towards a vanishing middle competition in the world garment industry abstract the international garment industry falls broadly into two segments one which may be referred to as the fashion segment is governed by competition based on new product introduction and quality improvements the other segment comprising of mass produced garments is governed by price competition while there is some evidence that the fashion sector is growing in importance our concern in this paper will be the price competitive sector which has been and continues to be predominantly the main arena in which newly industrializing and developing countries participate

rational heuristics expectations and behaviors in evolving economies with heterogeneous interacting agents we analyze the individual and macroeconomic impacts of heterogeneous expectations and action rules within an agent based model populated by heterogeneous interacting firms agents have to cope with a complex evolving economy characterized by deep uncertainty resulting from technical change imperfect information coordination hurdles and structural breaks in these circumstances we find that neither individual nor macroeconomic dynamics improve when agents replace myopic expectations with less naive learning rules our results suggest that fast and frugal robust heuristics may not be a second best option but rather rational responses in complex and changing macroeconomic environments jel c63 d8 e32 e6 o4

bad times good credit banks limited knowledge about borrowers creditworthiness constitutes an important friction in credit markets is this friction deeper in recessions thereby contributing to cyclical swings in credit or is the friction reduced as bad times reveal information about firm quality we test these alternative hypotheses using internal ratings data from a large swedish cross border bank and credit scores from a credit bureau the ability to classify corporate borrowers by credit quality is greater during bad times and worse during good times soft and hard information measures both display countercyclical patterns our results suggest that information frictions in corporate credit markets are intrinsically countercyclical and not due to cyclical variation in monitoring effort the presence of countercyclical information frictions provides a rationale for countercyclical provisions or capital in banks to smooth credit cycles

an updating country study thailand s needs and prospects in the 1990s abstract as one of the fastest growing economies of the latter half of the 1980s thailand is rapidly emerging as one of the new nics in seeking to examine the major issues facing thailand in the 1990s our paper focuses on two major themes first we address the trade and industrial policy issue while our conclusions favor a fairly orthodox open trade pattern of industrialization favoring functional rather than selective intervention we question the wisdom of trusting thai growth to the single engine of exports the second theme of the paper underlines the need for reasons of equality as well as of expediency for devoting more attention and resources to rural development

intercorporate shareholdings and corporate control in the japanese firm abstract the purpose of this paper is to specify a formal model that rationalizes the intercorporate shareholdings observed in the japanese equity market as a mechanism for mutual commitment and risk sharing that creates greater possibilities to resolve managerial myopic problems caused by the threat of external takeovers we show that under certain conditions all agents including the existing shareholders of the firm are strictly better off when participating in an implicit contract associated with intercorporate shareholdings the results also suggest that intercorporate ownership raises the stock prices of the member firms

credit market frictions and capital structure dynamics we study the implications of credit market frictions for the dynamics of corporate capital structure and the risk of default of corporations to do so we develop a dynamic capital structure model in which firms face uncertainty regarding their ability to raise funds in credit markets and have to search for investors when seeking to adjust their capital structure we provide a general analysis of shareholders dynamic financing and default decisions show when markov perfect equilibria in financing and default barrier strategies exist and when uniqueness can be achieved we then use the model to generate a number of novel testable implications relating credit market frictions to target leverage the pace and size of capital structure changes creditor turnover and the likelihood of default c 2014 elsevier inc all rights reserved

monetary policy and regional availability of debt financing the relative availability of bond and bank financing should affect the firm s external financing and investment decisions we define a measure that proxies for the regional borrowing inflexibility to substitute between bank and bond financing debt inflexibility debt inflexibility tilts the firm s financial structure towards equity and reduces investment the impact is stronger during the period of tight monetary policy particularly for smaller firms and firms without banking relationships debt inflexibility increases the sensitivity of cash holdings to cash flows reduces the likelihood of dividend payment and makes the firm more likely to pay equity in mergers and acquisitions

