what policy adjustments in the eu ets truly affected the carbon prices abstract carbon market becomes increasingly popular as a cost effective instrument to mitigate co 2 emissions however its construction is a learning by doing process and needs consistent regulatory updates in order to deliver optimal effects this paper uses the event study method to assess the impacts of different policy adjustments on the eua returns in the european union emissions trading scheme eu ets since 2005 comparing to existing studies that focus on the impact of a single policy this paper provides a complementary reference on if and to what extent policy adjustments can impact the carbon prices by classifying all regulatory update events into six categories its key findings are as follows first aggregate impacts of total 50 events studied are low while impacts of events having underlying negative impacts are higher than those having underlying positive impacts second 24 events have significant impacts on eua returns and are coherent to their theoretical impacts except one event third events having negligible impact on eua returns are those that are announced not for the first time or those having no impact on co 2 quotas supply and demand finally there are different impact patterns some events have different impacts on short end and long end carbon prices

pathways to a low carbon economy estimations on macroeconomic costs and potential of carbon emission abatement in beijing abstract developing reliable frameworks to estimate the potential of co2 emission abatement and its associated costs merits urgent attention this study aims to estimate the potential as well as macroeconomic costs of co2 emission abatement in beijing using the industrial economy as the basis multiobjective programming and genetic algorithm are integrated into the input output analysis several important findings have been gathered in the study 1 the abatement cost varies between 259 97 and 535 46 per ton at different rates of economic growth 2 a reinforced emission abatement target can induce higher macroeconomic costs 3 an inverse u shaped relationship between co2 reduction cost and gdp growth rate was found when gdp growth rate is above the threshold value of 7 marginal abatement costs decrease rapidly in parallel with gdp growth when the gdp growth rate is below 7 the marginal abatement cost increases significantly with economic growth 4 industries that have the highest and least potential of abatement have been identified for effectively reducing co2 emissions beijing needs to promote economic restructuring to maximize the potential of emission abatement and also fulfil the emission abatement target in a cost effective way this paper provides a quantitative approach to rationalize the policy design process of enacting emission targets and recommends cost effective abatement strategies

aggregate earnings and gross domestic product international evidence abstractrecent studies in macro accounting suggest that changes in aggregate accounting earnings can predict quarterly gdp growth in the usa our objective in this study is to test the robustness o

product market competition and managerial slack this article analyzes the effect of product market competition on managerial incentives in contrast to hart 1983a i show that competition may actually exacerbate the incentive problem the difference in results derives from our different assumptions about managerial preferences the importance of assumptions about preferences suggests that we do not yet understand the precise mechanism through which competition affects incentives

refinancing profitability and capital structure abstract we revisit the well established puzzle that leverage is negatively correlated with measures of profitability in contrast we find that at times when firms are at or close to their optimal level of leverage the cross sectional correlation between profitability and leverage is positive at other times it is negative these results are consistent with dynamic trade off models in which infrequent capital structure rebalancing is optimal the time series of market leverage and profitability in the quarters prior to rebalancing events match the patterns predicted by these models our results are not driven by investment layouts market timing payout or mechanical mean reversion of leverage

debt in industry equilibrium this article shows 1 how entry and exit of firms in a competitive industry affect the valuation of securities and optimal capital structure and 2 how given a trade off between tax advantages and agency costs a firm will optimally adjust its leverage level after it is set up we derive simple pricing expressions for corporate debt in which the price elasticity of demand for industry output plays a crucial role when a firm optimally adjusts its leverage over time we show that total firm value comprises the value of discounted cash flows assuming fixed capital structure plus a continuum of options for marginal increases in debt article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

competition risk and managerial incentives this paper examines how the degree of competition among firms in an industry affects the optimal incentives that firms provide to their managers a central assumption is that there is free entry and exit in the industry which implies that changes in the nature of competition lead to changes in the equilibrium market structure the main result is that as the intensity of product market competition increases as a result of greater product substitutability or greater market size principals unambiguously provide stronger incentives to their agents to reduce costs at the same time more intense competition also leads to more volatile firm level profits consequently managers incentives are positively correlated with firm level risk consistent with empirical evidence a decrease in the cost of entering the market has the opposite effect on incentives but still induces a positive correlation between risk and incentives

bankruptcy costs and the theory of oligopoly this paper examines the relationship between financial decisions and output decisions in oligopolistic markets assuming a duopoly market structure in which financial decisions and output decisions follow in sequence the authors analyze how bankrupt cy costs which are incurred when the firm is unable to meet current debt obligations affect the firm s behavior in output markets with fixed bankruptcy costs firms have an incentive to increase output le vels if they take on more debt proportional bankruptcy costs lead to a u shaped relationship between output and debt foresighted owners of firms are led to take into account the strategic output effects of financial structure when considering an optimal financial structure for the firm

