Bao Cong Nguyen To, Bao Khac Quoc Nguyen, Tam Van Thien Nguyen, Phuong Thi Minh Nguyen
We examine the role of the vaccine initiation rate in mitigating the international stock market volatility during COVID-19. Our findings reflect that the positive effect of the vaccine initiation rate assists in stabilizing the international stock markets. This possible effect is stronger for developed markets, and countries with the vaccine initiation rate are above its overall average. The mass vaccinations signal a lower probability of stringent government responses to the pandemic. The low level of trust in governments’ actions makes the investors hold compliance fears and doubt that the negative effects of COVID-19 may be longer, especially for emerging markets.
{"title":"Vaccine Initiation Rate and Volatility in the International Stock Market during COVID-19","authors":"Bao Cong Nguyen To, Bao Khac Quoc Nguyen, Tam Van Thien Nguyen, Phuong Thi Minh Nguyen","doi":"10.2139/ssrn.3945810","DOIUrl":"https://doi.org/10.2139/ssrn.3945810","url":null,"abstract":"We examine the role of the vaccine initiation rate in mitigating the international stock market volatility during COVID-19. Our findings reflect that the positive effect of the vaccine initiation rate assists in stabilizing the international stock markets. This possible effect is stronger for developed markets, and countries with the vaccine initiation rate are above its overall average. The mass vaccinations signal a lower probability of stringent government responses to the pandemic. The low level of trust in governments’ actions makes the investors hold compliance fears and doubt that the negative effects of COVID-19 may be longer, especially for emerging markets.","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129618511","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Substantially increased global corporate debt in the past decade revives macro stability concerns of foreign currency liability in emerging countries. Due to data unavailability, there is limited understanding of how the debt proceeds are used. We empirically study the use of proceeds of debt issuance in different currencies using a rich firm-level dataset from Korea which provides information on the currency denomination of both assets and liabilities of firms. We establish six key empirical findings: 1) Consistent with a carry trade hypothesis, firms that issue foreign currency short-term loans increase local currency liquid assets. 2) Consistent with a precautionary saving hypothesis, firms that issue foreign currency loans, regardless of the maturity of loans, increase foreign currency liquid assets. 3) Consistent with the corporate finance pecking order prediction, firms that issue local currency loans reduce both local and foreign currency liquid assets and lower dividend payouts. 4) Investment decreases with short-term foreign currency debt but increases with other types of debt. 5) Stronger carry trade and precautionary saving behavior are observed when the interest rate differential and exchange rate volatility are high, respectively. 6) Sectors that are financially dependent or export exposed have shown a stronger carry trade and precautionary saving behavior.
{"title":"Carry Trade and Precautionary Saving of Foreign Currency Debt: Evidence from Korean Firms","authors":"S. Wu, Annie Soyean Lee","doi":"10.2139/ssrn.3929036","DOIUrl":"https://doi.org/10.2139/ssrn.3929036","url":null,"abstract":"Substantially increased global corporate debt in the past decade revives macro stability concerns of foreign currency liability in emerging countries. Due to data unavailability, there is limited understanding of how the debt proceeds are used. We empirically study the use of proceeds of debt issuance in different currencies using a rich firm-level dataset from Korea which provides information on the currency denomination of both assets and liabilities of firms. We establish six key empirical findings: 1) Consistent with a carry trade hypothesis, firms that issue foreign currency short-term loans increase local currency liquid assets. 2) Consistent with a precautionary saving hypothesis, firms that issue foreign currency loans, regardless of the maturity of loans, increase foreign currency liquid assets. 3) Consistent with the corporate finance pecking order prediction, firms that issue local currency loans reduce both local and foreign currency liquid assets and lower dividend payouts. 4) Investment decreases with short-term foreign currency debt but increases with other types of debt. 5) Stronger carry trade and precautionary saving behavior are observed when the interest rate differential and exchange rate volatility are high, respectively. 6) Sectors that are financially dependent or export exposed have shown a stronger carry trade and precautionary saving behavior.","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"178 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116901738","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This chapter reviews recent empirical evidence on large firms and non-productive strategies that hinder creative destruction and reallocation. The focus is on three types of non-productive strategies: political connections, non-productive patenting, and anti-competitive acquisitions. Across different contexts using granular micro data sets, we overwhelmingly see that as firms gain market shares, they rely more on non-productive strategies but reduce their productive, innovation-based strategies. I discuss theoretical channels, aggregate implications, and potentials for some policies.
