Pub Date : 2011-11-01DOI: 10.1111/j.1467-9396.2011.00984.x
Larry D. Qiu, Shengzu Wang
This paper examines a multinational's choice between greenfield investment and cross‐border merger when it enters another country via foreign direct investment (FDI) and faces the host country's FDI policy. Greenfield investment incurs a fixed plant setup cost, whereas the foreign firm obtains only a share of the joint profit from a cross‐border merger under the restriction of the FDI policy. This trade‐off is affected by market demand, cost differential, and market competition, among other things. The host country's government chooses its FDI policy to affect (or alter) the multinational's entry mode to achieve the maximum social welfare for the domestic country. We characterize the conditions shaping the optimal FDI policy and offer intuitions on FDI patterns in developing and developed countries.
{"title":"FDI Policy, Greenfield Investment and Cross‐Border Mergers","authors":"Larry D. Qiu, Shengzu Wang","doi":"10.1111/j.1467-9396.2011.00984.x","DOIUrl":"https://doi.org/10.1111/j.1467-9396.2011.00984.x","url":null,"abstract":"This paper examines a multinational's choice between greenfield investment and cross‐border merger when it enters another country via foreign direct investment (FDI) and faces the host country's FDI policy. Greenfield investment incurs a fixed plant setup cost, whereas the foreign firm obtains only a share of the joint profit from a cross‐border merger under the restriction of the FDI policy. This trade‐off is affected by market demand, cost differential, and market competition, among other things. The host country's government chooses its FDI policy to affect (or alter) the multinational's entry mode to achieve the maximum social welfare for the domestic country. We characterize the conditions shaping the optimal FDI policy and offer intuitions on FDI patterns in developing and developed countries.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"144 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114672300","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}
Cassandra R. Cole, W. Ferguson, Ryan B. Lee, Kathleen A. McCullough
In today’s global marketplace, the internationalization decision has become increasingly relevant for a greater number of firms. We use the framework of the eclectic paradigm to empirically investigate the decision of U.S. reinsurers to internationalize based on their net exposure in both developed and developing nations. The reinsurance industry poses an interesting setting to study internationalization as we can measure the net exposure in a county given the requirements to report both ceded and assumed reinsurance. This allows for a better measure of the overall exposure reinsurers have in a given country. Of particular interest in exploring internationalization are the diversification benefits as well as the potential impact of free-trade initiatives and the economic development of the host country. We find that the characteristics impacting net reinsurance exposure vary based on the characteristics of the countries.
{"title":"Internationalization of the Reinsurance Industry: An Analysis of the Net Exposure of Reinsurers","authors":"Cassandra R. Cole, W. Ferguson, Ryan B. Lee, Kathleen A. McCullough","doi":"10.2139/ssrn.1121136","DOIUrl":"https://doi.org/10.2139/ssrn.1121136","url":null,"abstract":"In today’s global marketplace, the internationalization decision has become increasingly relevant for a greater number of firms. We use the framework of the eclectic paradigm to empirically investigate the decision of U.S. reinsurers to internationalize based on their net exposure in both developed and developing nations. The reinsurance industry poses an interesting setting to study internationalization as we can measure the net exposure in a county given the requirements to report both ceded and assumed reinsurance. This allows for a better measure of the overall exposure reinsurers have in a given country. Of particular interest in exploring internationalization are the diversification benefits as well as the potential impact of free-trade initiatives and the economic development of the host country. We find that the characteristics impacting net reinsurance exposure vary based on the characteristics of the countries.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"117 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132853726","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 proposes a model where heterogeneous firms choose whether to undertake R&D or not. Innovative firms are more productive, have larger investment opportunities and lower own funds for necessary tangible continuation investments than non-innovating firms. As a result, they are financially constrained while standard firms are not. The efficiency of the financial sector and a country’s institutional quality relating to corporate finance determine the share of R&D intensive firms and their comparative advantage in producing innovative goods. We illustrate how protection, R&D subsidies, and financial sector development improve access to external finance in distinct ways, support the expansion of innovative industries, and boost national welfare. International welfare spillovers depend on the interaction between terms of trade effects and financial frictions and may be positive or negative, depending on foreign countries’ trade position.
