an n person pure bargaining game abstract we propose an n person pure bargaining game which generalizes rubinstein s two person bargaining game and show that there exists a unique perfect equilibrium outcome the solution approaches the n person nash solution as defined by chae the n person nash bargaining solution with time preference econ lett 41 1993 21 24 in the time preference framework as the time lapse between bargaining rounds goes to 0 journal of economic literature classification number c78

what explains global exchange rate movements during the financial crisis abstract a striking and unexpected feature of the financial crisis has been the sharp appreciation of the us dollar against virtually all currencies globally the paper finds that negative us specific macroeconomic shocks during the crisis have triggered a significant strengthening of the us dollar rather than a weakening macroeconomic fundamentals and financial exposure of individual countries are found to have played a key role in the transmission process of us shocks in particular countries with low fx reserves weak current account positions and high direct financial exposure vis a vis the united states have experienced substantially larger currency depreciations during the crisis overall and to us shocks in particular

investor protection and equity markets we present a simple model of an entrepreneur going public in an environment with poor legal protection of outside shareholders the model incorporates elements of becker s j political econ 106 1968 172 crime and punishment framework into a corporate finance environment of jensen and meckling j financial econ 3 1976 305 we examine the entrepreneur s decision and the market equilibrium the model is consistent with a number of empirical regularities concerning the relation between investor protection and corporate finance it also sheds light on the patterns of capital flows between rich and poor countries and on the politics of reform of investor protection r 2002 elsevier science b v all rights reserved

one to many bargaining when pairwise agreements are non renegotiable abstract we study a model where a central player the principal bargains bilaterally with each of several players the agents to create and share the surplus of a coalitional game it is known that if the payments that were previously agreed with each of the remaining agents are renegotiated in case any bilateral negotiation permanently breaks down then the shapley value is the unique efficient and individual rational outcome consistent with bilateral nash bargaining here we show that when instead the agreed payments cannot be renegotiated the outcome is also unique but it now coincides with the nucleolus of an associated bankruptcy problem we provide a strategic foundation for this outcome then we study how such renegotiation affects the principal s payoff according to the properties of the surplus function we find for example that renegotiation benefits the principal when agents are complements and it hurts him when they are substitutes situations with respectively increasing and decreasing marginal contributions

the dynamics of international capital flows results from a dynamic hierarchical factor model abstract the present paper examines the degree of comovement of gross capital inflows which is a highly sensitive issue for policy makers we estimate a dynamic hierarchical factor model that is able to decompose inflows in a sample of 47 economies into i a global factor common to all types of flows and all recipient countries ii a factor specific to a given type of capital inflows iii a regional factor and iv a country specific component we find that the latter explains by far the largest fraction of fluctuations in capital inflows followed by regional factors which are particularly important for emerging markets fdi and portfolio inflows as well as bank lending to emerging europe the global factor however explains only a small share of the overall variation we also employ dynamic panel and time series regressions to explain the determinants of the estimated components the global factor is shown to reflect u s financial conditions

central bank transparency and cross border banking abstract we analyze the effect of central bank transparency on cross border bank activities based on a panel gravity model for cross border bank claims for 21 home and 47 destination countries from 1998 to 2010 we find strong empirical evidence that a rise in central bank transparency in the destination country on average increases cross border claims using interaction models we find that the positive effect of central bank transparency on cross border claims is only significant if the central bank is politically independent and operates in a stable economic environment central bank transparency and credibility are thus considered complements by banks investing abroad

bargaining orders in a multi person bargaining game abstract this paper studies a complete information bargaining game with one buyer and multiple sellers of different sizes or bargaining strengths the bargaining order is determined endogenously with a finite horizon there is a unique subgame perfect equilibrium outcome in which the buyer purchases in order of increasing size from the smallest to the largest with an infinite horizon if the sellers have sufficiently different sizes there is a unique equilibrium outcome which has the same bargaining order if the sellers have similar sizes with an infinite horizon there may be multiple equilibrium outcomes with different bargaining orders

on the role of confidentiality and deadlines in bilateral negotiations abstract the preference between public and private negotiations for a buyer who sequentially visits two sellers is examined it is shown that the buyer weakly prefers private negotiations so as to create strategic uncertainty about the trade history with substitute goods such uncertainty is valuable only when price offers have short deadlines that prevent a head to head competition with complementary goods strategic uncertainty is valuable to the extent that price coordination becomes a concern for sellers which is likely to be the case when sellers possess high bargaining powers their price offers have short deadlines and or goods are weak complements sellers strategic deadline choices as well as their incentives to disclose information about negotiations are also investigated

