bank incentives economic specialization and financial crises in emerging economies abstract we model the vulnerability of an economy to a financial crisis as arising from the interaction of the degree of economic specialization and bank debt financing the probability of a financial crisis is shown to increase in the degree of economic specialization bank debt financing has the beneficial effect of lowering the degree of economic specialization by increasing access to financing of investment opportunities that would not have been financed due to wealth constraints of entrepreneurs financial access effect however bank debt financing induces risk shifting incentives leverage effect the net effect on the probability of a financial crisis depends on which of these two effects dominates we show that commonly employed mechanisms in managing financial crises particularly bailouts induce an additional agency cost by distorting bank incentives to concentrate loans in specific sectors bank debt concentration effect we propose a tax based ex ante solution mechanism that simultaneously induces optimal investment and eliminates the bank debt concentration effect implementation issues and empirical policy implications are also discussed

an overview of hofstede inspired country level culture research in international business since 2006 kirkman lowe gibson s 2006 jibs article summarized and critiqued international business research inspired by the most cited book in the field hofstede s 1980 culture s consequences international differences in work related values hofstede 1980 2001 they identified a number of issues in this research and offered several recommendations for improving it in the future thus laying a strong foundation for hofstede related work since 2006 in this commentary we assess kirkman et al s 2006 impact on the field our review shows that their ideas have informed and inspired their own and other scholars work and have led to significant progress in the way in which hofstede s framework has been used in international business in the last decade here we specifically focus on the country level culture studies and assess how research has implemented kirkman et al s three main recommendations to explore cultural dimensions beyond those introduced by hofstede to distinguish between country effects and cultural effects and to show not only if culture matters but also how much it matters in addition to the overview we provide a comprehensive test of these recommendations showing how they can be put into research practice underscoring the theoretical and empirical relevance of the original 2006 article our commentary concludes with additional ideas on further strengthening hofstede inspired research at the country level of analysis

on the scope of the stockholder unanimity theorems if a firm is owned by several stockholders each of whom has different risk preferences then whose risk preferences determine whether the firm accepts or rejects a risky proposed change in its production plan it might appear that this is a political problem whose resolution is necessarily through political means such as proxy fights this appearance however is only partially accurate arrow 1964 ekern 1973 ekern and wilson 1974 leland 1973 1978 baron 1977 and others have developed a theory showing that if a sufficient variety of securities are traded on the stock market then conflict among stockholders does not occur the reason is that if an economy has enough different securities then in equilibrium each stockholder s preferences towards risk is aligned with every other stockholder s preferences consequently stockholders are unanimous in their evaluations of risky investment projects the purpose of this paper is to inquire if any reason exists why one should

stochastic growth with correlated production shocks this paper extends the stochastic growth model of brock and mirman j econ theory 4 1972 497 513 to allow the production shocks to be correlated over time the resultant optimal savings and consumption policies depend not only upon the current level of output but also upon the most recent realization of the random shock the properties of these policy functions are studied and it is shown that the markov process on output capital stock and consumption resulting from the application of these policies converges to a stationary distribution

term premia in a simple term structure model abstract the present paper is an extension of stiglitz s 1970 analysis we use variations of his original model in an attempt to relate his contribution to the more recent literature our main purpose is to determine the nature of the term premium implied by various forms of the utility maximization hypothesis our focus is primarily on what cox ingersoll and ross cir 1981 call the returns to maturity expectation hypothesis although we also investigate the local expectation hypothesis which is the central focus of the analysis in cir 1981 we study the conditions under which this hypothesis holds and when it does not hold we attempt to determine the direction of the resulting inequality we are able to obtain results for the case in which the demand for long bonds is positive and to compare these results to others obtained when long bond demand is zero the case studied in the recent literature

the state preference approach to general equilibrium in corporate finance abstract this paper attempts to implement the state preference approach in a multiperiod exchange economy the procedure is relevant for a further investigation of various important issues in corporate finance such as the results of modigliani and miller and the integration of the state preference and the mean variance approach to asset pricing

on the suboptimality of s 1 s lost sales inventory policies abstract this paper considers replenishment policies for the continuous review inventory model with poisson demand a fixed lead time on replenishment and lost sales during a stockout there is a time dependent stockholding cost and a cost per unit of sale lost but there is no or negligible cost associated with placing a replenishment order the standard policy is to specify a maximum stock level s and place a replenishment order whenever a demand occurs and is met this is commonly referred to as an s 1 s policy it is shown that there are other replenishment policies which give lower cost solutions in fact it is demonstrated that an s 1 s policy can never be optimal if s 2

