Bulletin of Economic Research最新文献

We study how passive cross-holdings affect product differentiation and welfare in a Cournot duopoly. We show that increasing unilateral ownership stimulates total investments, and therefore improves social welfare. Such cross-holdings should not be controlled in view of social welfare. However, we identify an inverted-U (a negative) relationship between consumer surplus and ownership when the demand is small (large). Then a government might apply intervention thresholds for passive ownership if it uses consumer surplus as the appropriate standard for antitrust enforcement. We further consider symmetric bilateral cross-holdings and show that our results are in general robust, but increasing ownership will generate more serious competition harms than unilateral cross-holdings. Thus, special concerns need to be given to bilateral cross-holdings.

In this paper, we assume that the domestic public firm competes in the market with a foreign private firm that cares about consumer surplus and the domestic government imposes tariffs on foreign firm. We aim to analyze the influence of the corporate social responsibility (CSR) level of foreign firm on privatization and tariff policy. It shows that if the government implements a privatization policy for the domestic public firm, the optimal degree of privatization decreases in the CSR level of foreign firm. Under the optimal privatization policy, if the product differentiation is relatively small, the equilibrium tariff increases in the CSR level; if the product differentiation is relatively large, the equilibrium tariff decreases in the CSR level; if the product differentiation is moderate, the relationship between the equilibrium tariff and CSR level is an inverted U-shape. We further consider the policy implications under sequential moves of firms.

This study uses the Plain Writing Act of 2010 as an exogenous variation in the readability of 10-K reports to establish the impact of report improvements on firm risk. We find that better readability significantly decreases total and idiosyncratic risks for US firms experiencing shocks to their readability environment during 2001–2016. The impact is stronger among firms with poorer governance, less external monitoring, and greater product market competition. The results based on supporting the causal impact of readability on firm risk are robust. Our findings suggest that more readable 10-K reports facilitate investor monitoring, inducing firms to manage risk better.

This paper proposes a frequentist model averaging approach in the presence of parameter instability and heteroskedasticity. We derive optimal weights combining the stable and break specifications of a predictive model, with the weights from minimizing the leave-one-out cross-validation information criterion (CV). We characterize the asymptotic distribution of the CV and provide the analytical expressions of the feasible optimal CV weights. Our simulations and applications forecasting the US and Taiwanese GDP growth demonstrate the superior performance of the CV model averaging relative to other methods such as the Mallows averaging, the approximate Bayesian averaging, and equal weighting.

This study investigates institutional distance as a factor of investors’ monitoring of corporate earnings attributes. We analyze the US cross-listing market to determine whether institutional monitoring depends on geographic or market proximity. We find that shareholdings of non-US institutions headquartered in the same country as the investee firm are significantly and positively related to earnings quality. However, we do not find such a monitoring role in the United States, or in institutions not incorporated in the investee firm's home country. Our findings support a geographic proximity advantage over market proximity, which is more pronounced when firms’ information opacity is more severe; the results are not altered by the choice of earnings attribute variables.

In this study, we analyze the effect of a merger between banks by extending a structural model of the banking industry with the possibility of bank runs developed by Egan et al. (2017; American Economic Review, 107, 169–216). We use our framework to analyze whether the 2008 merger between Wells Fargo and Wachovia was beneficial for social welfare. The results suggest that the stability of the financial system is critical for evaluating mergers in the banking industry.

In this paper, we study the impacts of cross-ownership structure on double marginalization problem (DMP) and social welfare under downstream the Bertrand and Cournot competition. We find that in the Bertrand competition, DMP is more serious under backward cross-ownership than under forward cross-ownership. Under forward cross-ownership, because the upstream firm internalizes part of a retailer's profit, it alleviates the DMP. However, for the whole society, forward cross-ownership is beneficial with respect to backward cross-ownership. The mark-up ratio under forward cross-ownership is the largest, followed by that under vertical separation. The lowest one is under backward cross-ownership. The results hold under Cournot competition as well.

Broadsheet newspapers are an important source of economic news. Using a unique dataset of more than 489,000 articles over the last 20 years, this article asks the question whether newspapers published in Scotland communicate similar economic sentiments as UK-wide newspapers. The findings show that although Scottish and UK newspapers share a positive correlation, this relationship varies over time. There is evidence of causality running mostly from the United Kingdom to Scotland. The Scottish Referendum 2014 has had an impact on newspaper reporting when there was more uncertainty in the communication. Individual newspapers respond differently during the referendum periods where some newspapers, The Daily Telegraph and Daily Record for instance reacted to the uncertainty rather strongly, whereas local newspapers represented news in a rather surprising positive note.

Proponents of quantitative easing (QE) unconventional policy have rather overstated some evidence that structural time series models do not predict long-term asset prices and yields as well as naive random walk forecasts, implying that predictions of price reversals cannot be profitable and, therefore, that QE effects are not transitory. Indeed, in this work we present evidence that naive models do not outperform structural vector autoregressive and Markov switching models in out-of-sample forecasting of corporate bond yields purchased by the European Central Bank, when the information set includes base money growth. It turns out that structural time series models provide additional information regarding the likelihood of price reversals, thus motivating investors to offset the effects of QE interventions if they perceive unconventional monetary policy regimes as temporary.

This article empirically examines how political connections (PCs) affect a firm's media reaction after corporate fraud. Using data for Chinese listed companies from 2008 to 2021, we find that the media reports more positively for firms with PCs than for others that do not possess such advantages after the enforcement against fraud. The results are robust to a series of robustness checks and endogeneity corrections. When decomposing media reports, we find that PCs only facilitate positive media coverage but do not impede negative media coverage, which is more pronounced in state-controlled media. This suggests that PCs protect firms’ branding by facilitating positive media reports rather than withholding bad news. Moreover, we find this protective effect is more pronounced in firms with stronger PCs, weaker anti-corruption regulation, lighter punishment for fraud, private ownership, and more donations. Further, the consequences analysis shows that this kind of protective effect significantly increases the probability of future fraud and stock price crashes. Our findings present a new perspective on the role of PCs and provide evidence for political bias in media coverage.