intra firm bargaining under non binding contracts we present a new methodology for studying the problem of intra firm bargaining based on the notion that contracts cannot commit the firm and its agents to wages and employment we develop and analyse a general non cooperative multilateral bargaining framework between the firm and its employees and consider outcomes which are immune to renegotiations by any party equilibrium firm profits are characterizable as both a weighted average of a neo classical non bargaining firm s profits and a generalization of shapley value for a corresponding cooperative game furthermore the resulting payoffs induce economically significant distortions in the firm s input and organizational design decisions

the institutional reforms debate and fdi flows to the mena region the best ensemble summary this paper empirically examines the theoretical debate on the adoption of a best approach to reforming institutions identified by rodrik 2008 in the context of property rights protection and fdi flows to eight mena countries the first best approach comprises strengthening domestic institutional functions only while the second best comprises in addition entering into force bilateral investment treaties and the interaction between functions and treaties empirically both approaches to reducing investment expropriation risk encourage fdi flows the positive effect of the second best approach depends on the success of the first best approach suggesting the two approaches are complementary

payoff uncertainty bargaining power and the strategic sequencing of bilateral negotiations this article investigates the sequencing choice of a buyer who negotiates with the sellers of two complementary objects with uncertain payoffs the possibility of inefficient trade may generate strict sequencing preference the buyer begins with the weaker seller if the sellers have diverse bargaining powers and with the stronger one if both sellers are strong bargainers this sequencing is likely to increase the social surplus moreover the buyer may find it optimal to raise her own acquisition cost by committing to a minimum purchase price or outsourcing the first and second mover advantages for the sellers are also identified

fooling all of the people some of the time a theory of endogenous sequencing in confidential negotiations we analyse a bargaining game in which one party called the buyer has the option of choosing the sequence of negotiations with other participants called sellers when the sequencing of negotiations is confidential and the sellers goods are highly complementary efficient non dissipative equilibria exist in which the buyer randomizes over negotiation sequences in these equilibria the buyer can obtain higher pay offs than in pure strategy equilibria or in public negotiations the degree of sequencing uncertainty that maximizes buyer pay offs is inversely related to the aggregate bargaining power of the sellers

taking gravity online the role of virtual proximity in international finance abstract this paper analyses international patterns of bilateral portfolio equity and debt investment in a gravity model framework we contribute to the literature by exploring the role of virtual proximity measured by bilateral internet hyperlinks between countries as a novel proxy for cross border information flows and cultural proximity more generally our findings show that bilateral portfolio investment is significantly affected by virtual proximity indicating that countries which are more closely connected in terms of web content are more integrated financially the effect is stronger for equity than for debt investment highlighting the larger information sensitivity of equity investments and is largest for investments among advanced economies moreover including virtual proximity in estimations reduces the importance of traditionally used proxies for information asymmetries and cultural proximity

bargaining and the right to remain silent this paper analyzes a class of alternating offer bargaining games with one sided incomplete information for the case of no gap if sequential equilibria are required to satisfy the additional restrictions of stationarity monotonicity pure strategies and no free screening we establish the silence theorem when the time interval between successive periods is made sufficiently short the informed party never makes any serious offers in the play of alternating offer bargaining games a class of parametric examples suggests that the time interval required to assure silence is not especially brief as a byproduct of the analysis we also prove under the same set of assumptions a uniform version of the coase conjecture when the time interval between successive periods is made sufficiently short the initial serious offer by either party in an alternating offer bargaining game must be less than e times the highest possible buyer valuation for an entire family of distribution functions

north south lending and endogenous domestic capital market inefficiencies abstract we develop an open economy model of intertemporal trade under asymmetric information capital market imperfections are endogenous and depend on a country s stage of economic development relative to the perfect information benchmark north south capital flows are dampened and possibly reversed and world interest rates are lower whereas riskless rates are equalized across borders the domestic loan rate is higher in poorer countries the model can be applied to a number of policy issues including the debt overhang problem the indexation of foreign public debts and the effect of income distribution on growth