executive incentives and the horizon problem an empirical investigation abstract this paper investigates the hypothesis that ceos in their final years of office manage discretionary investment expenditures to improve short term earnings performance we examine the behavior of r d expenditures for a sample of firms in industries that have significant ongoing r d activities the results suggest that ceos spend less on r d during their final years in office however we find the reductions in r d expenditures are mitigated through ceo stock ownership there is no evidence that the reduced r d expenditures are associated with either poor firm performance or reductions in investment expenditures that are capitalized for accounting purposes

measuring the effects of regulation with stock price data this article examines the usefulness of stock returns in measuring the effects of regulation when the dates on which market expectations change are not known and standard sources e g the wall street journal are used to choose announcement dates twenty major changes in regulatory constraint since 1887 are considered tests using either monthly or daily data are found to have surprisingly little ability to detect the effects of regulation the evidence shows that formal regulatory announcements are generally anticipated in cases where it is unclear when expectations change

capital structure and product market rivalry how do we reconcile theory and evidence this paper presents empirical evidence on the interaction of capital structure decisions and product market behavior we examine when firms recapitalize and increase the proportion of debt in their capital structure the evidence in this paper shows that firms with low productivity plants in highly concentrated industries are more likely to recapitalize and increase debt financing this finding suggests that debt plays a role in highly concentrated industries where agency costs are not significantly reduced by product market competition following the empirical evidence we introduce the strategic investment effects of debt and argue that this effect in conjunction with agency costs appears to fit the data this abstract was borrowed from another version of this item

determinants of capital structure evidence from a major developing economy a major shortcoming of capital structure studies on developing economies is that they generally restrict their analyses to large publicly traded manufacturing firms consequently we know little about the applicability of various capital structure theories to firms that are private small and or outside the manufacturing industry in these economies in this paper we conduct a comparative test of the trade off and pecking order theories using a comprehensive firm level dataset that covers manufacturing non manufacturing small large publicly traded and private firms in a major developing economy turkey the trade off theory provides a better description of the capital structures of all firm types than the pecking order theory moreover the trade off theory appears to be particularly suitable for understanding the financing choices of large private firms in the non manufacturing sector and when the economic environment is relatively stable by contrast pecking order theory is most useful when it comes to small publicly traded manufacturing firms especially when the economic environment is relatively unstable

multinationality portfolio diversification and asymmetric mne performance the moderating role of real options awareness the field of international business is fundamentally concerned with the implications of managerial actions that affect multinational risk and performance outcomes while portfolio diversification and real options theory are often used to describe the outcomes of multinational investment existing work often confuses the actions and predictions proposed by these theories this is concerning as the two theories emphasize different causal mechanisms managerial actions and conceptions of risk and performance whereas portfolio theory argues that passive management affects symmetric outcomes such as variance in returns by attaining a well diversified portfolio real options theory posits that managers actively shift subsidiary resources to affect asymmetric outcomes such as upside potential or downside risk by monitoring and responding to environmental changes affecting the portfolio this paper disentangles these two theories by focusing on unique predictions from real options theory that geographic dispersion of mne activities is associated with asymmetric outcomes that this association is contingent on management being aware of real options logic and that these effects are moderated by the degree of market uncertainty our findings confirm these predictions and suggest differences in the types of managerial strategies and actions required to effectively implement these distinct theories of the mne

financial signalling and the deep pocket argument this article provides a formal representation of telser s 1966 deep pocket argument by considering a model in which the entrant s and the incumbent s financial structures are endogenous the entrant s financial vulnerability may be explained by informational asymmetries in financial markets financiers are uncertain of the entrant s true value but they know the incumbent s true worth both firms have to finance a fixed expenditure before starting production in equilibrium the incumbent finances with equity while the high value entrant comes into the market heavily leveraged compared with the incumbent this provides an incentive for the incumbent to engage in predatory practices such as a price war to exhaust the entrant financially and cause his bankruptcy

evidence on the impact of the agency costs of debt on corporate debt policy in the last several years there has been increased theoretical emphasis on the agent principal problem as it applies to corporate finance this paper is an attempt to empirically test for the presence of the agency costs and their relation to the debt policy of corporations we find that firms with higher insider ownership have greater debt ratios than firms with lower insider ownership which may be explained by the agency costs of debt and or the agency costs of equity other regression results tend to confirm the theoretically optimal relationships put forth by myers we find that high growth firms use less debt rather than more debt high operating risk firms use more debt rather than less debt and firm size appears to be uncorrelated to the level of debt

