endogenous information flows and the clustering of announcements we consider the strategic timing of information releases in a dynamic disclosure model because investors don t know whether or when the firm is informed the firm will not necessarily disclose immediately we show that bad market news can trigger the immediate release of information by firms conversely good market news slows the release of information by firms thus our model generates clustering of negative announcements surprisingly this result holds only when firms can preemptively disclose their own information prior to the arrival of external information these results have implications for conditional variance and skewness of stock returns jel d21 d83 g12 g14 l11

high tech firms and credit rationing abstract informational frictions between borrowers and lenders differ across classes of borrowers innovative firms undertake high risk high return projects which are likely to be little understood by financial intermediaries as a consequence they may end up allocating too large a share of funds to traditional low risk low return projects this proposition finds some support in a cross section of italian manufacturing firms using several proxies to classify firms into high tech and low tech groups and direct information on each firm s access to bank credit high tech firms are found to be more likely to be credit constrained than low tech firms the results suggest that the responsiveness of r d expenditure to cash flow found in the literature is likely due to pervasive credit constraints on innovative firms rather than to cash flow proxying for future expectations the paper also sheds light on the main factors affecting the probability of a firm being rationed in the credit market

the liability insurance market t his paper offers an overview of the u s liability insurance market and the link between its performance and developments in tort law over the last few decades the dominant feature of the insurance market has been the intermittent periods of rapidly rising premiums and cutbacks on the availability of coverage the insurance cycle appears to be increasing in amplitude and since the 1960s has been concentrated increasingly in liability lines an episode of rising premiums in the late 1960s was followed by a six year period of declining and eventually negative growth rates in total liability insurance premiums over the 1975 1977 period the annual growth rate jumped to 30 percent then followed another period of declining real premiums until premiums nearly tripled in 1984 1986 accompanied by cancellations of policies and massive withdrawal of insurers from some lines this crisis had an economic impact beyond the insurance market leading to the withdrawal of many goods and services from u s markets in mid 1987 the market began to turn again with premiums falling by as much as 40 percent for some commercial policies since then aggregate revenue from premiums has been relatively stable the liability insurance market is intertwined with the tort system in addition to providing incentives to avoid accidents the tort system allocates the risks of accident costs in providing compensation for accident victims the modern expansion of liability in tort law as described by priest in this issue represents a shift in the burden of supplying insurance from first party insurance markets to liability or third party insurance markets clearly this shift will

mis measurement of the productivity and sustainability of african communal rangelands a case study and some principles from botswana abstract hypotheses about the relative productivities and impacts of current and officially recommended stocking rates were tested in a case study in southern africa they support the view that biased measurements of livestock productivity and inappropriate measurements of rangeland degradation can lead to under estimates of the productivity of african communal rangelands overestimates of the urgency of de stocking and misunderstanding of the strengths of measures required to effect it by including the full range of livestock products in estimates of productivity and calculating output per unit of land area rather than per unit of livestock more accurate estimates of productivity can be made estimates of degradation based on irreversible changes enable discrimination between trivial and important impacts of grazing modelling suggests de stocking is not in general worthwhile at present in eastern botswana it may be necessary to regulate numbers of animals in the future if livestock densities increase grass cover could fall below the critical level and rates of degradation increase suddenly and rapidly adverse climatic change could reduce herbaceous productivity with the same effect the approach used here should help decision making in those circumstaces choosing an appropriate stocking rate should be an ethical decision requiring negotiations among stakeholders practitioners should recognise that it is socially not technically determined and that it is but one level among many possible densities

