political uncertainty and stock market returns evidence from the 1995 quebec referendum abstract in this study we investigate the short run effect of the 30 october 1995 quebec referendum on the common stock returns of quebec firms our results show that the uncertainty surrounding the referendum outcome had an impact on stock returns of quebec firms we also find that the effect of the referendum varied with the political risk exposure of quebec firms that is the structure of assets and principally the degree of foreign involvement jel classification g14 g15

unemployment risk and precautionary wealth evidence from households balance sheets this paper examines precautionary behavior by relating job loss risk to household net worth we use existing best practice and some new strategies to deal with some problematic issues inherent in this literature regarding proxying uncertainty instrumentation and incorporating theoretical restrictions we do not find precautionary variation in the wealth holdings of households with low permanent income but do find precautionary effects for moderate and higher income households when the dependent variable is total net worth these findings are robust to several alternative specifications but we do not find precautionary responses in subaggregates of wealth that exclude home equity

beyond privatization institutional innovation and growth in china s large state owned enterprises abstract this article demonstrates that china s large state owned enterprises soes are not stagnant fossils waiting to die under economic reform policies this sector has undergone large change due to enhanced enterprise autonomy the impact of market forces rapid growth of domestic demand for upstream products strategic integration with the world economy and the state s policy to promote large businesses china s large soes are developing new institutional forms that do not neatly fit into existing patterns china is experimentally changing its institutions through a combination of central policy local initiative and interaction with international investment this presents a challenge to the transitional orthodoxy and to ideas concerning property rights in development economics there is not a universal model of property rights and government action that works best in all circumstances china s experience with the reform of large soes shows the diverse possibilities for effective industrial institutions

precautionary wealth accumulation evidence from canadian microdata this paper estimates the effect of labour income uncertainty on wealth accumulation using two data sources wealth information is obtained from the master files of the new canadian survey of financial security 1999 sfs labour income risk proxies are constucted by industry using the canadian survey of labour and income dynamics slid between 1996 and 2001 the empirical results suggest the presence of a strong precautionary saving motive among canadian households for broad definitions of wealth furthermore consistent with the buffer stock saving model the level of precautionary funds significantly increases when households face liquidity constraints ce texte calcule l effet de l incertitude du revenu de travail sur l accumulation de la richesse a l aide de deux sources de donnees les donnees sur la richesse sont tirees des resultats de l enquete sur la securite financiere esf de 1999 les coefficients de risque attaches aux diverses industries sont developpes a partir des resultats de l enquete sur la dynamique du travail et du revenu edtr entre 1996 et 2001 les resultats empiriques suggerent la presence d une forte motivation des menages canadiens aepargner aux fins de precaution si l on accepte des definitions assez comprehensives de la richesse de plus d une maniere qui correspond au modele d epargne pour stockage tampon le niveau des fonds aux fins de precaution s accroit de maniere significative a proportion que les menages font face a des contraintes de liquidite

how important is precautionary saving we estimate how much of the wealth of a sample of psid respondents is held because some households face more income uncertainty than others we begin by solving a theoretical model of saving which we use to develop appropriate measures of uncertainty we then regress measures of wealth on our measures of uncertainty and find evidence that households engage in precautionary saving finally we simulate the wealth distribution that our empirical results imply would prevail if all households had the same uncertainty as the lowest uncertainty group we find that between 39 and 46 percent of wealth in our sample is attributable to the extra uncertainty that some consumers face compared to the lowest uncertainty group

the nature of precautionary wealth abstract this paper uses the panel study of income dynamics to provide some of the first direct evidence that wealth is systematically higher for consumers with predictably greater income uncertainty however the apparent pattern of precautionary wealth is not consistent with a standard parameterization of the life cucle model in which consumers are patient enough to begin saving for retirement early in life wealth is estimated to be far less sensitive to uncertainty than implied by that model instead our results suggest that over most of their working life time consumers behave in accordance with the buffer stock models of saving described in carroll 1992 1997 or deaton 1991 in which consumers hold wealth principally to insulate consumption against near term fluctuations in income

opinion polls and canadian bond yields during the 1995 quebec referendum opinion poll announcements during the 1995 quebec referendum campaign that increased the likelihood of quebec sovereignty substantially increased the spread on quebec bond yields over both canada and ontario bond yields announcements that increased the likelihood of quebec sovereignty also increased the spread between government of canada real return bonds and government of the united kingdom real return bonds but had only a weak effect on expected inflation in canada expected inflation is proxied by the spread between nominal and real return bonds