gender biases in bank lending lessons from microcredit in france the evidence on gender discrimination in lending remains controversial to capture gender biases in banks loan allocations we observe the impact on the applicants of a microfinance institution mfi and exploit the natural experiment of a regulatory change imposing a strict eur 10 000 loan ceiling on microcredit descriptive statistics indicate that the presence of the ceiling is associated both with bank mfi co financing and with harsher treatment of female borrowers to investigate causal links we develop an econometric approach that addresses the concerns of selection biases multicollinearity and endogeneity our empirical findings suggest that the change in the mfi s gender related attitude was triggered by banks through co financing hence we speculate that co financing pushes ceiling constrained mfis to import whatever biases in loan granting that the banks are prone to overall this paper stresses that apparently benign regulations such as loan ceilings can significantly harm the women s empowerment efforts made by mfis

institutions foreign direct investment and domestic investment crowding out or crowding in studies of the relationship between fdi and domestic investment reach contradictory findings we argue that some of the conflicting evidence may be explained by the use of poor proxies for the theoretical concepts and questionable methodological choices we review the paper of morrissey and udomkerdmonkol published in this journal in 2012 improvements in the construction of the proxies and refinements in the estimation methodology reverse the finding of morrissey and udomkerdmonkol that fdi inflows crowd out domestic investment furthermore there is no strong evidence that good governance actually encourages domestic investment

secrecy and safety we provide a model showing that the use of confidential settlement as a strategy for a firm facing tort litigation leads to lower average safety of products sold than would occur if the firm were committed to openness a rational risk neutral consumer s response in a market wherein a firm engages in confidential settlements may be to reduce demand a firm committed to openness incurs higher liability and r d costs though product demand is not diminished we identify conditions such that if the cost of credible auditing to verify openness is low enough a firm prefers to eschew confidentiality

breakdown in multilateral negotiations abstract we analyze a complete information multilateral bargaining model in which a buyer is to purchase two complementary goods from two sellers binding cash offer contracts are used to govern transactions in contrast to preexisting literature we do not normalize the parties reservation utilities to zero we show that this assumption holds critical importance by demonstrating that a complete breakdown of negotiations may occur as the unique equilibrium outcome even if only two sellers are present

the determinants of cross border equity flows abstract we explore a new panel data set on bilateral gross cross border equity flows between 14 countries 1989 1996 we show that a gravity model explains international transactions in financial assets at least as well as goods trade transactions gross transaction flows depend on market size in source and destination country as well as trading costs in which both information and the transaction technology play a role distance proxies some information costs and other variables explicitly represent information transmission an information asymmetry between domestic and foreign investors and the efficiency of transactions the geography of information is the main determinant of the pattern of international transactions while there is weak support in our data for the diversification motive once we control for the informational friction we broaden the scope of our results by presenting some evidence linking the results on equity transactions to equity holdings

revisiting dynamic duopoly with consumer switching costs abstract the degree of collusiveness of a market with consumer switching costs is analyzed in an infinite horizon model of duopolistic competition in contrast with previous analyses we assume that firms compete for the demand for a homogeneous good by setting prices simultaneously in each period this problem is formulated as a simple stochastic game and a symmetric stationary markovian perfect equilibrium with distinctive economic features is studied we show that switching costs unambiguously relax price competition in equilibrium but that on the contrary they may make tacit collusion more difficult to sustain journal of economic literature classification numbers c73 d43 l13

equity and bond flows to latin america and asia the role of global and country factors abstract this paper investigates the factors motivating the large capital flows to a number of developing countries in recent years we use monthly us capital flows to nine latin american and nine asian countries to analyze the behavior of bond and equity flows employing a panel data approach we find that although global factors the drop in us interest rates and the slowdown in us industrial production are important in explaining capital inflows country specific developments are at least as important especially for asia we also find that equity flows are more sensitive than bond flows to global factors but that bond flows are generally more sensitive to a country s credit rating and secondary market debt price

worker substitutability and patterns of unionisation a strategic three party bargaining model is developed in which one distinguished party the firm has to reac h agreements with the other two each of which is a group of workers in the prebargaining stage the two worker groups decide whether to organize jointly or separately the main observation relates the equi librium pattern of unionization to the substitutability in production between the two groups the outcome is joint or separate unions acco rding to whether the two groups are substitute or complementary facto rs of production the analysis also considers possibilities for firm s strategic intervention in the unionization process copyright 1988 by royal economic society