special section land use options in dry tropical woodland ecosystems in zimbabwe introduction overview and synthesis the articles included in this special section focus on the ecological and economic interactions of woodland use in western zimbabwe one of the aims was to investigate the use of modelling to achieve integration among disciplines the integrated model draws on the models in the different papers comprising the special section the model has five ecological sectors five sectors covering woodland use by local people and the state forestry organisation two sectors to cover agriculture one sector for population growth and land use a sector to cover carbon sequestration and a sector to calculate net present values of the various uses the state has usually attempted to keep people and their livestock out of the state forest we show that the private benefits of cropland may be greater than those related to state or local use of the woodland but further work is required to incorporate the public costs of subsidies to cropland and the public benefits of woodland services livestock production in the woodlands is compatible with woodland management both from economic and ecological perspectives expulsion of forest 1 dwellers from the state forest makes little ecological impact on the woodland and does not improve the economic value of the woodland to the state however if the forestry commission relaxes the current control on in migration it is likely that the woodland will be rapidly depleted in the face of massive in migration modelling is seen as a framework for integration of ecological and economic issues but further work is required to incorporate institutional perspectives from the sociological and anthropological disciplines 2000 elsevier science b v all rights reserved

economic comparisons of livestock production in communal grazing lands in zimbabwe abstract during the last decade a new rangeland science has emerged one of the tenets of the new science is that pastoralists should not adhere to a single conservative stocking rate but rather adopt an opportunistic strategy where numbers will fluctuate widely in response to good and bad seasons it is further argued that opportunistic strategies give higher economic returns compared to strategies based on conservative stocking rates in the current paper we compare the economics of four cattle management scenarios the analysis is based on a simulation model of the fluctuation over time of animal numbers outputs and prices using data from field surveys and the literature our results suggest that strategies based on conservative stocking rates would have higher net present values than strategies based on opportunistic stocking rates previous analyses have failed to account for losses due to drought and the costs of capital tied up in livestock and the analyses have tended to compare commercial with communal production rather than considering different kinds of small holder production methods to receive the full benefits of destocking however a decision to destock has to be made at the level of the community as the benefits of improved outputs can only be achieved if the stocking rates of the communal grazing lands are reduced making collective decisions about managing numbers is a process with considerable transaction costs and thus the likelihood of new institutions emerging are lessened it is surprising that a tight tracking scenario where numbers of cattle are managed by purchasing and selling so as to maintain numbers in equilibrium with the available feed resources is being recommended in the most recent literature our results suggest that such a system would come with considerable economic losses the costs of a current programme to reclaim small dams illustrate the environmental costs of the opportunistic scenario a tight tracking policy is likely to further increase environmental degradation and its associated costs we identify several serious flaws in the papers that elevate opportunistic pastoral systems as giving higher economic returns than other systems

in search of optimal stocking regimes in semi arid grazing lands one size does not fit all we discuss the search for optimal stocking regimes in semi arid grazing lands we argue that one size does not fit all and that different stocking regimes are appropriate under different conditions this paper is an attempt to move beyond polarization of the current debate towards a more integrative and flexible approach to grazing management we propose five different conditions as major influences on grazing regimes environmental variability and predictability degradation and thresholds property right regimes discount rates and market stability and prices we suggest a lack of connection between the micro economics literature and natural science and social anthropological literature it is timely to achieve greater integration around some key questions and hypotheses and recognize that policy prescriptions at national or even regional levels are likely to have limited value due to context specificity

the cyclical behaviour of european bank capital buffers using an unbalanced panel of accounting data from 1997 to 2004 and controlling for individual bank costs and risk we find capital buffers of the banks in the eu15 have a significant negative co movement with the cycle for banks in the accession countries there is significant positive co movement capital buffers of commercial and savings banks and of large banks exhibit negative co movement those of co operative and smaller banks exhibit positive co movement speeds of adjustment are fairly slow we interpret these results and discuss policy implications noting that negative co movement of capital buffers will exacerbate the pro cyclical impact of basel ii

the penn square bank failure effect on commercial bank security returns a note abstract in this paper we apply standard event methodology to test the effect of the penn square bank failure on the daily returns of three groups of bank holding companies during the 75 day event period upstream banks which had penn square loan participations faced nearly continual declines in daily returns banks in the same economic region followed a pattern of less severe but continuously declining returns while returns for banks outside the region were not significantly affected we conclude that the market viewed the penn square failure as an isolated event which did not significantly affect banks away from regional economic influences