{"title":"Innovation, Trade, and Finance","authors":"P. Egger, C. Keuschnigg","doi":"10.1257/MIC.20120032","DOIUrl":"https://doi.org/10.1257/MIC.20120032","url":null,"abstract":"This paper proposes a model where heterogeneous firms choose whether to undertake R&D or not. Innovative firms are more productive, have larger investment opportunities and lower own funds for necessary tangible continuation investments than non-innovating firms. As a result, they are financially constrained while standard firms are not. The efficiency of the financial sector and a country’s institutional quality relating to corporate finance determine the share of R&D intensive firms and their comparative advantage in producing innovative goods. We illustrate how protection, R&D subsidies, and financial sector development improve access to external finance in distinct ways, support the expansion of innovative industries, and boost national welfare. International welfare spillovers depend on the interaction between terms of trade effects and financial frictions and may be positive or negative, depending on foreign countries’ trade position.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"137 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133102299","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}
In this study, we examine the relationship between the structure of financial systems and financial crises. Using cross-country data on financial structures and crises, we find that there is a significant short-term reversal in development of the banking sector and the stock market during both bank crises and market crashes, with the corporate bond market moving in the same direction as bank credit. However, the results are significant for countries with market-based financial systems but not for countries with bank-based financial systems. Emerging markets have mainly bank-based financial systems, which may explain why these markets require more time to recover from economic downturns after a financial crisis. Therefore, we argue that governments should emphasize a balanced financial system structure as it helps countries to recover from financial crises more quickly compared with countries that lack such balanced structures.
{"title":"Financial Crisis, Structure and Reform","authors":"Franklin Allen, Xian Gu, Oskar Kowalewski","doi":"10.2139/ssrn.1802252","DOIUrl":"https://doi.org/10.2139/ssrn.1802252","url":null,"abstract":"In this study, we examine the relationship between the structure of financial systems and financial crises. Using cross-country data on financial structures and crises, we find that there is a significant short-term reversal in development of the banking sector and the stock market during both bank crises and market crashes, with the corporate bond market moving in the same direction as bank credit. However, the results are significant for countries with market-based financial systems but not for countries with bank-based financial systems. Emerging markets have mainly bank-based financial systems, which may explain why these markets require more time to recover from economic downturns after a financial crisis. Therefore, we argue that governments should emphasize a balanced financial system structure as it helps countries to recover from financial crises more quickly compared with countries that lack such balanced structures.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121084484","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}
Jesse A. Ellis, Sara B. Moeller, Frederik Schlingemann, René M. Stulz
Using a sample of control cross-border acquisitions from 61 countries from 1990 to 2007, we find that acquirers from countries with better governance gain more from such acquisitions and their gains are higher when targets are from countries with worse governance. Other acquirer country characteristics are not consistently related to acquisition gains. For instance, the anti-self-dealing index of the acquirer has opposite associations with acquirer returns depending on whether the acquisition of a public firm is paid for with cash or equity. Strikingly, global effects in acquisition returns are at least as important as acquirer country effects. First, the acquirer's industry and the year of the acquisition explain more of the stock-price reaction than the country of the acquirer. Second, for acquisitions of private firms or subsidiaries, acquirers gain more when acquisition returns are high for acquirers from other countries. We find strong evidence that better alignment of interests between insiders and minority shareholders is associated with greater acquirer returns and weaker evidence that this effect mitigates the adverse impact of poor country governance.