precautionary savings a panel study theoretical literature shows that income uncertainty boosts saving yet empirical work is incomplete i test for the precautionary motive for saving using panel data knowing this motive s size is important for gauging the responsiveness of saving to government programs that reduce uncertainty and for comparison to other motives such as bequests most empirical studies of precautionary saving use either aggregate time series or cross sectional data which cannot capture the effects of individual income uncertainty i derive measures of total permanent and transitory income uncertainty from panel data the national longitudinal survey and find a strong precautionary motive a doubling of uncertainty increases the ratio of wealth to permanent income by 29

note performance evaluation of state owned enterprises a process perspective state owned enterprises soes have become important instruments of social and economic policy in industrialized mixed economies and in developing countries the use of soes as instruments of public policy and the resulting clashes between these enterprises and private firms on the one hand and government and other controllers on the other are causing concern public committees in different countries as well as international organizations have been searching for positive theory for guidance in handling the multitude of problems related to these enterprises theoretical models have made important contributions to the formalization of certain problems and the classification of the information needed to solve them unfortunately these theoretical models have had little relevance for the solution of important real problems much of the research on soes is concerned with how these enterprises should behave and what should be the product of their operations almost no research has been done on why soes function as they do the paucity of knowledge about the operation of soes stems both from insufficient research effort and from the concern of researchers with formal structures and products of these organizations and not with management behavior or with decision processes the purpose of this paper is to call for research beyond the confines of traditional economics using the tools of management science to obtain insights into the difficult but salient problems of soes

precautionary saving motives an assessment from uk time series of cross sections this paper gauges the strength of precautionary saving motives by estimating the coefficient of prudence from the u k family expenditure survey data set a time series of cross sections the instrumental variables estimates reveal that greater uncertainty systematically leads to larger current savings most of these impacts are large enough to be statistically consistent with widely accepted beliefs about attitudes towards risk so that precautionary saving behavior cannot be refuted moreover the households which are less likely to face liquidity constraints or to share risks are more sensitive to uncertainty finally the households for which the head works in the manufacturing industry are more inclined to self insure against uncertainty copyright 1996 by royal economic society

the dynamics of stock index and stock index futures returns in rational efficiently functioning markets the returns on stock index and stock index futures contracts should be perfectly contemporaneously correlated this study investigates the time series properties of 5 minute intraday returns of stock index and stock index futures contracts and finds that sp however the effect is not completely unidirectional with lagged stock index returns having a mild positive predictive impact on futures returns

the financial and operating performance of newly privatized firms an international empirical analysis this study compares the pre and postprivatization financial and operating performance of 61 companies from 18 countries and 32 industries that experience full or partial privatization through public share offerings during the period 1961 to 1990 our results document strong performance improvements achieved surprisingly without sacrificing employment security specifically after being privatized firms increase real sales become more profitable increase their capital investment spending improve their operating efficiency and increase their work forces furthermore these companies significantly lower their debt levels and increase dividend payout finally we document significant changes in the size and composition of corporate boards of directors after privatization the last fifteen years have witnessed a significant global shift away from state socialism towards entrepreneurial capitalism one of the most important and visible aspects of this trend has been the enthusiasm with which governments of all political persuasions have sold their state owned enterprises soes to private investors in hopes that the generally unsatisfactory economic performance of these firms can be improved by the discipline of private ownership this denationalization process given its current title of privatization by the conservative government of margaret thatcher in

precautionary saving and subjective earnings variance abstract in this paper i examine a model of precautionary saving and i show that the fact that people may insure against income risk makes it difficult to evaluate the extent of precautionary accumulation by simply looking at the relationship between wealth and earnings variance i also argue that occupations may represent a bad proxy for income risk

reform of china s electric power industry challenges facing the government abstract china s electrical power industry requires substantial reform if the country s economic growth is to be sustained the 1997 electricity law the creation of a state power company and the abolition of the ministry of electric power are important first steps on the path of reform but it seems that a clear plan is lacking objectives of the reform should include increasing the capacity to deliver power constraining the costs of the power industry increasing end user efficiency and minimising environmental damage efforts should be directed at restructuring the industry in such a way that fair competition may be introduced at least in power generation and at establishing a viable regulatory agency both tasks have the potential to be thwarted by a range of vested interests at different levels of government and industry

slack in the state owned enterprise an evaluation of the impact of soft budget constraints abstract in this paper slack in resource utilization is estimated using data envelopment analysis for a sample of 67 indian state owned 63 private sector and 27 foreign owned enterprises on a comparative basis the study is cross sectional and carried out for the year 1991 to assess how far the operation of soft budget constraints has had an impact on the economic performance of indian firms particularly operated as state owned enterprises specifically the presence of debt capital provided primarily by government owned financial institutions is strongly and negatively related to performance the results show that if firms turn out to be all equally efficient then average materials costs human capital usage costs costs associated with other operating items and physical capital usage by each state owned enterprise sampled can be reduced by rs 203 million rs 201 million rs 53 million and rs 255 million respectively if existing levels of inputs are used efficiently then the average addition to the value of output by each state owned enterprise can rise by rs 693 million the analyses reveal significant slack in resource utilization in indian state owned firms resulting from soft budget constraints and the implications of the existence of slack are discussed