control rights and capital structure an empirical investigation we show that incentive conflicts between firms and their creditors have a large impact on corporate debt policy net debt issuing activity experiences a sharp and persistent decline following debt covenant violations when creditors use their acceleration and termination rights to increase interest rates and reduce the availability of credit the effect of creditor actions on debt policy is strongest when the borrower s alternative sources of finance are costly in addition despite the less favorable terms offered by existing creditors borrowers rarely switch lenders following a violation a fundamental question in financial economics is how do firms choose their financial policies extant empirical research on this question has focused primarily on the presence of taxes and bankruptcy costs e g scott 1976 information asymmetry e g myers and majluf 1984 and more recently market timing behavior e g baker and wurgler 2002 however beginning with jensen and meckling 1976 a large body of theoretical research examines how incentive conflicts between managers and external investors affect corporate financial policies in particular theoretical research on financial contracting shows that in the presence of incentive conflicts optimal debt contracts will allocate certain rights to creditors after negative performance in order to help firms secure financing ex ante e g aghion and bolton 1992 and dewatripont and tirole

industry product market competition and managerial incentives abstract while some studies suggest that industry product market competition can substitute for managerial incentives other studies suggest a complementary relation the underlying assumption behind these studies is that competition can be uni dimensionally proxied for by industry concentration however recent studies suggest that competition can reflect several dimensions product substitutability market size and entry costs given the level of industry concentration using these determinants of competition this study contributes to the literature by showing that a firms provide stronger incentives when industry competition is greater b competition is multi dimensional in its relation to incentives and c industry characteristics play a major role in influencing incentives

a differential game approach to investment in product differentiation abstract we consider a dynamic oligopoly where firms invest to increase product differentiation and an externality effect operates in the r d activity via the demand functions in the fully noncooperative setting we find that the degree of differentiation resulting from r d effort is higher the larger is the population of firms in the industry if firms cooperate in the r d activity by setting up an r d cartel aggregate investment is larger and product substitutability is lower than in the decentralised case

a fuzzy stochastic model for carbon price prediction under the effect of demand related policy in china s carbon market abstract the establishment of china s carbon market has an obvious policy oriented feature and the carbon price is easily affected by demand related policies within a compliance period as prior models cannot help with clear simulation of the volatility of carbon price in china this paper develops a fuzzy stochastic model to predict such price under the effect of demand related policy first we quantify corporate final profit obtained from carbon trading based on different free allowance policies to measure the actual allowance demand in the carbon market second based on such demand we add the fuzzy number in each parameter of a stochastic differential equation and then develop a fuzzy stochastic model that can help to analyse the effect of demand related policy on carbon price in the immature carbon market third by analysing the demand related policy formulated in the second developing phase of the shanghai environment and energy exchange from nov 17 in 2016 through our model we predict the price trend after each demand related policy publication experimental results reveal the accurate fitting effect of the developed model that can help to estimate the supply and demand in the carbon market and evaluate the effectiveness of current carbon trading policy as well further our model can provide a robust theoretical implication for both corporate carbon trading strategies and governmental regulations on carbon demand related policy

the spillover effects of md a disclosures for real investment the role of industry competition abstract we explore whether disclosures in the management discussion analysis mda it is stronger when firms operate in industries that have lower entry costs are larger and have less substitutable products we obtain similar results for investment efficiency overall our evidence suggests that md a disclosures have spillover effects for investment that can improve investment efficiency and that spillover effects are moderated by industry competition

large sample evidence on firms year over year md a modifications the securities and exchange commission sec has expressed concern about the informativeness of firms management discussion and analysis mda the price reaction to md a modification scores has also weakened suggesting a decline in md a usefulness

how stable are corporate capital structures leverage cross sections more than a few years apart differ markedly with similarities evaporating as the time between them lengthens many firms have high and low leverage at different times but few keep debt to assets ratios consistently above 0 500 capital structure stability is the exception not the rule occurs primarily at low leverage and is virtually always temporary with many firms abandoning low leverage during the post war boom industry median leverage varies widely over time target leverage models that place little or no weight on maintaining a particular ratio do a good job replicating the substantial instability of the actual leverage cross section

price discovery and volatility spillovers in the european union emissions trading scheme a high frequency analysis abstract this paper models the relationship of european union allowance spot and futures prices within the second commitment period of the european union emissions trading scheme based on high frequency data we analyze the transmission of information in first and second conditional moments to reveal long run price discovery we compute common factor weights of schwarz and szakmary 1994 and information shares of hasbrouck 1995 based on estimated coefficients of a vecm to analyze the short run dynamics we perform granger causality tests we identify the futures market to be the leader of the long run price discovery process whereas the informational role of the futures market increases over time in addition we employ a version of the ueccc garch model as introduced by conrad and karanasos 2010 to analyze the volatility transmission structure the volatility analysis indicates a close relationship between the volatility dynamics of both markets whereas in particular we observe spillovers from the futures to the spot market as a whole the investigation reveals that the futures market incorporates information first and then transfers the information to the spot market

modeling and explaining the dynamics of european union allowance prices at high frequency in this paper we model the adjustment process of european union allowance eua prices to the releases of announcements at high frequency controlling for intraday periodicity volatility clustering and volatility persistence we find that the high frequency eua price dynamics are very well captured by a fractionally integrated asymmetric power garch process the decisions of the european commission on second national allocation plans have a strong and immediate impact on eua prices on the other hand our results suggest that eua prices are only weakly connected to indicators about the future economic development as well as the current economic activity