{"title":"Globalization, Governance, and the Returns to Cross-Border Acquisitions","authors":"Jesse A. Ellis, Sara B. Moeller, Frederik Schlingemann, René M. Stulz","doi":"10.2139/ssrn.1734308","DOIUrl":"https://doi.org/10.2139/ssrn.1734308","url":null,"abstract":"Using a sample of control cross-border acquisitions from 61 countries from 1990 to 2007, we find that acquirers from countries with better governance gain more from such acquisitions and their gains are higher when targets are from countries with worse governance. Other acquirer country characteristics are not consistently related to acquisition gains. For instance, the anti-self-dealing index of the acquirer has opposite associations with acquirer returns depending on whether the acquisition of a public firm is paid for with cash or equity. Strikingly, global effects in acquisition returns are at least as important as acquirer country effects. First, the acquirer's industry and the year of the acquisition explain more of the stock-price reaction than the country of the acquirer. Second, for acquisitions of private firms or subsidiaries, acquirers gain more when acquisition returns are high for acquirers from other countries. We find strong evidence that better alignment of interests between insiders and minority shareholders is associated with greater acquirer returns and weaker evidence that this effect mitigates the adverse impact of poor country governance.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"25 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115199368","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 whether firms' auditor choice reflects the strength of corporate ethics. Based on a sample of 132,853 firm year observations from forty-six countries around the globe during the period from 1998 to 2007 and controlling for a number of firm- and country-level factors, we find that firms in countries where “high corporate ethical values” prevail are more likely to hire a Big 4 auditor. We also find that the positive effect of home country corporate ethical values on the likelihood of hiring a high-quality auditor is reinforced by the extent of the firm's board size. These results establish an indirect link between corporate ethics and financial reporting quality through the firms' choice of auditor.
{"title":"Corporate Ethics and Auditor Choice – International Evidence","authors":"Noor Houqe, Tony van Zijl, K. Dunstan, A. Karim","doi":"10.2139/ssrn.1588295","DOIUrl":"https://doi.org/10.2139/ssrn.1588295","url":null,"abstract":"This paper examines whether firms' auditor choice reflects the strength of corporate ethics. Based on a sample of 132,853 firm year observations from forty-six countries around the globe during the period from 1998 to 2007 and controlling for a number of firm- and country-level factors, we find that firms in countries where “high corporate ethical values” prevail are more likely to hire a Big 4 auditor. We also find that the positive effect of home country corporate ethical values on the likelihood of hiring a high-quality auditor is reinforced by the extent of the firm's board size. These results establish an indirect link between corporate ethics and financial reporting quality through the firms' choice of auditor.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-12-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117060208","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 managerial power view of executive compensation suggests that CEO membership of the compensation committee is an open invitation to rent extraction by self-serving executives. However, using data from New Zealand – where CEO compensation committee membership was relatively common until quite recently – we find that annual pay increments for CEOs with this apparent advantage averaged four percentage points less than those enjoyed by other CEOs during the 1998–2005 period. This puzzling result cannot be explained by omitted governance variables, risk-return tradeoff considerations, selection bias, or compensation mis-measurement. We find some weak evidence suggesting it may be consistent with a form of optimal contracting.
{"title":"CEO Presence on the Compensation Committee: A Puzzle","authors":"G. Boyle, Helen Roberts","doi":"10.2139/ssrn.1650826","DOIUrl":"https://doi.org/10.2139/ssrn.1650826","url":null,"abstract":"The managerial power view of executive compensation suggests that CEO membership of the compensation committee is an open invitation to rent extraction by self-serving executives. However, using data from New Zealand – where CEO compensation committee membership was relatively common until quite recently – we find that annual pay increments for CEOs with this apparent advantage averaged four percentage points less than those enjoyed by other CEOs during the 1998–2005 period. This puzzling result cannot be explained by omitted governance variables, risk-return tradeoff considerations, selection bias, or compensation mis-measurement. We find some weak evidence suggesting it may be consistent with a form of optimal contracting.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"30 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-07-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122324399","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 study a sample of Continental European firms for changes in the sensitivity of their CEO turnover to their foreign peers’ accounting performance around the mandatory adoption of International Financial Reporting Standards (IFRS). We find a post-adoption increase in the use of Relative Performance Evaluation (RPE) based on foreign peers’ accounting information, consistent with greater financial reporting comparability associated with mandatory IFRS adoption. These findings cannot be explained by changes in foreign ownership or changes in foreign operations around mandatory IFRS adoption. Furthermore, we find stronger results for firms in more competitive industries and when peers are from highly correlated economies, consistent with the economic theory of RPE.
