efficiency and consistency of court decisions under common and civil law as a leading example we study the enforcement of property rights judges are of two types some are conservative and follow the precedent or the statute while others maximize social welfare when courts intervene ex post after the relevant economic choices have been made welfare maximizing courts face a commitment problem such an ex post bias has implications on the relative consistency and efficiency of each legal system surprisingly we find that court decisions are more consistent under common law than under civil law the welfare comparison between the two systems is instead ambiguous however in changing economic environments common law is more likely to dominate civil law because of its greater adaptability

tolerance for uncertainty and the growth of informationally opaque industries abstract hofstede s hofstede geert h 1980 culture s consequences international differences in work related values thousand oaks ca sage cross country psychological survey of ibm employees finds that some countries societies are systematically less tolerant of uncertainty while uncertainty tolerance is shown by some theoretic models to be essential to the growth of emerging sectors about which less is known this paper first uses durnev morck and yeung s durnev art morck randall and yeung bernard 2004 value enhancing capital budgeting and firm specific stock return variation the journal of finance 59 1 65 105 methodology to identify these informationally opaque industries the hypothesis is then made that countries characterized by high uncertainty aversion measured by hofstede s indicator and two other alternative indicators will grow disproportionately slower in industrial sectors where information is less available using the rajan and zingales rajan raghuram g and zingales luigi 1998 financial dependence and growth american economic review vol 88 3 559 586 difference in differences methodology which is relatively free from the endogeneity problem the study provides robust evidence of such an industrial growth pattern in 34 countries and 36 manufacturing industries it also shows that national uncertainty aversion is not driven by underdevelopment of financial sector inadaptability of civil law systems lower level of economic or human capital development labor market inflexibility or any of many other institutional factors the results remain robust when religious catholic vs protestant composition is used as an instrumental variable for national uncertainty aversion the international evidence presented helps explain why some countries are slower in embracing new vs traditional industries

demographics and business cycle volatility a spurious relationship summary this paper replicates the estimation results of three studies on the impact of the age composition of the labor force on business cycle volatility and investigates whether they signal a meaningful long run relationship we show that both the volatile age labor force share variable and the business cycle volatility measure exhibit non stationary behavior but find no robust evidence of cointegration hence the estimation results reported in the literature may be spurious this conclusion is further supported by the finding that the strong relationship i disappears when cross sectional dependence is accounted for using the ccep estimator and ii is highly sensitive to small changes in the composition of the sample to data revisions and to the exact definition of the volatile age labor share copyright 2016 john wiley sons ltd

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

risk sharing and industrial specialization regional and international evidence the authors provide empirical evidence that risk sharing enhances specialization in production to the best of their knowledge this well established and important theoretical proposition has not been tested before the empirical procedure is summarized as follows first the authors construct a measure of specialization in production and calculate an index of specialization for each of the european community ec and non ec oecd countries u s states canadian provinces japanese prefectures latin american countries and regions of italy spain and the united kingdom then they estimate the degree of capital market integration a measure of risk sharing within each of these groups of regions the ec countries the non ec oecd countries the united states canada japan italy spain and the united kingdom and rely on another author s estimate for latin america finally they perform a regression of the specialization index on the degree of risk sharing controlling for relevant economic variables they find a positive and significant relation between the degree of specialization of individual members of a group of countries provinces states or prefectures and the amount of risk that is shared within the group the authors perform regressions using variables such as shareholder rights and the size of the financial sector relative to gdp as instruments for the amount of inter regional risk sharing these regressions confirm that risk sharing facilitated by a favorable legal environment and a developed financial system is a direct causal determinant of industrial specialization this abstract was borrowed from another version of this item

the effects of legal reforms on the ownership structure of listed companies a general view in the corporate governance literature is that corporate ownership structures are rather stable in time and change slowly however even if changes in ownership structures are difficult due to path dependence anecdotal evidence indicates that some sort of transition towards the us style corporate ownership could be occurring in civil law countries the aim of this article is to test the so called law and finance view which predicts that this convergence will only happen if the appropriate regulatory framework is in place we test this prediction using longitudinal data from italian listed companies assessing the effects of recent legal reforms our results show that an increase in the protection of investors rights is associated with a lower use of control enhancing mechanisms and a lower separation of control and cash flow rights while it is less evident if it is associated with a more dispersed ownership these findings carry important implications for theory and practice

are asset price guarantees useful for preventing sudden stops a quantitative investigation of the globalization hazard moral hazard tradeoff abstract an implication of the globalization hazard hypothesis is that sudden stops caused by global financial frictions could be prevented by offering foreign investors price guarantees on emerging markets assets these guarantees create a tradeoff however because they weaken globalization hazard while creating international moral hazard we study this tradeoff using a quantitative equilibrium asset pricing model without guarantees margin calls and trading costs cause sudden stops driven by a fisherian deflation price guarantees prevent this deflation by propping up foreign demand for assets the effectiveness of price guarantees their distortions on asset markets and their welfare implications depend critically on whether the guarantees are contingent on debt levels and on the price elasticity of foreign demand for domestic assets

why does the law matter investor protection and its effects on investment finance and growth investor protection is associated with greater investment sensitivity to q and lower investment sensitivity to cash flow finance plays a role in causing these effects in countries with strong investor protection external finance increases more strongly with q and declines more strongly with cash flow we further find that q and cash flow sensitivities are associated with ex post investment efficiency investment predicts growth and profits more strongly in countries with greater q sensitivities and lower cash flow sensitivities the paper s findings are broadly consistent with investor protection promoting accurate share prices reducing financial constraints and encouraging efficient investment in this paper we study how investor protection affects firm level resource allocations our analyses center on two hypotheses our first hypothesis is that stock prices more strongly predict both investment and external finance in countries with stronger investor protection laws tobin 1969 shows in a frictionless setting that marginal q predicts real investment in this framework high marginal q firms should all else equal also raise the most capital as these firms invest more we use average q q as a proxy for marginal q and test whether investment and external finance are more sensitive to q in countries with stronger investor protection laws

cross country evidence on the link between volatility and growth this paper presents empirical evidence against the standard dichotomy in macroeconomics that separates growth from the volatility of economic fluctuations in a sample of ninety two countries as well as a sample of oecd countries the authors find that countries with higher volatility have lower growth the addition of standard control variables strengthens the negative relationship the authors also find that government spending induced volatility is negatively associated with growth even after controlling for both time and country fixed effects copyright 1995 by american economic association