debt and market incompleteness abstract this paper provides a capital structure equilibrium analysis in an environment characterized by market incompleteness and risky debt market incompleteness together with a comparative advantage for corporate borrowing leads to a miller 1977 type capital structure equilibrium wherein each firm within an industry faces an indeterminate debt level however at the aggregate industry level corporations act as financial intermediaries to generate cross sectional capital structure patterns across industries despite the fact that rents associated with financial intermediation services dissipate in equilibrium for any particular firm additional implications are drawn for observed cross sectional and time series regularities in capital structure

bond and stock returns in a simple exchange model this paper studies asset pricing in a general equilibrium representative agent exchange model the assumptions of isoelastic period utility and lognormal endowment allow the derivation of closed form solutions for asset returns without restricting the serial correlation of the log endowment risk premiums on stocks and real bonds are found to be simple functions of relative risk aversion the variance of the log endowment innovation and the weights in the moving average representation of the log endowment the paper analyzes the sign of term premiums the size of the equity premium and the effect of taste shocks on asset prices

an intertemporal general equilibrium model of asset prices this paper develops a continuous time general equilibrium model of a simple but complete economy and uses it to examine the behavior of asset prices in this model asset prices and their stochastic properties are determined endogenously one principal result is a partial differential equation which asset prices must satisfy the solution of this equation gives the equilibrium price of any asset in terms of the underlying real variables in the economy in this paper we develop a general equilibrium asset pricing model for use in applied research an important feature of the model is its integration of real and financial markets among other things the model endogenously determines the stochastic process followed by the equilibrium price of any financial asset and shows how this process depends on the underlying real variables the model is fully consistent with rational expectations and maximizing behavior on the part of all agents our framework is general enough to include many of the fundamental forces affecting asset markets yet it is tractable enough to be specialized easily to produce specific testable results furthermore the model can be extended in a number of straightforward ways consequently it is well suited to a wide variety of applications for example in a companion paper cox ingersoll and ross 7 we use the model to develop a theory of the term structure of interest rates many studies have been concerned with various aspects of asset pricing under uncertainty the most relevant to our work are the important papers on intertemporal asset pricing by merton 19 and lucas 16 working in a continuous time framework merton derives a relationship among the equilibrium expected rates of return on assets he shows that when investment opportunities are changing randomly over time this relationship will include effects which have no analogue in a static one period model lucas considers an economy with homogeneous individuals and a single consumption good which is produced by a number of processes the random output of these processes is exogenously determined and perishable assets are defined as claims to all or a part of the output of a process and the equilibrium determines the asset prices our theory draws on some elements of both of these papers like merton we formulate our model in continuous time and make full use of the analytical tractability that this affords the economic structure of our model is somewhat similar to that of lucas however we include both endogenous production and

cultural differences mne learning abilities and the effect of experience on subsidiary mortality in a dissimilar culture evidence from korean mnes in a departure from prior studies presuming a beneficial experience effect in foreign direct investment fdi the present paper examines the conditions under which fdi experience may actually harm subsequent subsidiaries we argue that multinational enterprises mnes may draw erroneous inferences and learn incorrectly from their early expansions when new to a dissimilar culture because their learning abilities are eroded by cultural differences we posit that the characteristics of an mne s international expansion including scope pace rhythm and entry mode moderate this negative experience effect by influencing the mne s learning ability in foreign cultures using a data set of fdis by south korean mnes between 1990 and 2006 we find a positive relationship between subsidiary mortality and experience when an mne has a low level of experience in a dissimilar culture this relationship is weaker if the mne s prior fdi has been dispersed across different cultures is stronger if it expanded internationally at a fast pace and becomes negative once the mne has accumulated a high level of experience in the host culture we conclude that when expanding into dissimilar cultures mnes must establish mechanisms to mitigate incorrect learning and reexamine the correctness of inferences drawn from past experience before applying them

creditor protection laws debt financing and corporate investment over the business cycle we examine how legal creditor rights are related to debt financing and corporate investment over the business cycle using firm level data from 40 countries we find that creditor rights are associated with greater debt financing and investment during economic downturns but creditor rights have a significantly smaller effect during expansions the beneficial effects of creditor rights during recessions are stronger for firms that are more likely to have severe shareholder bondholder agency problems we also find that during recessions relative to expansions strong creditor rights are associated with a smaller decline in net capital flows our findings are consistent with credit market frictions increasing during recessions and with stronger creditor rights decreasing the negative effects of these frictions overall the results suggest that better creditor protection laws help moderate the decline in debt financing and investment during recessions