{"title":"Barriers to Creative Destruction: Large Firms and Non-Productive Strategies","authors":"S. Baslandze","doi":"10.2139/ssrn.3927528","DOIUrl":"https://doi.org/10.2139/ssrn.3927528","url":null,"abstract":"This chapter reviews recent empirical evidence on large firms and non-productive strategies that hinder creative destruction and reallocation. The focus is on three types of non-productive strategies: political connections, non-productive patenting, and anti-competitive acquisitions. Across different contexts using granular micro data sets, we overwhelmingly see that as firms gain market shares, they rely more on non-productive strategies but reduce their productive, innovation-based strategies. I discuss theoretical channels, aggregate implications, and potentials for some policies.","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"43 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132225064","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
M. Lambert, Nicolas Moreno, Ludovic Phalippou, Alexandre Scivoletto
A large sample of employee reviews shows a decline in satisfaction after a Leveraged Buy-Out (LBO), but with significant heterogeneity. The key driver is the previous ownership structure. For Private-to-Private transactions, dissatisfaction is concentrated in non-management employees and comes mostly from how management treats them. In Public-to-Private transactions, the dissatisfaction is stronger, multi-faceted, and present for all employees, including management. Industry and Private Equity sponsor fixed effects are significant, but second order. Other ownership changes (M&A, IPO) trigger less dissatisfaction.
{"title":"Employee Views of Leveraged Buy-Out Transactions","authors":"M. Lambert, Nicolas Moreno, Ludovic Phalippou, Alexandre Scivoletto","doi":"10.2139/ssrn.3926300","DOIUrl":"https://doi.org/10.2139/ssrn.3926300","url":null,"abstract":"A large sample of employee reviews shows a decline in satisfaction after a Leveraged Buy-Out (LBO), but with significant heterogeneity. The key driver is the previous ownership structure. For Private-to-Private transactions, dissatisfaction is concentrated in non-management employees and comes mostly from how management treats them. In Public-to-Private transactions, the dissatisfaction is stronger, multi-faceted, and present for all employees, including management. Industry and Private Equity sponsor fixed effects are significant, but second order. Other ownership changes (M&A, IPO) trigger less dissatisfaction.","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"22 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114158501","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
. We introduce continuous-time learning models of dynamic unobservable fund manager abilities under a nonlinear framework, with risk-neutral or risk-averse investors. In equilibrium, sensitivities of inferred manager abilities to fund returns’ innovation shocks are time nonmonotonic, inducing time-nonmonotonic flow-performance sensitivities and convexities. Funds’ exit probabilities change with time and fund sizes at any fund age. Our empirical evidence of nonmonotonic flow-performance sensitivities and convexities, and old funds’ increasing exit probability with fund age support our nonlinear framework, which current linear frameworks cannot explain. We also offer insights into the current empirical controversy of whether flow-performance relations are linear or convex.
{"title":"Fund Flows, Performance, and Exit Under Dynamic Unobservable Managing Ability","authors":"Dave Feldman, Jing Xu","doi":"10.2139/ssrn.3719953","DOIUrl":"https://doi.org/10.2139/ssrn.3719953","url":null,"abstract":". We introduce continuous-time learning models of dynamic unobservable fund manager abilities under a nonlinear framework, with risk-neutral or risk-averse investors. In equilibrium, sensitivities of inferred manager abilities to fund returns’ innovation shocks are time nonmonotonic, inducing time-nonmonotonic flow-performance sensitivities and convexities. Funds’ exit probabilities change with time and fund sizes at any fund age. Our empirical evidence of nonmonotonic flow-performance sensitivities and convexities, and old funds’ increasing exit probability with fund age support our nonlinear framework, which current linear frameworks cannot explain. We also offer insights into the current empirical controversy of whether flow-performance relations are linear or convex.","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"25 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127506209","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Formal theoretical proofs show modeling of stock returns on `everywhere differentiable' continuums always is inappropriate to modeling of rational expectations equilibriums (REE). Simultaneously, modeling of stock returns in discrete time always is robust to modeling of each of REE, or feasibility of deviations from REE. In stated respect, modeling in discrete time results in dichotomous sufficiency conditions for each of conformance with, or deviation of investors' priors from REE. Bane of modeling in continuous time is non-dichotomization of connectedness property of stock prices from evolution of stock prices, a contradiction to the norm that connectedness properties be independent of specific elements that are located in topological spaces. In aggregate, while modeling in continuous time induces positive relations between risk (volatility) and returns, contrary to rational expectations, it is relatively low realizations for volatility that have higher risk of generation of negative returns.