sovereign stress and smes access to finance evidence from the ecb s safe survey abstract we study the effect of sovereign stress on smes capital structure using restricted access data from the european central bank we find that during the sovereign debt crisis and controlling for borrowers quality firms in stressed countries became more likely to be denied credit to be credit rationed and to face higher loan rates less creditworthy firms were not more likely to become credit constrained suggesting no flight to quality in lending we also find that in order to make up for the decline in bank credit firms in stressed countries began relying considerably more on retained earnings and government subsidies

successful adjustment in indian industry the case of ludhiana s woolen knitwear cluster abstract this paper examines the case of adjustment in a labor intensive export industry woolen knitwear to understand how traditional sectors in developing regions cope with external crises and rise above them india s woolen knitwear industry concentrated in ludhiana recently survived two crises the collapse of its largest export market the former soviet union and the simultaneous opening up of the domestic market to freer trade after an unusually short downturn the cluster not only recovered rapidly but is increasingly diversifying into more demanding and competitive external markets four factors are key to explaining this surprisingly resilient recovery first the best performing firms had a strong and simultaneous presence in dynamic segments of the domestic market alongside exports this generated key organizational learning and built managerial and production capacities that helped firms adapt quickly to more demanding markets later second an important feature of the learning relationship between first time exporters and their foreign buyers was the small scale nature of contracts and a customization of fit between the producer and the feedback giving intermediary third better performing firms paid equal if not greater attention to making organizational changes in their work practices than to the purchase of new equipment fourth the embedded nature of production networks and the government s past programs to assist local firms have indirectly helped create a dynamic middle tier of locally rooted exporters who appear to be leading the cluster s transformation and modernization

small and medium sized enterprise financing and securitization firm level evidence from the euro area this paper analyzes the impact of securitization on access to finance for small and medium sized enterprises smes in the euro area using firm level survey data on sme financing conditions we show that an increase in securitization issuance reduces the probability of smes facing credit constraints and decreases the costs of bank financing for nonconstrained firms our results reveal that in addition to the volume of securitization its type and quality matter for credit extension to smes the paper thus provides empirical support for recent initiatives to revive securitization in europe and for effective monetary policy transmission in the euro area jel d22 e44 e51 e58 g21

why european banks are less profitable than u s banks a decomposition approach abstract the low profitability of european banks relative to their u s counterparts has recently raised concerns among policy makers and researchers this paper attempts to shed light on this issue by using the o donnell 2012 decomposition approach this approach enables us to decompose the relative profitability of european banks into an output input price index and a total factor productivity index with the former further decomposed into two price indexes and the latter further into four productivity and efficiency measures our results show that european banks profitability was not only weak but also deteriorated over time our further analysis shows that the decline in the output input price index was due to declines in relative lending rate and relative return on securities and an increase in funding costs while the decline in the productivity index was driven by declines in technical efficiency scale efficiency and residual mix efficiency

corporate debt structure and economic recoveries abstract this paper analyzes the business cycle behavior of the corporate debt structure and its interaction with economic recovery the debt structure is measured as the share of bonds in the total credit to non financial corporations for a quarterly panel of countries over the period 1989 2013 we first show that the substitution of loans for bonds in recoveries is a regular property of business cycles secondly we provide evidence that economies with high bond share and important bond loan substitution recover from the recessions faster this identified link between corporate debt structure and business cycles is robust to the inclusion of traditional factors which shape recessions and recovery such as the size and the quality of financial markets the occurrence of bank crisis the dynamics of credit and the distribution of firm size

an empirical analysis of the determinants of corporate debt ownership structure i examine the relation between corporate debt ownership structure and several firm characteristics suggested by recent theory the results demonstrate the importance of monitoring and information costs the likelihood and costs of inefficient liquidation and borrowers incentives in affecting firms debt source preferences several theoretical predictions receive support while others do not the results also suggest important differences between bank and private non bank debt which contrasts with most theoretical models additionally i find evidence of systematic use of bank debt by firms with access to public debt suggesting the benefits attributed to bank debt in theoretical models remain important after firms gain access to public debt markets although different lenders appear to have different maturity preferences the results also suggest debt maturity and debt ownership decisions may be separable

