Corporate Governance in the Multinational Enterprise: A Financial Contracting Perspective
Diemo Dietrich, Björn Jindra
International Business Review,
2010
Abstract
The aim of this paper is to bring economics-based finance research more into the focus of international business theory. On the basis of an analytical model that introduces financial constraints into incomplete contracting in an international vertical trade relationship, we propose an integrated framework that facilitates the study of the interdependencies between internalisation decisions, firm-internal allocations of control rights, and the debt capacity of firms. We argue that the financial constraint of an MNE and/or its supplier should be considered as an important determinant of internal governance structures, complementary to, and interacting with, institutional factors and proprietary knowledge.
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Stages of the 2007/2008 Global Financial Crisis: Is there a Wandering Asset-Price Bubble?
Lucjan T. Orlowski
Einzelveröffentlichungen,
No. 3,
2008
Abstract
This study argues that the severity of the current global financial crisis is strongly influenced by changeable allocations of the global savings. This process is named a “wandering asset bubble”. Since its original outbreak induced by the demise of the subprime mortgage market and the mortgage-backed securities in the U.S., this crisis has reverberated across other credit areas, structured financial products and global financial institutions. Four distinctive stages of the crisis are identified: the meltdown of the subprime mortgage market, spillovers into broader credit market, the liquidity crisis epitomized by the fallout of Bear Sterns with some contagion effects on other financial institutions, and the commodity price bubble. Monetary policy responses aimed at stabilizing financial markets are proposed.
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Deriving the Term Structure of Banking Crisis Risk with a Compound Option Approach: The Case of Kazakhstan
Stefan Eichler, Alexander Karmann, Dominik Maltritz
Discussion paper, Series 2: Banking and financial studies, No. 01/2010,
No. 1,
2010
Abstract
We use a compound option-based structural credit risk model to infer a term structure of banking crisis risk from market data on bank stocks in daily frequency. Considering debt service payments with different maturities this term structure assigns a separate estimator for short- and long-term default risk to each maturity. Applying the Duan (1994) maximum likelihood approach, we find for Kazakhstan that the overall crisis probability was mainly driven by short-term risk, which increased from 25% in March 2007 to 80% in December 2008. Concurrently, the long-term default risk increased from 20% to only 25% during the same period.
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Smuggling Illegal versus Legal Goods across the U.S.-Mexico Border: A Structural Equations Model Approach
A. Buehn, Stefan Eichler
Southern Economic Journal,
No. 2,
2009
Abstract
We study the smuggling of illegal and legal goods across the U.S.-Mexico border from 1975 to 2004. Using a Multiple Indicators Multiple Causes (MIMIC) model we test the microeconomic determinants of both smuggling types and reveal their trends. We find that illegal goods smuggling decreased from $116 billion in 1984 to $27 billion in 2004 as a result of improved labor market conditions in Mexico and intensified U.S. border enforcement. Smuggling legal goods is motivated by tax and tariff evasion. While export misinvoicing fluctuated at low levels, import misinvoicing switched from underinvoicing to overinvoicing after Mexico's accession to the GATT and the North American Free Trade Agreement (NAFTA) induced lower tariffs.
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Lending Technology, Bank Organization and Competition
Hans Degryse, Steven Ongena, Günseli Tümer-Alkan
Journal of Financial Transformation,
2009
Abstract
This paper reviews recent theoretical and empirical studies investigating how both bank technology and organization shape bank-borrower interactions. We refer to two related concepts for bank technology. First, the technologies banks employ in loan granting decisions and second, the advances in information technology linked to the bank's lending technology. We also summarize and interpret the theoretical and empirical work on bank organization and its influence on lending technologies. We show that the choice of lending technology and bank organization depend heavily on the availability of information, the technological progress in the collection of information, as well as the banking market structure and the legal environment. We draw important policy conclusions from the literature. Competition authorities and supervisors have to remain alert to the consequences of the introduction of any new technology because: (1) advances in technology do not necessarily lead to more intense banking competition, and (2) the impact of technological and financial innovation on financial efficiency and stability depends on the incentives of the entire „loan production chain.‟
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Is the European Monetary Union an Endogenous Currency Area? The Example of the Labor Markets
Herbert S. Buscher, Hubert Gabrisch
IWH Discussion Papers,
No. 7,
2009
Abstract
Our study tries to find out whether wage dynamics between Euro member countries became more synchronized through the adoption of the common currency. We calculate bivarate correlation coefficients of wage and wage cost dynamics and run a model of endogenously induced changes of coefficients, which are explained by other variables being also endogenous: trade intensity, sectoral specialization, financial integration. We used a panel data structure to allow for cross-section weights for country-pair observations. We use instrumental variable regressions in order to disentangle exogenous from endogenous influences. We applied these techniques to real and nominal wage dynamics and to dynamics of unit labor costs. We found evidence for persistent asymmetries in nominal wage formation despite a single currency and monetary policy, responsible for diverging unit labor costs and for emerging trade imbalances among the EMU member countries.