{"title":"Everywhere Differentiable Continuums, Mathematical Spaces, and Axioms: Modeling of Financial Phenomena","authors":"Oghenovo A. Obrimah","doi":"10.2139/ssrn.3861264","DOIUrl":"https://doi.org/10.2139/ssrn.3861264","url":null,"abstract":"Formal theoretical proofs show modeling of stock returns on `everywhere differentiable' continuums always is inappropriate to modeling of rational expectations equilibriums (REE). Simultaneously, modeling of stock returns in discrete time always is robust to modeling of each of REE, or feasibility of deviations from REE. In stated respect, modeling in discrete time results in dichotomous sufficiency conditions for each of conformance with, or deviation of investors' priors from REE. Bane of modeling in continuous time is non-dichotomization of connectedness property of stock prices from evolution of stock prices, a contradiction to the norm that connectedness properties be independent of specific elements that are located in topological spaces. In aggregate, while modeling in continuous time induces positive relations between risk (volatility) and returns, contrary to rational expectations, it is relatively low realizations for volatility that have higher risk of generation of negative returns.","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"27 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130031438","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study highlights the importance of investment-specific technological (IST) progress in affecting the business cycle, which is identified by properly specifying shock propagation mechanisms. IST progress differentiates the value of investment goods across different vintages, which raises payouts from new investments while inducing capital losses of older investment goods. I develop a DSGE model that focuses on asset valuation by capital owners, considering their net wealth. The study shows that an IST shock raises investment and output significantly in contrast to the existing studies that estimate DSGE models. When associated with other shocks related to financial market mechanisms, the IST shock accounts for approximately 35% of output fluctuations. These findings are similar to those reported in the studies that adopted less stringent shock propagation mechanisms such as structural VAR models. These findings can provide a way to reconcile the significantly different results reported in the literature until date.
{"title":"Investment-Specific Technological Progress: The Perspective of Capital Owners","authors":"Yosuke Jin","doi":"10.2139/ssrn.3941839","DOIUrl":"https://doi.org/10.2139/ssrn.3941839","url":null,"abstract":"This study highlights the importance of investment-specific technological (IST) progress in affecting the business cycle, which is identified by properly specifying shock propagation mechanisms. IST progress differentiates the value of investment goods across different vintages, which raises payouts from new investments while inducing capital losses of older investment goods. I develop a DSGE model that focuses on asset valuation by capital owners, considering their net wealth. The study shows that an IST shock raises investment and output significantly in contrast to the existing studies that estimate DSGE models. When associated with other shocks related to financial market mechanisms, the IST shock accounts for approximately 35% of output fluctuations. These findings are similar to those reported in the studies that adopted less stringent shock propagation mechanisms such as structural VAR models. These findings can provide a way to reconcile the significantly different results reported in the literature until date.","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131552031","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines how investors perceive business group membership in Korea during the COVID-19 pandemic. Evidence of a time-varying and heterogeneous value of affiliation emerges from stock price performance analysis. I find that investors discount business group affiliation during a market collapse, but are willing to pay a premium for affiliation during market recovery. Overall, this pattern is more pronounced for financially weak affiliates and large business groups. Results also show that business group membership alleviates investors’ concerns regarding financial flexibility highlighting the role of internal capital markets as a substitute to external finance.