can equity volatility explain the global loan pricing puzzle we examine whether equity volatility can explain the difference in syndicated corporate loan spreads paid by u s and european borrowers first documented by carey and nini 2007 we argue that ols estimates of the association between equity volatility and loan spreads are biased and inconsistent we suggest instrumental variables that potentially identify consistent estimates our instrumental variable results indicate that there is no statistically significant difference in loan spreads paid by u s and european borrowers and that ols estimates of the association between idiosyncratic equity volatility and corporate loan spreads are biased downward by about a factor of 5

flexible specialization and small size the case of caribbean tourism abstract if export industrialization was fashionable in the 1960s and 1970s today flexible specialization is definitely in appealing to the very heart of the developing world traditional small scale and craft production flexible specialization has become the new passport to development this article cautions that the prescription of small scale flexible specialization piore and sable 1984 leads to a very dangerous kind of optimism in the developing world the danger lies in equating flexibility with small size this is because small size may not be necessary and certainly is not a sufficient condition for flexible specialization the keys to flexible specialization lie elsewhere in information technology applications networks synergies systems gains scope economies production and organizational flexibility not in small size this argument is developed with reference to the caribbean tourist industry a comparative analysis of jamaica s superclub hotel chain and italy s benetton textile company is undertaken this is done with a view to determining the factors in the success of their flexible specialization strategies implications for policy are drawn out

financial frictions and employment during the great depression abstract we provide new evidence that a disruption in credit supply played a quantitatively significant role in the unprecedented contraction of employment during the great depression using a novel hand collected dataset of large industrial firms our identification strategy exploits preexisting variation in the need to raise external funds at a time when public bond markets essentially froze local bank failures inhibited firms ability to substitute public debt for private debt which exacerbated financial constraints we estimate a large and negative causal effect of financing frictions on firm employment we find that the lack of access to credit likely accounted for a substantial fraction of the aggregate decline in employment of large firms between 1928 and 1933

got rejected real effects of not getting a loan using a lender cutoff rule that generates plausibly exogenous variation in credit supply i investigate a new channel through which funding shocks are transmitted to the real economy based on a sample of more than 15 000 loan applications from small and medium sized enterprises i find that precautionary savings motives can aggravate real effects low liquidity firms whose loan applications were rejected increase cash holdings and cut noncash assets in excess of the requested loan amount these results point to the amplifying effect of precautionary savings motives in the transmission of credit supply shocks received december 11 2016 editorial decision february 22 2018 by editor philip strahan

cyclicality of credit supply firm level evidence abstract we quantify fluctuations in bank loan supply in the time series by studying firms substitution between loans and bonds using firm level data any firm that raises new debt must have a positive demand for external funds conditional on the issuance of new debt we interpret firms switching from loans to bonds as a contraction in bank credit supply we find strong evidence of this substitution at times that are characterized by tight lending standards depressed aggregate lending poor bank performance and tight monetary policy we show that this substitution behavior has strong predictive power for bank borrowing and investments by small firms

did financial frictions stifle r d investment in europe during the great recession abstract we investigate the role of financial frictions in r d spending in a large sample of european firms our identification strategy exploits the contraction in credit supply that followed the 2008 09 global financial crisis and 2012 euro area sovereign debt crisis together with differences in financial frictions across firms and industries to identify a causal effect of financial constraints on investment in innovation we show that firms that are more likely financially constrained in industries more dependent on external finance invest disproportionally less in r d during periods of tight credit supply smaller private firms with weaker balance sheets also have a lower share of r d in total investment suggesting r d drops more than total investment during these crisis episodes these results are robust to different proxies of financial constraints and fixed effects identification strategies