opportunistic and conservative pastoral strategies some economic arguments abstract this paper revisits the debate over the relative effectiveness of conservative and opportunistic stocking strategies for african pastoral rangelands the paper is based on a reassessment of the results of an earlier paper in this journal by campbell et al 2000 campbell b m dore d luckert m mukamuri b gambiza j 2000 economic comparisons of livestock production in communal grazing areas of zimbabwe ecol econ 33 413 438 which argued that the advocacy of opportunistic strategies by the new range science was misplaced this paper questions some of the assumptions of this scenario modelling effort both in terms of causal structure and parameter estimates by developing a mimic model and using data from the same site a dryland communal area in southern zimbabwe this paper shows how the conclusions of the earlier paper were premature the need for sensitivity analysis in assessing model findings is emphasised if policy conclusions with potentially major impacts on people s livelihoods are to be drawn a brief discussion of the implications of this reassessment including more broadly the limitations and prospects of economic ecological modelling in policymaking for rangeland management concludes the paper

geometric mean approximations in 1959 henry latana 2 proposed an approximation to the geometric mean that was a simple function of the arithmetic mean and variance thereby indicating a mathematical relationship between the risky investment choice model of bernoulli and the markowitz mean variance model in 1969 young and trent 4 presented empirical test results of the latane approximation as well as a set of other approximations to the geometric mean based on moments and concluded that the latane formula yielded a quite accurate approximation to the geometric mean in jean s 1980 paper 1 relating the geometric mean model to stochastic dominance models the infinite series representation of the geometric mean used suggests a more accurate approximation with moments of the geometric mean than that contained in the earlier papers may be possible various forms of that series expressed in alternate origin moments are tested empirically below and the results confirm that this later series does yield the greatest accuracy of the three approaches

costs of overstocking on cattle and wildlife ranches in zimbabwe abstract in african semi arid savannas livestock production frequently dominates human activity but it has been claimed that wildlife ranching can be more profitable than extensive beef production traditional accounting methods generally exclude the biological costs of stocking effects on rangeland productivity this paper presents a framework for evaluating overstocking effects on the financial profits based on market prices and economic profits estimated from the opportunity costs of inputs and outputs of alternative range based animal production systems the method was applied to 50 commercial cattle wildlife and mixed ranches in the zimbabwe midlands using 1989 90 data level of overstocking was estimated from positive differences between grazer stocking rate and rangeland carrying capacity which was predicted from long term mean annual rainfall since it is generally impossible to accurately quantify stocking effects on rangeland productivity and thus to confidently evaluate overstocking costs values ranging from z 0 00 to z 0 50 kg 1 ha 1 overstocking were used the resulting range of costs were subtracted from financial and economic profits cattle ranches were significantly overstocked while mixed and wildlife ranches were not thus cattle ranch profits decreased more rapidly with increasing simulated overstocking cost in other words with increasing sensitivity to overstocking wildlife and mixed ranches had a higher probability of remaining financially and economically profitable than did cattle ranches

do investors herd in emerging stock markets evidence from the taiwanese market abstract this paper has three main contributions to the literature on investor herds first it extends investor herding studies to an emerging yet relatively sophisticated taiwanese stock market at the sector level by using firm level data second it employs different methodologies designed to test the existence of investor herds to better understand the sources of herd behavior third it discusses the implications of different herding measures for investors exposed to systematic and unsystematic risks we find that the linear model based on the cross sectional standard deviation cssd testing methodology yields no significant evidence of herding however the non linear model proposed by chang et al 2000 and the state space based models of hwang and salmon 2004 lead to consistent results indicating strong evidence of herd formation in all sectors we also find that the herding effect is more prominent during periods of market losses our results suggest limited diversification opportunities for investors in this market especially during periods of market losses when diversification is most needed further research is necessary to see whether similar findings hold for other emerging markets

capital adequacy ratio regulations and accounting choices in commercial banks abstract this study examines a commercial bank manager s incentives to reduce regulatory costs imposed when the bank s capital adequacy ratio falls below its regulatory minimum it also tests the general political sensitivity hypothesis that a manager seeks to reduce political costs incurred when revenue is unusually large tests of adjustments to the loan loss provision loan charge offs and securities gains and losses attempt to control for exogenous economic conditions and previous investing decisions results are consistent with hypotheses associating accounting adjustments with capital adequacy ratio guidelines but fail to support the political sensitivity hypothesis