{"title":"Investors’ Perception of Business Group Membership during An Economic Crisis: Evidence from the COVID-19 Pandemic","authors":"Romain Ducret","doi":"10.2139/ssrn.3889505","DOIUrl":"https://doi.org/10.2139/ssrn.3889505","url":null,"abstract":"This paper examines how investors perceive business group membership in Korea during the COVID-19 pandemic. Evidence of a time-varying and heterogeneous value of affiliation emerges from stock price performance analysis. I find that investors discount business group affiliation during a market collapse, but are willing to pay a premium for affiliation during market recovery. Overall, this pattern is more pronounced for financially weak affiliates and large business groups. Results also show that business group membership alleviates investors’ concerns regarding financial flexibility highlighting the role of internal capital markets as a substitute to external finance.","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128267485","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Laura Leal, Haaris Mateen, Makoto Nirei, J. Scheinkman
Nirei and Scheinkman (2021) proposed an equilibrium model of price adjustments with menu-costs with a finite number of firms and derived a "reproduction number" for repricing and a limit functional form for the distribution of the number of simultaneously price-adjusting firms. We show that the distribution of price-changes in data from the Billion Prices Project is well fitted by this functional form and exhibits a reproduction number that is close to unity, indicating that complementarity in price-changes plays a major role in repricings.
{"title":"Repricing Avalanches in the Billion-Prices Data","authors":"Laura Leal, Haaris Mateen, Makoto Nirei, J. Scheinkman","doi":"10.2139/ssrn.3907149","DOIUrl":"https://doi.org/10.2139/ssrn.3907149","url":null,"abstract":"Nirei and Scheinkman (2021) proposed an equilibrium model of price adjustments with menu-costs with a finite number of firms and derived a \"reproduction number\" for repricing and a limit functional form for the distribution of the number of simultaneously price-adjusting firms. We show that the distribution of price-changes in data from the Billion Prices Project is well fitted by this functional form and exhibits a reproduction number that is close to unity, indicating that complementarity in price-changes plays a major role in repricings.","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"29 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123516415","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The COVID-19 epidemic, declared by the World health Organization as a global epidemic on 11th of March 2020, is now not only a global health crisis but also a global economic and financial crisis. In this situation Sri Lanka’s all major sources of income are at high risk. This research is focused the economic impact of COVID-19 on Sri Lankan economy specific the three major components of the economy in Agriculture, Industry & Service sector. Those are contributed their share to the GDP at current prices by 7.3%, 28.4%, 58.3% respectively in the first quarter of 2020.As a result of the COVID-19 outbreak many sectors in the economy was in deep decline. Therefore GDP estimates of the first quarter of 2020, have reported in Agriculture, & Industrial activities by 5.6% and 7.8% respectively. Although during the first Quarter of 2020 services sector activities have been continued further. Also the severe downturn in the tourism industry, which has been instrumental in boosting Sri Lanka’s foreign reserves, has been a major challenge at Present. The Sri Lanka Rupee is depreciating rapidly due to the depreciation of foreign reserves. In such a situation Sri Lanka is facing a serious challenge of sustaining economic growth by spending large amounts of foreign exchange on vaccinations and PCR & RAT tests required for virus control.
{"title":"Sri Lanka's Economy Plummeting under the Influence of COVID-19 Epidemic","authors":"S. Sandanayake","doi":"10.2139/ssrn.3914259","DOIUrl":"https://doi.org/10.2139/ssrn.3914259","url":null,"abstract":"The COVID-19 epidemic, declared by the World health Organization as a global epidemic on 11th of March 2020, is now not only a global health crisis but also a global economic and financial crisis. In this situation Sri Lanka’s all major sources of income are at high risk. This research is focused the economic impact of COVID-19 on Sri Lankan economy specific the three major components of the economy in Agriculture, Industry & Service sector. Those are contributed their share to the GDP at current prices by 7.3%, 28.4%, 58.3% respectively in the first quarter of 2020.As a result of the COVID-19 outbreak many sectors in the economy was in deep decline. Therefore GDP estimates of the first quarter of 2020, have reported in Agriculture, & Industrial activities by 5.6% and 7.8% respectively. Although during the first Quarter of 2020 services sector activities have been continued further. Also the severe downturn in the tourism industry, which has been instrumental in boosting Sri Lanka’s foreign reserves, has been a major challenge at Present. The Sri Lanka Rupee is depreciating rapidly due to the depreciation of foreign reserves. In such a situation Sri Lanka is facing a serious challenge of sustaining economic growth by spending large amounts of foreign exchange on vaccinations and PCR & RAT tests required for virus control.","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"79 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-08-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131904110","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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