bank capital and lending relationships this paper investigates the mechanisms behind the matching of banks and firms in the loan market and the implications of this matching for lending relationships bank capital and the provision of credit i find that bank dependent firms borrow from well capitalized banks while firms with access to the bond market borrow from banks with less capital this matching of bank dependent firms with stable banks smooths cyclicality in aggregate credit provision and mitigates the effects of bank shocks on the real economy

do smes benefit from unconventional monetary policy and how microevidence from the eurozone we study the impact of the announcement of the european central bank s ecb s outright monetary transactions program on small firms access to finance using a matched firm bank data set from eight eurozone countries we find that following the announcement credit access improved relatively more for firms borrowing from banks with high balance sheet exposures to impaired sovereign debt with such firms less likely to be refused a loan or to be price rationed loan terms also improved as manifested by lengthening of loan maturities unconventional monetary policy has a positive impact on firms investment and profitability while its effect on firm innovation is weaker

optimal debt structure and the number of creditors within an optimal contracting framework we analyze the optimal number of creditors a company borrows from we also analyze the optimal allocation of security interests among creditors and intercreditor voting rules that govern renegotiation of debt contracts the key to our analysis is the idea that these aspects of the debt structure affect the outcome of debt renegotiation following a default debt structures that lead to inefficient renegotiation are beneficial in that they deter default but they are also costly if default is beyond a manager s control the optimal debt structure balances these effects we characterize how the optimal debt structure depends on firm characteristics such as its technology its credit rating and the market for its assets

bank bias in europe effects on systemic risk and growth europe s financial structure has become strongly bank based far more so than in other economies we document that an increase in the size of the banking system relative to equity and private bond markets is associated with more systemic risk and lower economic growth particularly during housing market crises we argue that these two phenomena arise owing to an amplification mechanism by which banks overextend and misallocate credit when asset prices rise and ration it when they drop the paper concludes by discussing policy solutions to europe s bank bias which include reducing regulatory favouritism towards banks while simultaneously supporting the development of securities markets

are banks really special new evidence from the fdic induced failure of healthy banks the fdic used cross guarantees in order to close 38 subsidiaries of first republicbank corporation in 1988 and 18 subsidiaries of first city bankcorporation in 1992 when lead banks from each of these texas based bank holding companies were declared insolvent i use this plausibly exogenous failure of otherwise healthy subsidiary banks as a natural experiment in order to study the impact of bank failure on local area real economic activity the resolution of these institutions was associated with a significant decline in failed bank lending that led to a permanent reduction in real county income of about 3 percent jel codes e5 g18 g33 keywords bank failures cross guarantee uniqueness of banks

clothing chips and competitive advantage the impact of microelectronics on trade and production in the garment industry abstract this paper presents the results of a research project which examined the impact of microelectronics on the nature of production and the patterns of international trade in the clothing industry empirical evidence is given on the effects of microelectronics related innovations currently being used by clothing manufacturers in the developed countries radical innovations have been introduced in the pre assembly stage which have revolutionized this phase of production in contrast the introduction of microelectronics into assembly technology is still limited as a result the clothing industry remains reliant on labor intensive techniques that place it at a competitive disadvantage compared to low wage developing countries hence the determinants of international competitive advantage in the industry remain largely unaltered however due to increasing concentration and major new r d efforts in the public and private sector it is argued that the preconditions are being laid for a fundamental structural and technological transformation of the industry in the north which could have very important implications for the competitive position of third world clothing exporters emphasis is also placed upon the continued restraining effects of protectionist barriers imposed by the main importing nations and on the differential impact of this on the ability of newer entrants to achieve rapid and sustained export growth

seniority and monopsony in the academic labor market workers with high seniority usually have higher wages than workers with low seniority and the same total labor marke t experience in contrast the results of this paper indicate that higher seniority is associated with lower salaries for university professors the author documents this finding for national surveys a nd individual institutions and explains it as due to monopsonistic discrimination by employers copyright 1993 by american economic association