real flexibility and financial structure an empirical analysis i examine the empirical relation between real flexibility and financial structure i test whether real flexibility increases debt capacity by lowering default risk and making assets more marketable or decreases debt capacity by facilitating risk shifting and asset substitution i measure real flexibility as the sensitivity of marginal production and investment decisions to variations in the economic environment i find that financial leverage is negatively related to production flexibility but positively related to investment flexibility this split in results suggests that although asset substitution facilitated by investment flexibility can be prevented contractually risk shifting facilitated by production flexibility is intractable copyright 2003 oxford university press

an international comparison of capital structure and debt maturity choices this study examines how the institutional environment influences capital structure and debt maturity choices of firms in 39 developed and developing countries we find that a country s legal and tax system corruption and the preferences of capital suppliers explain a significant portion of the variation in leverage and debt maturity ratios specifically firms in more corrupt countries and those with weaker laws tend to use more debt especially short term debt explicit bankruptcy codes and deposit insurance are associated with higher leverage and more long term debt more debt is used in countries where there is a greater tax gain from leverage

debt and the marginal tax rate abstract do taxes affect corporate debt policy this paper tests whether the incremental use of debt is positively related to simulated firm specific marginal tax rates that account for net operating losses investment tax credits and the alternative minimum tax the simulated marginal tax rates exhibit substantial variation due to the dynamics of the tax code tax regime shifts business cycle effects and the progressive nature of the statutory tax schedule using annual data from more than 10 000 firms for the years 1980 1992 i provide evidence which indicates that high tax rate firms issue more debt than their low tax rate counterparts

on the debt capacity of growth options we relate the value of growth options in the firm s investment opportunity set to the level of debt in the firm s capital structure underinestment costs of debt increase and free cash flow benefits fall with additional growth options thus if debt capacity is defined as the amount of debt the firm optimally adds for an incremental project then the debt capacity of growth options is negative this result implies that book leverage should fall with the addition of growth options our tests using a large sample of industrial firms confirm this prediction

capital structure and interaction among firms in output markets theory and evidence i develop a simple model that examines the relations between the extent of competitive interaction among firms in output markets their capital structures and the aggressiveness of their operating strategies a firm s optimal leverage is related to the degree to which its operating strategy affects its rivals value functions and resulting optimal output market choices this relation is positive regardless of whether the competition in output markets is in strategic substitutes or in strategic complements i test the model s prediction using two proxies for the extent of competitive interaction among firms the empirical evidence provides support for the model

price drivers and structural breaks in european carbon prices 2005 2007 this article aims at characterizing the daily price fundamentals of european union allowances euas traded since 2005 as part of the emissions trading scheme ets the presence of two structural changes on april 2006 following the disclosure of 2005 verified emissions and on october 2006 following the european commission announcement of stricter phase ii allocation allows to isolate distinct fundamentals evolving overtime the results extend previous literature by showing that eua spot prices react not only to energy prices with forecast errors but also to unanticipated temperatures changes during colder events besides the sub period decomposition of the pilot phase gives a better grasp of institutional and market events that drive allowance price changes

modeling co2 emission allowance prices and derivatives evidence from the european trading scheme this paper studies the three main markets for emission allowances within the european union emissions trading scheme eu ets powernext nord pool and european climate exchange ecx the analysis suggests that the prohibition of banking of emission allowances between distinct phases of the eu ets has significant implications in terms of futures pricing motivated by these findings we develop an empirically and theoretically valid framework for the pricing and hedging of intra phase and inter phase futures and options on futures respectively

a measure of competition based on 10 k filings in this paper we develop a measure of competition based on management s disclosures in their 10 k filing and find that firms rates of diminishing marginal returns on new and existing investment vary significantly with our measure we show that these firm level disclosures are related to existing industry level measures of disclosure e g herfindahl index but capture something distinctly new in particular we show that the measure has both across industry variation and within industry variation and each is related to the firm s future rates of diminishing marginal returns as such our measure is a useful complement to existing measures of competition we present a battery of specification tests designed to explore the boundaries of our measure and how it varies with the definition of industry and the presence of other measures of competition

multiple bubbles in the european union emission trading scheme abstract the european union emission trading scheme eu ets is the first large scale co 2 emission trading system in the world carbon allowances are financial assets potentially vulnerable to the behavior of traders and investors in fact the carbon price has been quite volatile since the inception of the market and it has recently hit very low values however to date no work exists to evaluate whether volatility and price spikes are due to episodes of speculation and price bubbles our paper fills this gap we use the recent approaches developed by phillips and yu 2010 phillips et al 2011 and phillips et al 2015a 2015b who propose a recursive right sided unit root approaches to detect and date stamp mildly explosive behaviors and carbon market exuberance we complement this methodology by using the wild bootstrap procedure by goncalves and kilian 2004 to control for the heteroschedasticity of carbon price data analyzing the eu ets front month contract price from 2005 to 2014 we find different episodes of price bubbles these episodes are not explained by similar behavior of the fundamentals but seem related to energy and environmental policy announcements our results can provide insightful policy implications in the context of the actual carbon market reform as well as the implementation of stricter financial regulations rules to co 2 trading