immigrant links to the home country empirical implications for u s bilateral trade flows immigrants ties to their home countries can play a key role in fostering bilateral trade linkages immigrant ties include knowledge of home country markets language preferences and business contacts that have the potential to decrease trading transaction costs empirical results for the united states suggest that immigrant links have historically been important in increasing bilateral trade flows with immigrants home countries copyright 1994 by mit press

net foreign asset com position does financial development matter abstract we investigate the relationship between a country s domestic financial development and the composition of its net foreign asset position using a pooled mean group estimator and data for 50 countries for the 1970 2007 period the results show that financial development reduces a country s long run net foreign asset position in addition financial development leads to higher net equity and lower net debt positions these findings confirm the theoretical predictions of mendoza et al 2009 the results are robust to using different indicators of financial development and inclusion of the level of development of a country in the cointegrating relationship

decentralized one to many bargaining we study a one to many bargaining model in which one active player bargains with every passive player on how to share the surplus of a joint project the order of bargaining is not fixed and the active player decides whom to bargain with in each period our model admits a rich set of equilibria and we identify the upper and lower bounds of equilibrium payoffs we also examine whether two natural ordering protocols often assumed in existing studies can sustain endogenously although the queuing protocol may indeed arise in an equilibrium the rotating protocol is in general not self enforcing

foreign direct investment and debt financing in emerging economies the rich dynamics of capital flows is an important characteristic of business cycles in emerging market economies in the data external debt is always procyclical while fdi is procyclical only in normal times we provide a microfounded rationale for this pattern by linking financial shocks to capital flows for this purpose we build a small open economy model in which firms are subject to borrowing constraints and are either owned domestically or by foreign investors who purchase firms through fdi during a financial crisis the valuation gap per unit net worth between foreign and domestic investors widens which triggers more fdi inflow our model produces business cycle moments consistent with empirical observations

troubled banks impaired foreign direct investment the role of relative access to credit during the 1980 s theories were developed to explain the striking correlation between real exchange rates and foreign direct investment fdi however this relationship broke down for japanese fdi in the 1990 s as the real exchange rate appreciated while fdi plummeted we propose the relative access to credit hypothesis and show that unequal access to credit by japanese firms contributes to the explanation of declining japanese fdi using bank level and firm level data sets we find that financial difficulties at banks were economically and statistically important in reducing the number of fdi projects by japanese firms into the united states jel g21 f36

currency crashes in emerging markets an empirical treatment we use a panel of annual data for over 100 developing countries from 1971 through 1992 to characterize currency crashes we define a currency crash as a large change of the nominal exchange rate that is also a substantial increase in the rate of change of nominal depreciation we examine the composition of the debt as well as its level and a variety of other macroeconomic factors external and foreign crashes tend to occur when output growth is low the growth of domestic credit is high and the level of foreign interest rates are high a low ratio of fdi to debt is consistently associated with a high likelihood of a crash

competing for loyalty the dynamics of rallying support abstract we consider a class of dynamic collective action problems in which either a single principal or two competing principals vie for the support of members of a group we focus on the dynamic problem that emerges when agents negotiate and commit their support to principals sequentially we show that competition reduces agents welfare with public goods or if and only if there are positive externalities on uncommitted agents and increases agents welfare with public bads we apply the model to the study of corporate takeovers vote buying and exclusive deals jel d42 d62 d72 d82 g34 h41

home bias in open economy financial macroeconomics standard theory would predict that investors hold a well diversified portfolio of equities across the world but despite the process of financial globalization investors still hold a disproportionate share of local equities in their portfolio the equity home bias french and poterba 1991 we review the various explanations of this puzzling phenomenon in the context of recent developments in macroeconomic modelling that have allowed to incorporate sophisticated international portfolio choices in standard two country general equilibrium models we refer to this literature as open economy financial macroeconomics we focus on three broad classes of explanations i hedging motives in frictionless financial markets real exchange rate and non tradable income risk ii asset trade costs in international financial markets such as transaction costs differences in tax treatments between national and foreign assets iii informational frictions and behavioural biases these recent developments raise the need for new portfolio facts beyond the equity home bias and we will present some new evidence on cross border asset holdings across different types of assets equities bonds and bank lending we also present some new micro data on institutional holdings of equity at the fund level these data should inform macroeconomic modelling of the open economy and a growing literature of models of delegated investment