conservatism and international ipo underpricing we study the impact of country level accounting conservatism on international ipo underpricing examining 13 285 ipos from 36 countries we find that ipos are underpriced less in countries in which existing public firms practice more accounting conservatism the link between conservatism and underpricing is robust to alternative measures of conservatism country mean regressions sample country exclusions and endogenous treatment models consistent with the hypothesis that conservatism reduces underpricing by mitigating the impact of information asymmetries we find that higher country level conservatism is associated with lower country level pin values and that the negative relation between conservatism and underpricing is strongest for ipos involving small firms in which information asymmetries are likely to be high lastly we find evidence that legal origin a factor linked to the practice of conservatism influences the relations between underpricing and conservatism

tranching in the syndicated loan market around the world loan tranching allows banks to manage risk and facilitate firm financing which may be essential for firms that cannot access investors from stock markets we analyze the determinants and benefits of loan tranching by pooling the tranches of individual loans to create the largest cross country sample of syndicated loans covering more than 150 000 loans from multinational and domestic firms we find that in addition to market deal and borrower characteristics legal and institutional differences impact loan tranching strong creditor protection and efficient debt collection increase the probability of tranching and reduce tranche spreads ultimately promoting firms access to debt we also find evidence that tranching facilitates the financing of multinational firms abroad due to the transfer of legal and cultural institutions to foreign subsidiaries overall our results suggest that tranching plays an important role in reducing a country s financial development gap and promotes firms access to debt

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

are current syndicated loan alliances related to past alliances abstract the odds of a current syndicate relationship between two lenders depend upon their previous alliances the odds are significantly higher lower and strongest for a current lead participant relationship with a continuation reversal of their previous roles to illustrate the odds are nearly four times higher when two lenders have allied in the previous 5 years the strength of lead participant syndicate relationships between two lenders with same ordered roles is most sensitive to the lead bank s reputation and informationally opaque participants tend to have stronger relationships with lead banks lenders exhibit home bias in their syndicate alliances since ongoing relationships are stronger with domestic counterparts

a retrospective on culture s consequences the 35 year journey abstract our 2006 journal of international business studies article a quarter century of culture s consequences a review of the empirical research incorporating hofstede s cultural values framework provided a comprehensive review of 180 empirical journal articles and edited volume chapters published between 1980 and june 2002 that incorporated hofstede s cross cultural values framework we examined empirical research that positioned culture as either a main or moderating effect the review attempted to make sense of the almost quarter century of research examining the impact of culture at the individual group organization and country levels in the present commentary we provide a a summary of the progress that has been made in the intervening decade and most importantly b a new set of recommendations for the next decade to guide those wishing to study the role of national culture in organizations

financial credibility ownership and financing constraints in private firms as shown in the international business literature the ability of controlling owners to extract private benefits is greater in countries with weaker legal institutions in these countries providing credible financial information could play an especially important role in reducing information asymmetry between private firms and external providers of finance for our sample of firms across 68 countries we find that firms with greater financial reporting credibility i e annual financial statements reviewed by an external auditor experience significantly lower perceived problems in gaining access to external finance further the impact of financial credibility in reducing financing constraints in the presence of a controlling owner is more pronounced in countries with weaker creditor rights given the predominance of private firms around the world their economic significance and the fact that an increasing number of private firms now operate in multinational environments with different institutional features we contribute to the literature on the role of financial information firm characteristics and country level institutions for an important and interesting group of firms

lost sales problems with stochastic lead times convexity results for base stock policies we consider a single location inventory system with periodic review and stochastic demand it places replenishment orders to raise the inventory position that is inventory on hand plus inventory in transit to exactly s at the beginning of every period the lead time associated with each of these orders is random however the lead time process is such that these orders do not cross demand that cannot be met with inventory available on hand is lost permanently we state and prove some sample path properties of lost sales inventory on hand at the end of a period and inventory position at the end of a period as functions of s the main result is the convexity of the expected discounted sum of holding and lost sales costs as a function of s this result justifies the use of common search procedures or linear programming methods to determine optimal base stock levels for inventory systems with lost sales and stochastic lead times it should be noted that the class of base stock policies is suboptimal for such systems and we are primarily interested in them because of their widespread use