{"title":"Accounting Integration and Comparability: Evidence from Relative Performance Evaluation Around IFRS Adoption","authors":"Joanna S. Wu, I. Zhang","doi":"10.2139/ssrn.1650782","DOIUrl":"https://doi.org/10.2139/ssrn.1650782","url":null,"abstract":"We study a sample of Continental European firms for changes in the sensitivity of their CEO turnover to their foreign peers’ accounting performance around the mandatory adoption of International Financial Reporting Standards (IFRS). We find a post-adoption increase in the use of Relative Performance Evaluation (RPE) based on foreign peers’ accounting information, consistent with greater financial reporting comparability associated with mandatory IFRS adoption. These findings cannot be explained by changes in foreign ownership or changes in foreign operations around mandatory IFRS adoption. Furthermore, we find stronger results for firms in more competitive industries and when peers are from highly correlated economies, consistent with the economic theory of RPE.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"78 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-07-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122485249","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}
By introducing the concept of conditional probability of joint failure (CPJF), and by proposing a new measure for the systemic impact of currency crises, we provide new insights into the different sources of currency crises. We conclude that financial openness helps to diminish the probability of a currency crisis even after controlling for the onset of a banking crisis, that systemic currency crises mainly exist regionally, and that monetary policy geared towards price stability reduces the probability of a currency crisis.
{"title":"Can Financial Openness Help Avoid Currency Crises?","authors":"Gus Garita, Chen Zhou","doi":"10.2139/ssrn.1331889","DOIUrl":"https://doi.org/10.2139/ssrn.1331889","url":null,"abstract":"By introducing the concept of conditional probability of joint failure (CPJF), and by proposing a new measure for the systemic impact of currency crises, we provide new insights into the different sources of currency crises. We conclude that financial openness helps to diminish the probability of a currency crisis even after controlling for the onset of a banking crisis, that systemic currency crises mainly exist regionally, and that monetary policy geared towards price stability reduces the probability of a currency crisis.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"86 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-06-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114489697","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 goal of this paper is to explain the de facto financial market integration to global markets with foreign equity ownership using a unique data set of foreign portfolio flows at the individual stock level. The main result is the positive link between global financial integration and past portfolio inflows by foreign investors on the cross-section of local stocks. The results have high economic significance. Across individual stocks a 2.4% increase in foreign portfolio inflows corresponds to up to 13.5% greater relative explanatory power of the global factor in explaining local stock returns in the following month. The lead-lag effect between foreign portfolio inflows and financial integration does not exist in the opposite direction. I show that stocks that experience an increase in foreign ownership are not more financially integrated in the past, i.e. the foreign portfolio flows are not a response to increased financial integration.
{"title":"Foreign Ownership and World Market Integration","authors":"Emre Konukoglu","doi":"10.2139/ssrn.1571533","DOIUrl":"https://doi.org/10.2139/ssrn.1571533","url":null,"abstract":"The goal of this paper is to explain the de facto financial market integration to global markets with foreign equity ownership using a unique data set of foreign portfolio flows at the individual stock level. The main result is the positive link between global financial integration and past portfolio inflows by foreign investors on the cross-section of local stocks. The results have high economic significance. Across individual stocks a 2.4% increase in foreign portfolio inflows corresponds to up to 13.5% greater relative explanatory power of the global factor in explaining local stock returns in the following month. The lead-lag effect between foreign portfolio inflows and financial integration does not exist in the opposite direction. I show that stocks that experience an increase in foreign ownership are not more financially integrated in the past, i.e. the foreign portfolio flows are not a response to increased financial integration.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"74 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-06-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123214333","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}
京公网安备 11010802042870号
京ICP备2023020795号-1
扫码关注我们
求助内容：
应助结果提醒方式：