do domestic investors have an information advantage evidence from indonesia using transaction data from the jakarta stock exchange i find three pieces of evidence which indicate that domestic investors have an information advantage over foreign investors first foreign investors systematically buy at higher and sell at lower intra day prices than domestic investors second foreign investors tend to sell prior to large positive returns finally the permanent impact of foreign purchases is smaller than that of domestic purchases over time prices at which foreign investors trade have worsened while foreign selling prior to positive returns has disappeared

fragmented property rights and royalty bargaining abstract we consider production by a firm that relies on the patent rights that are held by other actors before production can take place bargains have to be struck with each patent holder over the royalty per unit produced in the negotiations a patent holder must be mindful of the fact that a large royalty will increase the product price and lower demand for the final product hence each patent holder would prefer to gain a large royalty at the expense of rivals when the producer makes the first offer in an alternating offer framework we analyze whether it should conduct negotiations sequentially with some grouping of patent holders or simultaneously we demonstrate that the producer will prefer simultaneous negotiation an individual patent holder would prefer to negotiate early with the producer and then to see remaining rights holders negotiate simultaneously a firm that holds several patents would want to negotiate royalties on each one sequentially and then have simultaneous negotiation of payments to other rights holders

hot money accounting labels and the permanence of capital flows to developing countries an empirical investigation using maximum likelihood kalman filtering techniques and non parametric variance ratio statistics we gauge the relative importance of permanent and temporary components of capital flows to latin american and asian developing countries over the period 1988 1997 for the broad categories of flows in the capital account equity flows ef bond flows bf official flows of commercial bank credit bc and foreign direct investment fdi we find relatively low permanent components in ef bf and of while commercial bc flows appear to contain quite large permanent components and fdi flows are almost entirely permanent these results have a natural interpretation and clear policy implications

information immobility and foreign portfolio investment we examine how residents of the united states allocate their stock portfolios internationally we find that a large u s foreign direct investment fdi position in a destination country in 1990 is associated with a relatively large stock portfolio position in that country in the 2001 2006 period moreover a change in the u s fdi position from 1980 to 1990 helps predict the change in the u s foreign portfolio investment position from 1994 to 2006 these results are rationalized by van nieuwerburgh and veldkamp s 2009 equilibrium model of learning and portfolio choice under an information processing constraint fdi establishes marginal differences in the endowments of information about different countries which later translate into differences in stock portfolio holdings we control for cross country differences in capital controls proximity along different dimensions corporate governance and economic and capital market development our results also hold for the g6 countries collectively jel f21 f36 g11

delay in multilateral bargaining under complete information abstract this paper analyzes a complete information infinite horizon multilateral bargaining model in which one player bargains with each of the other players one at a time and binding cash offer contracts are used to govern transactions under a weak stationarity condition on equilibrium strategies we characterize the set of equilibria for the game we show that when players are sufficiently patient significant delay in reaching agreements may emerge and this delay can become longer quickly as the number of involved parties rises indeed when the number of bargainers is large perpetual disagreement can occur in equilibrium journal of economic literature classification numbers c78 d23 d62

bargaining with durable offers and endogenous timing abstract the timing structure of a bargaining game is crucial in the static bargaining model of j nash 1953 econometrica 21 128 140 any division of the surplus is a possible equilibrium in the alternating offer model of a rubinstein 1982 econometrica 50 97 109 there is a unique subgame perfect nash equilibrium spne this paper takes a step toward endogenizing the timing of offers by expanding the strategy space to include the duration of the offer and permitting but not imposing simultaneous moves we find that virtually any division is a possible spne whenever simultaneous accept reject decisions are permitted

history gravity and international finance abstract we analyse patterns of bilateral financial investment using data on us holdings of foreign bonds we document a history effect in which holdings seven decades ago continue to influence holdings today 10 15 of the cross country variation in us investors foreign bond holdings is explained by holdings 70 years ago plausibly reflecting fixed costs of market entry and exit and endogenous learning this effect is twice as large for bonds denominated in currencies other than the dollar suggesting the existence of even higher fixed costs of initiating us foreign investment in such currencies our findings point to history and path dependence as key sources of financial market segmentation

a bargaining model with incomplete information about time preferences etude d un jeu de negociation strategique sequentiel avec information incomplete caracterisation d une classe d equilibres sequentiels appeles equilibres sequentiels de negociation et demonstration de l unicite de cet equilibre