financial institutions and markets across countries and over time the updated financial development and structure database this article introduces the updated and expanded version of the financial development and structure database the database includes indicators on the size efficiency and stability of banks nonbank financial institutions and equity and bond markets over 1960 2007 it also contains indicators of financial globalization

determinants of sovereign wealth fund investment in private equity vs public equity this paper examines the investments of 19 sovereign wealth funds swfs in 424 firms both public and private around the world from 1991 through 2010 the data indicate that swfs similar to other institutional investors are less likely to invest in private equity than in public equity internationally however the economic significance of this impact is surprisingly low unlike other institutional investors swfs are more likely to invest in private equity compared with public equity in target nations where investor protection is low and where the bilateral political relations between the swf and the target nation are weak surprisingly cultural differences play a marginally positive role in the choice to invest in private equity investment outside an swf s own sovereign nation comprehensively we find that swfs act distinctively from other traditional institutional investors when investing in private equity

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

mobility and redistribution the ability of individuals to move freely from one jurisdiction to another is generally seen as a constraint on the amount of redistribution that each jurisdiction within a system of governments can undertake in this paper we look at this proposition by developing a positive analysis of income redistribution by local governments in a federal system we ask how much redistribution occurs when only local governments can have tax transfer instruments individuals can move freely among jurisdictions and voters in each jurisdiction are fully aware of the migration effects of redistributive policies local redistribution is shown to induce sorting of the population with the poorest households located in the communities that provide the most redistribution while the threat of out migration affects the potential for redistribution our results suggest that significant local redistribution is nonetheless feasible numerical computations indicate that the proportion of residents who are renters is a major factor affecting the local choice of level of redistribution

international corporate diversification market valuation and size adjusted evidence errunza and senbet es 7 analyze the effects of international operations on the market value of the firm both at theoretical and empirical levels the theoretical model which is largely heuristic exploits the costly supply adjustment of multinational firms mncs in providing international portfolio diversification services to investors who face differential cost barriers to direct holdings of assets across national boundaries mncs compete as financial intermediaries to undo the barriers so that in equilibrium profits are driven out mncs and pure domestic firms sell at an equivalent risk adjusted return however costly financial intermediation and the associated relative efficiency leads to a positive valuation effect for mncs relative to purely domestic firms further the equilibrium analysis implies that demand side investor barriers to international capital flows alone are inconsequential to the valuation of mncs in their pure financial role but that the interaction with the supply side costs are necessary to produce a valuation effect at the corporate level es subject the theory to an empirical analysis in a value based approach by employing a variant of tobin s 17 qratio the analysis controlling for industrial market power suggests that the relationship between the excess valuation and the degree of international involvement doi has magnified over periods characterized by severe u s government controls vis a vis the more recent periods in this paper we formalize the theoretical argument by viewing indirect portfolio diversification by mncs as a means of completing the international capital market we employ a paradigm in the unanimity literature and formally characterize the equilibrium in which there is a rationale for mnc financial intermediation we then perform an expanded empirical study by employing generalized least squares and maximum likelihood procedures since the positive relationship between excess valuation and doi as suggested in es 7 might be attributed to the so called small firm or size and the p e effects the test methodology controls for such effects also the traditional literature has relied upon foreign sales percentage as a proxy for doi in view of the well recognized limitations of this proxy we employ four different measures of international

trust in large organizations several authors suggest that trust is an important determinant of cooperation between strangers in a society and therefore of performance of social institutions we argue that trust should be particularly important for the performance of large organizations in a cross section of countries evidence on government performance participation in civic and professional societies importance of large firms and the performance of social institutions more generally supports this hypothesis moreover trust is lower in countries with dominant hierarchical religions which may have deterred networks of cooperation trust hold up remarkably well on a cross section of countries this abstract was borrowed from another version of this item

design and marketing of financial products marketing costs are introduced into the security design environment outlined in allen and gale 1988 it is shown that splitting the firm s cash flow between products enhances their investor appeal and reduces marketing costs we also explain how the extremal product design in allen and gale is thereby avoided and how in simple cases debt equity or warrants can be optimal furthermore we illustrate in general terms how the optimal solution employs portfolios of option type products and we give an example of two optimal products that share profits in seven of eight states article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