saving and liquidity constraints this paper is concerned with the theory of saving when consumers are not permitted to borrow and with the ability of such a theory to account for some of the stylized facts of saving behavior the models presented in the paper seem to account for important aspects of reality that are not explained by traditional life cycle models copyright 1991 by the econometric society

risk aversion uncertain information and market efficiency abstract this paper develops and tests the uncertain information hypothesis as a means of explaining the response of rational risk averse investors to the arrival of unanticipated information the theory predicts that following news of a dramatic financial event both the risk and expected return of the affected companies increase systematically and that prices react more strongly to bad news than good an empirical investigation of over 9000 marketwide and firm specific events produces results consistent with these predictions we conclude that the market reacts to uncertain information in an efficient if not instantaneous manner

managerial autonomy of state owned enterprises determining factors the present paper reports on managerial autonomy of state owned enterprises soes or its reverse the control which is exerted by government and supervising public authorities on soes first it examines the types of control applied using evidence from a sample of 110 greek soes the paper identifies certain distinct dimensions of control related to strategic business boundary issues pricing decisions resource acquisition and mobilisation issues second environmental and organisational determinants of the control intensity are identified results broadly suggest that the intensity of control as perceived by enterprise managers is i positively related to dependence on the state for resources to enterprise size and to political visibility i e social orientation of product market strategy and ii negatively related to market competition and demand unpredictability an interpretation of the results is attempted drawing on wider organisational social and economic theories policy implications are discussed

political uncertainty and asset valuation evidence from business relocations in canada abstract quebec s drive for sovereignty from canada has been the source of political uncertainty for decades in canada this paper studies empirically stock market s reaction to the announcements of business relocations from the province of quebec to other provinces within canada similar announcements about toronto are used for control empirical results show that the market s reaction to the announcements of business relocations a from quebec is positive b from toronto is negative and c to toronto is positive the difference in abnormal returns between the quebec and toronto samples is positive and significant

the effect of asset and ownership structure on political risk some evidence from mitterrand s election in france abstract previous research suggests that political risk varies considerably from firm to firm yet few empirical tests of the cross sectional variation in political risk exist french assets were massively revalued the day after mitterrand was elected in 1981 providing a unique opportunity to test for the effect of firm specific factors on political risk although foreign ownership tends to increase political risk other factors can reduce it a simple model of political behavior is presented in which politicians value among other things economic growth a foreign firm with significant future growth options is likely to experience less political risk than other foreign firms and under certain circumstances less risk than even other domestic firms tests of these hypotheses are conducted using data from the french and u s capital markets the results are generally consistent with the hypotheses

managerial strategic behavior in state owned enterprises business and political orientations two different functions managing the business in the product or service markets and managing public support in the political markets must be performed by managers of state owned enterprises soes each organization has to strike a strategic balance between these two functions the way this is done is indicative of the organizational orientation and behavior the greater the relative emphasis on managing public support the stronger is the political orientation in our terminology the greater the relative emphasis on managing the business the stronger is the business orientation this paper proposes that explanation of behavior of soes can be improved by taking into account the orientation of management toward the mix of business and politics although the combination of business and political goals of soe has long been recognized the mix of business and political activities as a strategic variable was rarely distinguished this strategic variable is operationally defined measured and explained an insight into the purposes of business and political activities is gained through an analysis of the external and internal orientation of management the organization may concentrate internally on its own needs and goals or externally on the needs and goals of the outside publics this distinction can be useful in descriptive as well as normative research management orientation whether business or political is associated with a specific set of behavioral tendencies or implications these implications are expressed in propositions which state that an increase in the political and external orientation of management are related to an increased likelihood that 1 sales rather than profit goals would be emphasized 2 low prices relative to costs would be charged 3 goals would be relatively unstable 4 goals would be stated in unclear or vague terms 5 performance evaluation would be carried out on an irregular basis 6 public support would be sought prior to action 7 top management would be recruited from the public sector an exploratory survey of 50 executives of soes in fourteen latin american asian and african countries was used to test the propositions with few exceptions the empirical results support the above propositions further research which will include additional variables and a larger sample can increase the reliability of the findings and improve our understanding of the factors which influence management orientation