the pecking order of cross border investment abstract is there a pecking order of cross border investment in that countries become financially integrated through some types of investment rather than others using a novel database of bilateral capital stocks for all types of investment fdi portfolio equity securities debt securities as well as loans for a broad set of 77 countries we show that such a pecking order indeed exists the paper focuses on two key determinants of this pecking order information frictions and the quality of host country institutions overall we find that in particular fdi and to some extent also loans are substantially more sensitive to information frictions than investment in portfolio equity and debt securities we also show that the share as well as the size of fdi that a country receive are largely insensitive to institutional factors in host countries while portfolio investment is by far the most sensitive to the quality of institutions this provides new evidence in favor of some hypotheses but contradicts others put forward in the literature on trade in financial assets

information and capital flows the determinants of transactions in financial assets abstract we show that a gravity model explains international transactions in financial assets at least as well as goods trade transactions our results support the hypothesis that informational asymmetries are responsible for the strong negative relationship between asset trade and distance this result is very important for theories of asset trade portfolio adjustments and home bias we strengthen it by investigating the roles of explicit informational variables as well as distance in explaining separately cross border trade in corporate equities corporate bonds and government bonds

a pecking order of capital inflows and international tax principles abstract even though financial markets today show a high degree of integration the world capital market is still far from the textbook story of high capital mobility the purpose of this paper is to highlight key sources of market failure in the context of international capital flows and to provide guidelines for efficient tax structure in the presence of capital market imperfections the analysis distinguishes three types of international capital flows foreign portfolio debt investment foreign portfolio equity investment and foreign direct investment the paper emphasizes the efficiency of a non uniform tax treatment of the various vehicles of international capital flows

the geography of trade in goods and asset holdings gravity models have been widely used to describe bilateral trade in goods portes and rey portes r rey h 2005 the determinants of cross border equity flows journal of international economics 65 2 269 296 applied this framework to cross border equity flows and found that distance which proxies information asymmetries is a surprisingly very large barrier to cross border asset trade we adopt a different point of view and explore the complementarity between bilateral trade in goods and bilateral asset holdings in a simultaneous gravity equations framework providing different instruments for both endogenous variables we show that a 10 increase in bilateral trade raises bilateral asset holdings by 6 to 7 the reverse causality is also significant albeit smaller controlling for trade the impact of distance on asset holdings is drastically reduced keywords gravity models international finance international trade simultaneous equations

location matters an examination of trading profits the electronic trading system xetra of the german security exchange provides a unique data source on the equity trades of 756 professional traders located in 23 different cities and eight european countries we explore informational asymmetries across the trader population traders located outside germany in non german speaking cities show lower proprietary trading profit their underperformance is not only statistically significant it is also of economically significant magnitude and occurs for the 11 largest german blue chip stocks we also examine whether a trader location in frankfurt as the financial center or local proximity of the trader to the corporate headquarters of the traded stock or affiliation with a large financial institution results in superior trading performance the data provide no evidence for a financial center advantage or of increasing institutional scale economies in proprietary trading however we find evidence for an information advantage due to corporate headquarters proximity for high frequency intraday trading

portfolio capital flows hot or cold a distinction is often made between short term and long term capital flows the former are deemed unstable hot money and the latter are deemed stable cold money using time series analysis of balance of payments data for five industrial and five developing countries we find that in most cases the labels short term and long term do not provide any information about the time series properties of the flow in particular long term flows are often as volatile as short term flows and the time it takes for an unexpected shock to a flow to die out is similar across flows long term flows are also at least as unpredictable as short term flows and knowledge of the type of flow does not improve the ability to forecast the aggregate capital account copyright 1995 by oxford university press

corruption and cross border investment in emerging markets firm level evidence abstract this paper studies the joint impact of corruption on the entry mode and volume of inward foreign direct investment fdi using a unique firm level data set we find that corruption not only reduces inward fdi but also shifts the ownership structure towards joint ventures the latter finding supports the view that corruption increases the value of using a local partner to cut through the bureaucratic maze however r d intensive firms are found to favor sole ownership

fdi debt and capital controls abstract we examine the link between financial sector fdi flows banking debt flows and capital controls in emerging market economies during episodes of large gross capital inflows surges we find that fdi surges in the financial sector behave remarkably similar to surges in banking debt flows they are associated with boom bust cycles in gdp and expansions of credit in foreign currency unlike surges in fdi in the non financial sectors moreover global and contagion factors have a strong explanatory power in explaining surges in financial fdi and banking debt flows compared to surges in non financial sectors but capital controls have the opposite effect on the two types of flows restrictions on short term debt flows tend to decrease the likelihood of surges in banking debt flows but increase the likelihood of surges in financial sector fdi