consumption co integration and varying coefficients the australian evidence an aggregate consumption function incorporating random coefficient approach is estimated to investigate the changing pattern of consumer response in austrialia using quarterly data from 1959 iv to 1990 iv the methdology applied is that of hidreth and houck 1968 singh et al 1976 and hoque 1991 the largenge multiplier test as suggested by breush and pagan 1979 supports the hypothesis of randomness in the response coefficients our study indicates strong dependence on the first difference of income and that consumers respond quite slowly to short run fluctuations this is because consumption and income have been found to be integrated of order one and co integrated thus as error correction model has been estimated following engle and granger 1987

emission abatement untangling the impacts of the eu ets and the economic crisis abstract in this study we use historical emission data from installations under the european union emissions trading system eu ets to evaluate the impact of this policy on greenhouse gas emissions during the first two trading phases 2005 2012 as such the analysis seeks to disentangle two causes of emission abatement that attributable to the eu ets and that attributable to the economic crisis that hit the eu in 2008 09 to do so we use a dynamic panel data approach our results suggest that by far the biggest share of abatement was attributable to the effects of the economic crisis this finding has serious implications for future policy adjustments affecting core elements of the eu ets including the distribution of eu emission allowances

the degree of spillovers and the number of rivals for maximum effective r d abstract the amount of cost reduction or effective r d that results in a symmetric sequential nash equilibrium with quadratic payoffs and differentiated goods is shown to increase with spillovers in oligopolies with a few rivals and to achieve a maximum for spillovers that are not perfect in industries with many firms similar tendencies apply for consumer surplus profits and static welfare more rivals typically lead to reduced investments output and profitability while consumer surplus and welfare increase or at least do not decrease limited entry in markets with a few rivals may enhance innovative investments profitability and consumer surplus if only product differentiation and spillovers are sufficiently high and r d costs sufficiently low too many rivals will then again lead to reductions and a decrease in static welfare

the role of supplementary statements with management earnings forecasts we investigate managers decisions to supplement their firms management earnings forecasts we classify these supplementary disclosures as qualitative soft talk disclosures or verifiable forward looking statements we find that managers provide soft talk disclosures with similar frequency for good and bad news forecasts but are more likely to supplement good news forecasts with verifiable forward looking statements we examine the market response to these forecasts and find that bad news earnings forecasts are always informative but that good news forecasts are informative only when supplemented by verifiable forward looking statements supporting our argument that these statements bolster the credibility of good news forecasts

opec announcements and their effects on crude oil prices we investigate evidence on the effects of opec announcements on world oil prices by examining announcements from both official conferences and ministerial meetings on major international crudes including the key benchmarks and several other heavy and light grades with data from 1982 to 2008 we use event study methodology and find differentiation in the magnitude and significance of market responses to opec quota decisions under different price bands we also find some weak evidence of differentiation between light and heavy crude grades

debt agency costs and industry equilibrium we show that risk characteristics of projects cash flows are endogenously determined by the investment decisions of all firms in an industry as a result in reasonable settings financial structures which create incentives to expropriate debtholders by increasing risk are shown not to reduce value in an industry equilibrium without taxes capital structure is irrelevant for individual firms despite its effect on the equityholders incentives but the maximum total amount of debt in the industry is determinate allowing for a corporate tax advantage of debt capital structure becomes relevant but firms are indifferent between distinct alternative debt levels the effect of firms financial structures on subsequent investment and output decisions has recently received considerable attention in the finance literature the central insight that equityholders control the firm s investment and production decisions and in general do not maximize the value of a levered firm has been applied to the analysis of risk shifting underinvestment and firms abilities to enter into optimal contracts with their customers existing models of firms financial structures and their effect on investment decisions are generally based on a single firm framework and do not take into account the relationship between project cash flows and the investment decisions of all firms in the industry 2 in this paper we allow the distribution of investment projects within an industry to adjust and show that this generates new insights and reverses several key results of single firm agency cost models the new predictions conform with well documented

trade secrets law and corporate disclosure causal evidence on the proprietary cost hypothesis this study exploits the staggered adoption of the inevitable disclosure doctrine idd by u s state courts as an exogenous shock that generates variations in the proprietary costs of disclosure we find that firms respond to idd adoption by reducing the level of disclosure regarding their customers identities supporting the proprietary cost hypothesis our results are stronger for firms in industries with a higher degree of entry threats for firms in more volatile industries and for firms with a lower degree of external financing dependence overall this study represents one of the first efforts in identifying the causal effect of proprietary costs of disclosure on the supply of disclosure this article is protected by copyright all rights reserved