special section land use options in dry tropical woodland ecosystem in zimbabwe household resource allocations in response to risks and returns in a communal area of western zimbabwe abstract a household production model is constructed in the context of a subsistence economy influenced by fluctuating rainfall increasing populations and relationships to the natural resource base households are modelled as attempting to optimally allocate their resources among four sectors agriculture woodlands with wood and non wood sub sectors livestock and urban simulations show that although welfare decreases over the 50 year simulation period the resource base appears to be able to sustain the increased pressure data to feed the model are limited implying further research is needed on resources expended by households by sector perceptions of risk and differentiation within and among households according to gender and wealth despite data limitations results show the importance of considering that households may allocate resources between multiple sectors as these options may buffer their welfare from rainfall shocks and increasing population pressures

sequential sales learning and cascades when ipo shares are sold sequentially later potential investors can learn from the purchasing decisions of earlier investors this can lead rapidly to cascades in which subsequent investors optimally ignore their private information and imitate earlier investors although rationing in this situation gives rise to a winner s curse it is irrelevant the model predicts that 1 offerings succeed or fail rapidly 2 demand can be so elastic that even risk neutral issuers underprice to completely avoid failure 3 issuers with good inside information can price their shares so high that they sometimes fail 4 an underwriter may want to reduce the communication among investors by spreading the selling effort over a more segmented market consider a scenario in which an issuer is selling a new security of uncertain value for example an ipo initial public offering of stock or high yield debt through an underwriter the s e c has banned variable price sales while the value of this new security is highly uncertain to individual market participants investors hold perfectly accurate information when aggregated moreover there are many potential investors and a small number of these investors can jointly determine the value of the firm or its project with high precision it would seem that in this scenario underpriced offerings would succeed and overpriced offerings would fail nevertheless this paper shows that if the distribution channels of invest ment banks are limited underpriced offerings can fail and overpriced offer ings can succeed with limited distribution channels it takes the under writer time to approach interested investors therefore later investors can observe how well an offering has sold to date or at least how successful it has sold relative to offerings previously undertaken by this underwriter

banking on the boom tripped by the bust banks and the world war i agricultural price shock bank lending booms and asset price booms are often intertwined although a fundamental shock might trigger an asset boom aggressive lending can push asset prices higher leading to more lending and so on such a dynamic seems to have characterized the agricultural land boom surrounding world war i this paper examines i how banks responded to the asset price boom and how they were affected by the bust ii how various banking regulations and policies influenced those effects and iii how bank lending contributed to rising farm land values in the boom and how bank closures contributed to falling prices in the bust we find that rising crop prices encouraged bank entry and balance sheet expansion in agriculture counties state deposit insurance systems amplified the impact of rising crop prices on the size and risk of bank portfolios while higher minimum capital requirements dampened the effects further increases in county farm land values and mortgage debt were correlated with the number of local banks ex ante and increases in bank loans during the boom when farm land prices collapsed banks that had responded most aggressively to the asset boom had a higher probability of closing while counties with more bank closures experienced larger declines in land prices than can be explained by falling crop prices alone

why bank credit policies fluctuate a theory and some evidence in a rational profit maximizing world banks should msdntain a credit policy of lending if and only if borrowers have positive net present value projects why then are changes in credit policy seemingly correlated with changes in the condition of those demanding credit this paper argues that rational bank managers with short horizons will set credit policies that influence and are influenced by other banks and demand side conditions this leads to a theory of low frequency business cycles driven by bank credit policies evidence from the banking crisis in new england in the early 1990s is consistent with the assumptions and predictions of the theory

credit booms and macrofinancial stability this paper explores several questions about credit booms and busts when do credit booms occur when do they end up in busts and when do they not what are the implications for different policies if curbing credit growth and or mitigating the associated risks is an objective we find that credit booms are often associated with financial reform and economic growth they also tend to be more frequent in fixed exchange rate regimes only one in three credit boom episodes are followed by a financial crisis these booms tend to be larger and last longer macroprudential tools have at times proven effective in containing booms and more often in limiting the consequences of busts due to the buffers they helped to build