the source of fluctuations in money evidence from trade credit abstract this paper tests the relative importance of technology shocks and financial shocks as sources of fluctuations in money the model extends the theory of king and plosser 1984 by recognizing that both money and trade credit provide transactions services under certain conditions the co movements between money and trade credit can reveal the nature of the underlying shocks the empirical results strongly suggest that shocks to the financial system account for most of the fluctuations in money in the long run and at business cycle frequencies on the other hand technology shocks appear to be more important at seasonal frequencies

equity bonds and bank debt capital structure and financial market equilibrium under asymmetric information this paper proposes a model of financial markets and corporate finance with asymmetric information and no taxes where equity issues bank debt and bond financing coexist in equilibrium the relationship banking aspect of financial intermediation is emphasized firms turn to banks as a source of investment mainly because banks are good at helping them through times of financial distress this financial flexibility is costly since banks face costs of capital themselves which they attempt to minimize through securitization to avoid this intermediation cost firms may turn to bond or equity financing but bonds imply an inefficient liquidation cost and equity an informational dilution cost we show that in equilib rium the riskier firms prefer bank loans the safer ones tap the bond markets and the ones in between prefer to issue both equity and bonds this segmentation is broadly consistent with stylized facts

explaining and forecasting bank loans good times and crisis abstractthis article aims to develop a parsimonious model to explain and forecast bank loans to nonfinancial companies during calm periods as well as in situations of financial turmoil it focuses on the french context over a period including financial banking and sovereign debt crises theoretical views and intuitions led us to gauge the marginal informational content of a large set of leading indicators in var and vecm models and to investigate potential nonlinearity in credit dynamics in accordance with firms and banks balance sheet effects the growth rate of equity prices appears to be one of the most interesting leading indicator as well as a significant threshold variable for explaining regime switching however it appears difficult to accurately predict the right credit dynamics regimes a simple var model finally performs better

the macroeconomics of shadow banking we propose a dynamic macroeconomic model of nancial intermediation in an environment where households demand liquid assets in contrast to the literature intermediaries can issue equity without any friction in normal times intermediaries maximize liquidity creation by levering up the collateral value of their assets a process we call shadow banking a rise in uncertainty causes investors to demand liquidity in bad states intermediaries respond by simultaneously deleveraging and substituting toward safe liabilities shadow banking eectively shuts down prices fall and investment plummets the model generates amplication via endogenous collateral runs as well as ight to quality eects the model s macroeconomic eects are consistent with a slow economic recovery even when and especially when intermediary capital is high we analyze the impact of several policy interventions in the areas of unconventional monetary policy and regulatory reform

identifying the risk taking channel of monetary transmission and the connection to economic activity abstract i use loan level data from the syndicated loan market in the u s to investigate how monetary policy affects banks sensitivity to risk using loan level data and banks sensitivity to risk enables me to identify the risk taking channel and disentangle it from other monetary channels i show that banks change their behavior toward risk following changes in monetary policy where loose monetary policy reduces banks sensitivity to risk i then provide evidence for the significant contribution of risk taking shocks and changes in banks risk taking behavior to economic outcomes and business cycle fluctuations the paper s primary contribution is in providing new loan level evidence for the existence of the risk taking channel in the u s as well as a possible link between the risk taking channel and business cycle fluctuations

does the source of capital affect capital structure prior work on leverage implicitly assumes capital availability depends solely on firm characteristics however market frictions that make capital structure relevant may also be associated with a firm s source of capital examining this intuition we find firms that have access to the public bond markets as measured by having a debt rating have significantly more leverage although firms with a rating are fundamentally different these differences do not explain our findings even after controlling for firm characteristics that determine observed capital structure and instrumenting for the possible endogeneity of having a rating firms with access have 35 more debt copyright 2006 oxford university press

a discrete choice model for large heterogeneous panels with interactive fixed effects with an application to the determinants of corporate bond issuance a discrete choice model for large heterogeneous panels with interactive fixed effects with an application to the determinants of corporate bond issuan