the composition of international capital flows risk sharing through foreign direct investment abstract evidence on international capital flows suggests that foreign direct investment fdi is less volatile than other financial flows to explain this finding i model international capital flows under the assumptions of imperfect enforcement of financial contracts and inalienability of fdi imperfect enforcement of contracts leads to endogenous financing constraints and the pricing of default risk inalienability implies that it is not as advantageous to expropriate fdi relative to other flows these features combine to give a risk sharing advantage to fdi over other capital flows this risk sharing advantage of fdi translates into a lower default premium and lower sensitivity to changes in a country s financing constraint the model offers the new implication that financially constrained countries should borrow relatively more through fdi this is because fdi is harder to expropriate and not because fdi is more productive or less volatile using several creditworthiness and country risk ratings to measure financing constraints i present new evidence linking fdi and financing constraints moreover numerical simulations of the model generate stronger serial correlation for fdi than for other flows into developing countries this corroborates the view that non fdi flows are more short term and more likely to change direction

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

why is capital so immobile internationally possible explanations and implications for capital income taxation the evidence on international capital immobility is extensive including the lack of international portfolio diversification real interest differentials across countries and the high correlation between domestic savings and investment the authors develop a model with asymmetric information between countries that helps rationalize all the above observations and then examine the implications of this model for optimal domestic tax policy without asymmetric information past work showed that small open economies should not impose corporate income taxes with asymmetric information the optimal policy instead involves government subsidies to capital imports some omitted factors that argue against subsidizing capital imports are explored briefly copyright 1996 by american economic association

the currency composition of international portfolio assets in this paper we empirically assess the importance of gravity type variables and measures of macroeconomic and financial volatilities in explaining portfolio holdings denominated across the main global currencies us dollar usd euro eur pound sterling gbp japanese yen jpy and swiss franc chf our findings underscore the importance of trade ties and common membership euro area we also find that international positions co move with the level of macroeconomic and financial uncertainty importantly we identify heterogeneous patterns at a currency level

why doesn t capital flow from rich to poor countries an empirical investigation we examine the empirical role of difierent explanations for the lack of ows of capital from rich to poor countries the lucas paradox the theoretical explanations include difierences in fundamentals across countries and capital market imperfections we show that during 1970i2000 low institutional quality is the leading explanation for example improving peru s institutional quality to australia s level implies a quadrupling of foreign investment recent studies emphasize the role of institutions for achieving higher levels of income but remain silent on the speciflc mechanisms our results indicate that foreign investment might be a channel through which institutions afiect long run development

direct foreign ownership institutional investors and firm characteristics in this paper we characterize foreign ownership using a dataset of ownership and attributes of swedish rms the analysis reveals that foreigners show a preference for large rms rms paying low dividends and rms with large cash positions on their balance sheets when we further analyze the preference for large rms we nd that market liquidity and presence in international markets measured through export sales or listings on other exchanges seem to characterize foreign holdings better than rm size alone foreigners also tend to underweight rms with a dominant owner importantly we demonstrate that most of the features associated with foreign ownership are driven by the fact that foreign investors typically are mutual funds or other institutional investors hence we identify an institutional investor bias rather than a foreign investor bias finally using ownership data on a country level we conclude that the results are particularly strong among u s investors who comprise the largest institutions among foreign investors 2001 elsevier science s a all rights reserved jel classixcation g1 g15

international diversification during the financial crisis a blessing for equity investors abstract this paper empirically investigates international equity investors foreign portfolios before and during the financial crisis by estimating a gravity model for 22 source and 42 destination countries during 2001 2009 the results show a significant negative relationship between foreign equity holdings and stock market correlations during the financial crisis while there is no relationship before the crisis when distinguishing between active and passive rebalancing the results clearly indicate a significantly negative relationship between active rebalancing and correlations during the crisis these findings hold as well at the individual country level when allowing for source country specific coefficients an analysis from the perspective of each source country s representative investor who optimizes mean variance utility shows that active rebalancing provides sizeable utility gains during the crisis finally there is even a significantly negative relationship between future correlations and active rebalancing since 2007 suggesting that prior to the crisis investors already repositioned their country weights to markets with lower correlation during 2008 2009