portable country governance and cross border acquisitions the agency theory and law and finance literatures show good country governance encourages financial development mitigates agency problems and increases firm value drawing on these literatures we develop a theory that benefits from good country governance are portable by firms across countries through cross border acquisitions using acquisitions from 56 countries from 1990 to 2007 we find that acquirers can transport the benefits from good country governance so that they gain more from acquiring targets with worse country governance than their own as predicted the acquirer s stock price reaction to acquisitions increases with the country governance distance between the acquirer and the target

continuous review lost sales inventory models with poisson demand a fixed lead time and no fixed order cost abstract this paper considers continuous review lost sales inventory models with no fixed order cost and a poisson demand process there is a holding cost per unit per unit time and a lost sales cost per unit the objective is to minimise the long run total cost base stock policies are in general sub optimal under lost sales the optimal policy would have to take full account of the remaining lead times on all the orders currently outstanding and such a policy would be too complex to analyse let alone implement this paper considers policies which make use of the observation that for lost sales models base stock policies can be improved by imposing a delay between the placement of successive orders the performance of these policies is compared with that of the corresponding base stock policy and also with the policy of ordering at fixed and regular intervals of time

modified base stock policies for continuous review lost sales inventory models with poisson demand and a fixed lead time abstract this paper reconsiders the lost sales inventory system studied by hill 2007 the commonly assumed policy to apply to the system is a pure base stock policy pbsp for which the best base stock is easily found hill shows that his simple delay policy sdp and full delay policy fdp perform better the sdp is a s d policy where s is the base stock of the best pbsp and d is a common lower bound on the delay between the placement of successive replenishment orders we show by simulation that the d value suggested by johansen 2001 outperforms hill s suggestion and that the performance often can be further improved by optimizing d for the test bed investigated by hill we show that for some parameter settings an additional improvement is achieved when s and d are optimized simultaneously the policy suggested by johansen performs better than the fdp in all settings where the former policy reduces the average cost of the best pbsp by at least 1

on the term structure of interest rates abstract this paper tests the one good stochastic growth model with respect to its ability to explain the term structure of real interest rates we undertake both a qualitative and quantitative analysis first we assess the changing shape of the yield curve over the model economy s business cycle and compare our results with what is empirically observed second we employ the model to study various implications of informational and allocative efficiency properties which the artificial economy must possess it is found for example that long term rates are less volatile than short term rates and that holding premia can be highly correlated over time third we study the time varying risk premium implicit in the economy s forward rate structure a purely quantitative assessment of the model s explanatory power is also provided

foreign independent directors and the quality of legal institutions foreign directors can affect firm value through their advising and monitoring functions however the demand for these directors as well as their effect on firm performance is likely to be influenced by firm and country level characteristics in a large sample of non us firms we find that foreign directors are more likely to be associated with firms that have more foreign operations and an international shareholder base and firms that are located in countries with a limited supply of potentially qualified domestic directors countries with a smaller less well educated populace and lower levels of capital market development we also find that the association between foreign directors and firm performance is more positive in countries with lower quality legal institutions and when the director comes from a country with higher quality legal institutions than the firm s host country our study highlights the importance of considering national demographic factors and levels of capital market development when modeling the supply and demand for foreign directors and also underscores the importance of institutional quality in the foreign director s home and host country when assessing the effect of that director on firm performance

capital structure equilibrium under market imperfections and incompleteness this paper generalizes miller s supply side equilibrium argument to other forms of capital market imperfections and incompleteness if corporations possess a comparative advantage in dealing with these imperfections they have an incentive to act as financial intermediaries corporations attempts to profit from these intermediation activities dictate an optimal capital structure for the corporate sector as a whole but in equilibrium the capital structure of any single firm is a matter of indifference in addition the positive role that corporate finance plays in completing the market restores standard perfect market results on asset pricing and the associated portfolio separation properties

investor protection and the value impact of stock liquidity this paper investigates the effect of investor protection on the value impact of stock liquidity using a sample of firms from 40 countries for the period between 1996 and 2010 we show that investor protection is positively associated with the value impact of stock liquidity this association is robust to the difference in differences approach based on a natural experiment further evidence shows that the positive effect of home country investor protection on the liquidity valuation association attenuates in countries with globally integrated capital markets