full insurance in the presence of aggregate uncertainty this paper tests implications of full consumption insurance the object is to determine how much mileage can be obtained from a model with complete markets with such features as private information or liquidity constraints omitted the implication exploited is that individual consumption responds to aggregate risk but not to idiosyncratic risk the test involves regressing the change in household consumption onto the change in aggregate consumption and other right hand side variables such as the change in household income and change in employment status all variables other than the change in aggregate consumption are predicted to be insignificant in explaining the change in household consumption with observations on consumption and income for 10 695 households from the consumer expenditure survey the results are mixed the results for one specification exponential utility are mostly consistent with full consumption insurance the results for the other specification power utility are not

a simple test of consumption insurance are consumers effectively insured against idiosyncratic shocks to income or wealth either by formal institutions such as charities private insurance and government programs or by informal mechanisms such as gifts and loans from relatives friends and neighbors under full insurance consumption growth should be cross sectionally independent of idiosyncratic variables that are exogenous to consumers this proposition is tested by cross sectional regressions of consumption growth on a variety of exogenous variables full insurance is rejected for long illness and involuntary job loss but not for spells of unemployment loss of work due to strike and an involuntary move

how prudent are consumers using data from the consumer expenditure survey this paper presents a simple test that provides an explicit estimate of the parameter in the utility function that reflects the strength of the precautionary saving motive the coefficient of relative prudence the test yields a fairly precise estimate of a small precautionary motive in fact the estimate is too small to be consistent with widely accepted beliefs about risk aversion the presence of liquidity constrained households does not appear to explain this finding and there is some evidence that self selection of households into risky environments also cannot explain the results

the financial and operating performance of newly privatized firms evidence from developing countries this paper examines the change in the financial and operating performance of 79 companies from 21 developing countries that experienced full or partial privatization during the period from 1980 to 1992 we use accounting performance measures adjusted for market effects in addition to unadjusted accounting performance measures both unadjusted and market adjusted results show significant increases in profitability operating efficiency capital investment spending output employment level and dividends we also find a decline in leverage following privatization but this change is significant only for unadjusted leverage ratios our results are generally robust when we partition our data into various subsamples

privatization not the only answer abstract governments in many developing countries created state owned enterprises soes to produce goods or provide services the private sector seemed unwilling or unable to offer in many cases soes have turned out to be problem children at best inefficient and at worst unable to fulfill their original functions now the recommended solution to the problem of state owned enterprises is privatization but privatization is no more a solution to the problems of soes than soes were a solution to the problems they were created to solve the problem of soes is not ownership but rather a lack of explicit goals and objectives and an absence of organization cultures and systems that support and encourage fulfillment of those goals and objectives in some circumstances privatization may aid in fulfillment of an enterprise s goals and objectives because of the culture and systems it fosters in other cases not

investment planning and arm s length control in a nationalised industry applying a relatively decentralised system of control which would keep state owned enterprises soe at arm s length from ministerial departments has been a stated policy for many governments around the world however the specific controls typically used for implementing this policy have seldom been successful the purpose of this paper is to review and evaluate certain of these controls drawing upon the british system of arm s length control of nationalised industries in order to delimit the problem the paper cuts across the government soe relationship from the perspective of investment planning using primary information from the capital investment process in a particular nationalised industry the paper searches for evidence on whether and in what ways existing controls have not been successful three types of controls are investigated 1 the economic and financial groundrules which are supposed to simulate a competitive business style efficiency these rules are often assumed to act as an invisible hand limiting direct government control 2 the direct investment review in the framework of the wider public sector expenditure survey in discussing the nature of this review the paper examines whether government approval of investment conforms to an incrementalist or muddling through model it further considers the role for incremental methods in controlling soe investment 3 the attempt to use corporate planning as a control instrument evidence from internal control processes within the enterprise and in particular the review of investment by a central executive is used in order to evaluate the above controls this serves to show the diffuse character of the planning process and the possibilities and limitations of using similar controls at the government level suggestions are put forward for strengthening these forms of control by modifying or reinforcing certain elements within the existing arm s length framework the paper would be useful for evaulating the difficulties involved in establishing some form of orderlines and formalisation in government soe relationships it shows some of the weaknesses associated with certain technocratic rules and solutions to public policy problems in this environment

privatization financial development property rights and growth abstract this study analyzes how prevailing institutional arrangements i e property rights contracting rights political institutions and corporate governance practices affect privatized firms performance capital markets development and economic growth most of the studies surveyed show that privatization enhances privatized firms performance efficiency and profitability which percolates to economic growth privatized firms performed better in countries with better regulatory and legal frameworks partial privatization may be beneficial in countries with weak institutions namely the french civil law countries the stronger the economic and the governing institutions the easier it is for privatized firms to thrive and contribute to economic growth overall privatization allows firms to achieve improved efficiency while driving the development of the financial sector