managerial incentives and product market competition are imperfectly competitive leibenstein 1966 claims that there may be a substantial amount of x inefficiency where x inefficiency measures the degree to which actual profits depart from the maximum of profits that could be obtained if all operations in the firm were carried out at minimal costs he offers empirical evidence from case studies showing that the welfare loss due to organizational slack is of an order of magnitude bigger than the welfare loss due to monopolistic price distortions on imperfectly competitive markets these results support the common presumption that increasing competition reduces organizational and in particular managerial slack however this early literature does not offer a theoretical explanation for the link between competition and managerial incentives in particular it ignores the fact that managerial incentives can be affected by the design of an incentive scheme in this paper i derive the optimal incentive scheme for a manager as a function of the competitiveness of the environment in which his firm operates the basic impact of increased competition is that it reduces the profits of a firm this has two effects in the model first if a firm has high costs then the reduction of profits may be sufficient to render the firm unprofitable so the probability that it has to be liquidated goes up this unambiguously induces the manager of the firm to work harder for a cost reduction in order to avoid liquidation and to keep his job second the reduction in profits may affect

an econometric model of kuwait s non oil gdp a model covering the production part of the non oil gdp in kuwait is specified and estimated for the period 1972 93 the estimated model has passed the test of validation quite well therefore the model has been used to experiment with a number of possible scenarios to depict a future path of all the endogenous variables of the model the postulated scenarios are adopted from the various policy options of kuwait s ministry of planning the results have indicated that a quick reform policy will cause a substantial decline in non oil production and consumption a better policy option would be to choose a policy between minor and gradual reform

debt and communications technology diffusion retrospective evidence this study has evaluated the relationship between debt in the capital structure of firms and the dynamics of broadband and digital technology adoption in the united states based on a large dataset on local exchange carriers in the united states over a contemporary historical fourteen year period from 1988 to 2001 using treatment effects modeling the impact of debt in impacting the levels of firms broadband deployment has been found to be negative and significant the primary source of debt in the sector has been in the form of arm s length corporate bonds and the assumptions of the monitoring hypothesis associated with such debt that lenders in the face of information and collective actions problems might not be able to control managers and hence invest less in highly technology intensive situations are supported by the data additionally the data set has been split into separate sets for two periods one between 1988 and 1995 for the period before the telecommunications act of 1996 came into force and the other set between 1996 and 2001 and the results have stayed consistent a test of the coefficients between the two periods has shown that the negative impact of leverage on broadband deployment has become stronger after the introduction of competition in the sector and this has suggested that the change in the institutional logics between the two periods has been of material impact in influencing lenders perceptions

why leverage affects pricing we explain and provide evidence for effects of leverage on pricing our model identifies two effects that either counteract or reinforce each other depending on the debt maturity structure i firms set higher prices underinvest in market share if they have more debt and ii firms engage in dynamic risk shifting by setting lower higher prices if the current debt obligation will be higher lower in the next period than in the present period using a unique dataset of owner managed hotels in austrian ski resorts we provide empirical evidence of both effects

industry characteristics and financial risk contagion this article proposes a new measure of tail risk spillover the conditional coexceedance ccx defined as the number of joint occurrences of extreme negative returns in an industry conditional on an extreme negative return in the financial sector the empirical application provides evidence of significant volatility and tail risk spillovers from the financial sector to many real sectors in the u s economy from 2001 to 2011 these spillovers increase in crisis periods the ccx in a given sector is positively related to its amount of debt financing and negatively related to its valuation and investment therefore real economy sectors which require relatively high debt financing and whose value and investment activity are relatively lower are prime candidates for stock price volatility and depreciation in the wake of a financial sector crisis evidence also suggests that the higher the industry s degree of competition the stronger the tail risk spillover from the financial sector

risks and financing decisions in the energy sector an empirical investigation using firm level data using a sample of 102 uk energy firms over the period 1981 2009 this paper empirically examines the effects of uncertainty on firms leverage decisions the results indicate that both firms specific and macroeconomic uncertainty have negative sizeable and statistically significant impacts on the uk energy sector firms target leverage the results also indicate that the profitability of energy firms plays an important role in uncertainty leverage relationship by changing the total effect of uncertainty on leverage while more profitable firms appear to reduce their leverage by a relatively large amount in response to increased macroeconomic uncertainty they are less likely to be affected by firm specific uncertainty these results suggest that stability in macroeconomic conditions and business activity is important to the stability of the capital structure of firms in the energy sector which would in turn be conducive to stability in their investments and production

do industry level analyses improve forecasts of financial performance prior research documents mean reversion in firm profitability and growth under the implicit assumption that profitability and growth of all firms revert to a common benchmark at the same rate however a large body of academic research suggests that there are systematic interindustry differences e g industry barriers to entry that differentially affect firm performance based on industry membership we evaluate the relative forecast accuracy of mean reverting models at the industry and economywide levels and find that industry specific models are generally more accurate in predicting firm growth but not profitability