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Contestability, Technology and Banking
S. Corvoisier, Reint E. Gropp
ZEW Discussion Papers, No. 09-007,
No. 7,
2009
Abstract
We estimate the effect of internet penetration on retail bank margins in the euro area. Based on an adapted Baumol [1982] type contestability model, we argue that the internet has reduced sunk costs and therefore increased contestability in retail banking. We test this conjecture by estimating the model using semi-aggregated data for a panel of euro area countries. We utilise time series and cross-sectional variation in internet penetration. We find support for an increase in contestability in deposit markets, and no effect for loan markets. The paper suggests that for time and savings deposits, the presence of brick and mortar bank branches may no longer be of first order importance for the assessment of the competitive structure of the market.
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Globalisation and the Competitiveness of the Euro Area
Filippo di Mauro, Katrin Forster
ECB Occasional Paper Series,
No. 97,
2008
Abstract
Against the background of increasing competition and other significant structural changes implied by globalisation, maintaining and enhancing competitiveness has evolved into one of the prime concerns in most countries. Following up on previous work (see in particular ECB Occasional Papers No. 30 and No. 55), this Occasional Paper examines the latest developments and prospects for the competitiveness and trade performance of the euro area and the euro area countries. Starting from an analysis of most commonly used, traditional competitiveness indicators, the paper largely confirms the findings of previous studies that there have been substantial adjustments in euro area trade. Euro area firms have taken advantage of the new opportunities offered by globalisation, and have at the same time been increasingly challenged by emerging economies. This is primarily reflected in the loss of export market shares which have been recorded over the last decade. While these can partly be related to the losses in the euro area's price competitiveness, further adjustment also seems warranted with regard to the export specialisation. Compared with other advanced competitors, the euro area remains relatively more specialised in labour intensive categories of goods and has shown only a few signs of a stronger specialisation in research-intensive goods. Nevertheless, the paper generally calls for a more cautious approach when assessing the prospects for euro area competitiveness, as globalisation has made it increasingly difficult to define and measure competitiveness. Stressing the need to take a broader view on competitiveness, specifically with a stronger emphasis on productivity performance, the paper also introduces a more elaborate framework that takes into account the interactions between country-specific factors and firm-level productivity. It thus makes it possible to construct more broadly defined competitiveness measures. Pointing to four key factors determining the global competitiveness of euro area countries - market accessibility, market size, technological leadership of firms and institutional set-up - the analysis provides further arguments for continuing efforts to increase market integration and strengthen the competitive environment within Europe as a mean of enhancing resource allocation and coping with the challenges globalisation creates.
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Will Oil Prices Decline Over the Long Run?
Filippo di Mauro, Robert K. Kaufmann, Pavlos Karadeloglou
ECB Occasional Paper Series,
No. 98,
2008
Abstract
At present, oil markets appear to be behaving in a fashion similar to that in the late 1970s and early 1980s when oil prices rose sharply over an extended period. Furthermore, like at that time, analysts are split on whether such increases will persist or reverse, and if so by how much. The present paper argues that the similarities between the two episodes are not as strong as they might appear at first sight, and that the likelihood of sharp reversals in prices is not particularly great. There are a number of reasons in support of the view that it is unlikely that the first two decades of this century will mimic the last two decades of the previous century. First, oil demand is likely to grow significantly in line with strong economic growth in non-OECD countries. Second, on the supply side, OPEC is likely to enhance its control over markets over the next two decades, as supply increases in newly opened areas will only partially offset declining rates of production in other geologically mature non-OPEC oil regions. Moreover, while concerns about climate change will spur global efforts to reduce carbon emissions, these efforts are not expected to reduce oil demand. Finally, although there is much talk about alternative fuels, few of these are economically viable at the prices currently envisioned, and given the structural impediments, there is a reduced likelihood that the market will be able to generate sufficient quantities of these alternative fuels over the forecast horizon. The above factors imply that oil prices are likely to continue to exceed the USD 70 to USD 90 range over the long term.
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