mapping world cultures cluster formation sources and implications this paper extends and builds on ronen and shenkar s synthesized cultural clustering of countries based on similarity and dissimilarity in work related attitudes the new map uses an updated dataset and expands coverage to world areas that were non accessible at the time cluster boundaries are drawn empirically rather than intuitively and the plot obtained is triple nested indicating three levels of similarity across given country pairs also delineated are cluster adjacency and cluster cohesiveness which vary from the highly cohesive arab and anglo clusters to the least cohesive confucian and far eastern clusters exploring predictors of cluster formation we draw on the ecocultural perspective and other inputs and examine the combined role of language religion and geography in generating cluster formation we find that these forces play a prominent yet complex role for instance the religion and language brought by the spanish fail to create a singular cohesive latin american cluster akin to the anglo cluster the role of economic variables is similarly considered finally comparing the current map with that of 1985 we find strong support for the divergence vs convergence argument implications for international business are delineated

resolving the agency problems of external capital through options this paper investigates the role of stock options in resolving the agency problems of external capital as originally identified by jensen and meckling 1976 these problems are precipitated by managerial incentives a to consume excessive non pecuniary benefits or perquisites beyond the optimal level for sole ownership and b to engage in risk shifting in productive decisions so as to transfer wealth from external capital contributors these incentive problems can be resolved through a strategy that judiciously combines call and put options retained by the owner manager and external financiers respectively the resolution of the agency problems through this mechanism provides an economic rationale for the existence of managerial stock options and convertible debt the work by jensen and meckling 7 has brought more realism to the theory of the firm in their paper jm address agency problems in the context of a firm which is viewed as a nexus of contracts among various factors of production the contractual relationships involve incentive conflicts arising from the pursuit of self interest by limiting themselves to an entrepreneur or owner manager who retains complete control of the firm jm have demonstrated that financing through the issuance of common stock or debt to outsiders engenders costs these costs are precipitated in part by the manager s propensity to consume nonpecuniary benefits or perquisites perks by employing certain resources in excess of their optimal usage 1 and by his propensity to engage in high risk investment projects so as to transfer wealth from bondholders to stockholders 2

pure and modified base stock policies for the lost sales inventory system with negligible set up costs and constant lead times abstract the studied inventory system with continuous review has an easily computed optimal s 1 s policy when unsatisfied demands are backlogged we assume that unsatisfied demands are lost and then it is also easy to compute the best s 1 s policy but as demonstrated by roger hill at the isir symposium in 1996 this pure base stock policy can never be optimal if s 2 our focus is on periodic review we use erlang s loss formula to derive approximate expressions for the stockout probability and the average cost these expressions are used to approximate the average cost and to compute a good base stock we formulate and implement a markov decision model to find the optimal replenishment policy the model is solved by a policy iteration algorithm because the optimal policy is often rather complicated we introduce modified base stock policies they are specified by a pair s t where s is the base stock and t is a lower bound for the number of review periods between review epochs in which placing a replenishment order is permitted a simple one has s equal to the base stock computed from erlang s formula and fixes t as the largest integer which is less than or equal to the ratio of the number of review periods per delivery period and s our numerical examples show that the simple modified base stock policy provides most of the cost reduction which can be obtained by replacing the best pure base stock policy by the optimal policy

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

cultural diversity and the performance of multinational firms we test the hypothesis that culturally related international diversification will have a positive impact on firm performance and that the opposite will be true for culturally unrelated globalization cultural diversity for fortune 500 firms was used to predict performance over a ten year period 1985 1994 controlling for several organizational and industry characteristics regression tests using nine indicators of cultural diversity revealed no significant cultural effects alternate interpretations are offered

the governance impact of a changing investor landscape within the backdrop of comparative corporate governance research we draw on the managerial reporting and impression management literatures to examine how the type level and nature of foreign shareholders infused with their own governance logic influence initial managerial earnings optimism and how foreign ownership shapes earnings guidance in a stakeholder oriented setting drawing on japanese data and addressing endogeneity concerns our results show that under the presence of foreign owners managers are more optimistic in their initial earnings forecasts but that in subsequent revisions they are more likely to provide timely adjustments of their earnings forecast and avoid making last minute adjustments this research illustrates how foreign practices travel across borders and contributes to understanding triggers to governance and strategic changes

game theoretic pricing and ordering decisions with partial lost sales in two stage supply chains abstract few papers have studied the optimal pricing and ordering with partial lost sales from a two stage game theoretic perspective this paper considers a supply chain game with a buyer and a seller through pricing and ordering models with partial lost sales we evaluate the optimal solutions for the buyer and the seller and provide insights into both the deterministic and stochastic demand models we also propose search algorithms to obtain the global optimum when convexity and concavity conditions are not satisfied