the effect of taxes and depreciation on corporate investment and financial leverage this paper provides an analysis of the effect of corporate and personal taxes on the firm s optimal investment and financing decisions under uncertainty it extends the deangelo aad masulis capital structure model by endogenizing the firm s investment decision the authors results indicate that when investment is allowed to adjust optimally the existing predictions about the relationship between investment related and debt related tax shields must be modified in particular the authors show that increases in investment related tax shields due to changes in the corporate tax code are not necessarily associated with reductions in leverage at the individual firm level in cross sectional analysis firms with higher investment related tax shields normalized by expected earnings need not have lower debt related tax shields normalized by expected earnings unless all firms utilize the same production technology differences in production technologies across firms may thus explain why the empirical results of recent cross sectional studies have not conformed to the predictions of deangelo and masulis

the limitations of industry concentration measures constructed with compustat data implications for finance research industry concentration measures calculated with compustat data which cover only the public firms in an industry are poor proxies for actual industry concentration these measures have correlations of only 13 with the corresponding u s census measures which are based on all public and private firms in an industry also only when u s census measures are used is there evidence consistent with theoretical predictions that moreconcentrated industries which should be more oligopolistic are populated by larger and fewer firms with higher price cost margins further the significant relations of compustatbased industry concentration measures with the dependent variables of several important prior studies are not obtained when u s census measures are used one of the reasons for this occurrence is that compustat based measures proxy for industry decline overall our results indicate that product markets research that uses compustat based industry concentration measures may lead to incorrect conclusions jel g10 g30 l10 a growing number of studies that consider the effects of product markets on financial economics related phenomena use industry concentration measures calculated with compustat data which cover only the public firms in an industry these studies examine issues related to asset pricing hou and robinson 2006 informed trading tookes 2008 idiosyncratic stock return volatility gaspar and massa 2006 mergers and acquisitions song and walkling 2000 fee and thomas 2004 shahrur 2005 corporate governance defond and park 1999 engel hayes andwang2003 rennie2006 karuna2007 capitalstructure lang and stulz 1992 kaleand shahrur 2007 corporate disclosurepolicy

what will china s carbon emission trading market affect with only electricity sector involvement a cge based study abstract on december 29 2017 china s carbon trading scheme ets was officially launched and it may be the largest emission trading platform in the world this paper establishes 5 counter measured scenarios based on the recently launched china s national ets market and constructs a dynamic recursive computable general equilibrium model to study the impact of national ets on the economy energy and environment we find that the national ets will have a negative impact on gdp by 0 19 1 44 the national ets can significantly increase the price of electricity however the increase in the prices of other commodities will be much lower than that of electricity as long as the mechanism of the ets market remains unchanged emission reduction per year will increase linearly economic output and co2 emission are sensitive to annual decline factor adf this paper argues that china s national ets market is an effective tool to reduce co2 emission and we suggest that adf could be 0 5 when allocating carbon allowance for the electricity sector this could balance economic output and co2 reduction also it is easy to achieve the goal of double control total amount and intensity in china

product market competition and credit risk abstract this study theoretically and empirically investigates effects of product market competition on credit risk we first develop a real options based structural model in a homogeneous oligopoly and show that credit spreads are positively related to the number of firms in an industry the disparity of firm size in an industry is relevant to both product market competition and credit risk and we therefore extend the model to an asymmetric duopoly case in particular we demonstrate that credit spreads of relatively small large firms within an industry are positively negatively related to herfindahl hirschman index and the relative firm size in an industry is an important determinant of credit risk the models implications are empirically scrutinized by a reduced form hazard model and generally supported by performing out of sample analyses the results demonstrate that firm size together with the interaction terms between intra industry firm size dummies and competition intensity can effectively predict default

how china s current carbon trading policy affects carbon price an investigation of the shanghai emission trading scheme pilot abstract to better establish a unified carbon market in china this study evaluates the effect of current carbon trading policy and further investigates the relationship between such policy that is published during the second phase of shanghai environment and energy exchange seee and shanghai emission allowance shea price we aim to analyze whether these policies can improve the operation efficiency of current carbon market by the mean reversion test cox ingersoll ross cir model and event study method we first analyze the potential price discovery function of shea products thereby describing the transmission channel of current policy to shea price then we examine the effect of carbon policies published in different periods on their corresponding shea price by the auto correlation test and cir simulation we find that 3 4 of all auto correlation values are less than 0 after apr 2017 and the minimum cumulative error is 31 3792 under the supply and demand channel these findings imply that shea price has the discovery function at the middle and end of trading period and the current policy affects shea price through its effect on the fundamentals of supply and demand further more than 60 of all r values r value that reflects the response of price to policy are less than 1 which implies that the published policy will improves future shea price accordingly we argue that seee belongs to a policy oriented market and the change of carbon price is closely related to emission allocation policies in this case china s government should further push forward the smooth operation of current carbon market by the aid of incentive policy in the coming period

do rivals enhance your credit conditions abstract in a model where firms rely on bank financing to build capacity put up specialized productive assets as collateral and then compete a la cournot we introduce a probability of default we investigate how the number of competitors affects the equilibrium amount of bank credit and derive conditions under which an inverted u shaped relationship occurs on the one hand more competitors enhance the resale value of collateralized productive assets on the other hand more competitors shrink firms profits and the resulting income that can be pledged to banks we then extend the analysis to firms outside the cournot industry that are willing to buy productive assets in liquidation and show that the equilibrium bank credit becomes monotonically decreasing in the number of competitors

investment efficiency and product market competition does more competition lead to more information production and greater investment efficiency this question is largely unexplored in the finance literature this article provides both a model and a series of extensive empirical tests the model features a 2 stage bayesian game in differentiated products market competition we find that competition causes firms to acquire less information and investments to become more inefficient relative to a first best case with the same market structure empirically the panel regression analysis provides strong support for the theory and shows that investment is more efficient in concentrated industries

labor protection and leverage this paper exploits inter temporal variations in employment protection across countries and finds that rigidities in labor markets are an important determinant of firms capital structure decisions over the 1985 2007 period we find that reforms increasing employment protection are associated with a 187 basis point reduction in leverage we interpret this finding to suggest that employment protection increases operating leverage crowding out financial leverage this result is robust across measures of employment protection and leverage and does not appear to be due to pre treatment differences between treated and control firms omitted variables unobserved changes in regional economic conditions and reverse causality heterogeneous treatment effects are consistent with our economic intuition we find that the negative effect is more pronounced in firms that are subject to frequent hiring and firing

pricing exit and location decisions of firms evidence on the role of debt and operating efficiency abstract we compare pricing and exit decisions of discounters across the business cycle cities containing high debt and or low efficiency firms display higher prices during non recession years during recessions prices increase in cities with less efficient incumbents but decrease in cities with a mix of high and low debt firms high debt firms are more likely to exit cities with lower prices and high debt exiting firms are more likely to be efficient apparently low debt firms strategically lower prices during recessions to force exit of efficient financially constrained rivals weaker competitors face another cost new entrants locate closer

a test of the purchasing power parity hypothesis the purchasing power parity ppp hypothesis is examined in the case of less developed countries although the issue has been debated extensively in the context of the developed countries there has hardly been any study using the experience of the less developed countries quarterly data from four countries is used for the period 1961 1 1990 4 and hardly any evidence is found of the hypothesis a special test namely a cointegration test designed for the hypothesis has been implemented

investment and competition this paper examines how industry structure affects corporate investment patterns real options theory shows that deferring irreversible investment in the face of uncertainty is valuable theory also shows that the value of waiting to invest falls if investment opportunities are contestable consistent with these theories we find that firms in monopolistic industries exhibit lower investment q sensitivity and are slower to invest than firms in competitive industries however we find that investment q sensitivity and investment speed are highest in oligopolistic industries suggesting that the value of investing strategically can outweigh the value of waiting indeed oligopolistic industries experience less entry and more exit than other industries

improving the liquidity of china s carbon market insight from the effect of carbon price transmission under the policy release abstract through a series of policies release the trading system of china s carbon market is being improved but its current liquidity is still low to improve market liquidity this paper analyzes the relation between the release of policy related to carbon market operations and the volatility of carbon price thus arranging an optimal adjustment scheme for government s policy making through the jump test and logit regression we investigate historical policies and prices of 7 emission trading scheme pilots in china to explore the impact of policy release on carbon price and then quantify the effectiveness of these policies empirical results indicate that in the short term new policies can rapidly lead to a large volatility of carbon price but it can also reduce the abnormal volatility with the spread of price information further the demand stimulus policies promote a positive volatility of carbon price in the long term the insufficient demands for carbon emissions quota raise the disappearance of market dividends caused by the policy release and lead to an excessive call back of carbon price thus increasing mid and long term risks in carbon markets additionally china s macro environment policy can stabilize carbon price and thus an effective tool for improving the liquidity of carbon markets is developing demand stimulus policies

how does industry affect firm financial structure we examine the importance of industry to firm level financial and real decisions we find that in addition to standard industry fixed effects financial structure also depends on a firm s position within its industry in competitive industries a firm s financial leverage depends on its natural hedge its proximity to the median industry capital labor ratio the actions of other firms in the industry and its status as entrant incumbent or exiting firm financial leverage is higher and less dispersed in concentrated industries where strategic debt interactions are also stronger but a firm s natural hedge is not significant our results show that financial structure technology and risk are jointly determined within industries these findings are consistent with recent industry equilibrium models of financial structure copyright 2005 oxford university press