Economic Systems最新文献

We explore how a crackdown on organized crime affects stock returns. We theorize that a crackdown on organized crime is associated with both the governance effect and the uncertainty effect. Using stock earnings data on Chinese A-share listed firms, we find that, on one hand, stock prices experience salient decreases in short-term periods because the uncertainty effect dominates; on the other hand, significantly positive long-term returns have been documented because governance effects dominate. We further show that the stock return decline associated with the uncertainty effect is mainly driven by a change in discount rate, and the positive long-term return may stem from enhanced firm innovation and city business climate. Our findings pass a battery of robustness and endogeneity checks. We contribute to studies on organized crime and determinants of stock prices.

Overcapacity has long been a "chronic problem affecting China's economic development." Why is China's overcapacity intractable? This study takes the "Revitalization Plans of Ten Industries" (the RPTI) issued by the Chinese government in 2009 as a quasi-natural experiment. It deploys the data of China's A-share listed enterprises and the difference-in-differences (DID) model to investigate the impact of the selective industrial policy on enterprise overcapacity. The results show that the policy has a significant and persistently negative effect on the capacity utilization rate of the treated group. Mechanistic studies reveal that policy-induced overcapacity is caused by increasing government subsidies for the treated group, depressing corporate investment efficiency, and growing capital misallocation. After considering zombie enterprises, we find that the policy mainly leads to the overcapacity of regular enterprises but has no negative impact on zombie enterprises, and zombie enterprises crowd out the capacity utilization rate of regular enterprises in the same industry. This study indicates that a selective industrial policy that prevents the market elimination mechanism from functioning is an underlying cause of overcapacity in China. The study's findings reveal why the administrative de-capacity policies enacted by the Chinese government have failed to eliminate backward capacity but rather created a new overcapacity issue.

Climate mitigation in developing nations calls for a shift to renewable technologies from fossil fuels. However, such transformative change requires enormous concessional funding in the energy sector. This paper examines the impact of energy aid and its composition on the transition to clean energy infrastructure in the power sector in 67 developing countries during the period 2002–2017. The analysis is also conducted by segregating aggregate renewable technologies into hydro and non-hydro sources. Applying system GMM and panel quantile regression techniques, we find that the effectiveness of energy aid depends upon its composition and the maturity of renewable technology in the recipient countries. Renewable and distribution energy aid benefits the transition only with hydro sources and has a counter-productive effect on non-hydro renewable technologies, such as solar and wind. In contrast, findings reveal that energy aid for non-renewable energy generation and policy hinder the transition process with both hydro and non-hydro renewable technologies. These findings warrant a shift in the composition and technology target of energy aid by the donors in order to foster climate mitigation and mobilize private investments in relatively less developed non-hydro renewable technologies.

In this paper, we contribute empirically to the debate on the legitimacy of the African Union by exploring the question on whether individual opinions in support of African integration are sensitive to macroeconomic fluctuations? For this purpose, we use the 4th, 5th, 6th and 8th Afrobarometer survey data waves and a contextual logistic model. We find that an increase in GDP per capita is associated with a decline in the probability to support the African Union. Accordingly, economic growth discourages citizens’ positive appraisal for the union. Our results also show an asymmetry in the relationship between public opinion on supporting the African Union and economic growth. Policy implications are discussed.

This paper studies the impact of the liberalization of the Chinese stock market on company total factor productivity (TFP) and its mechanism of action by using the "Shanghai-Hong Kong Stock Connect" program. The benchmark regression results based on the multi-period difference-in-difference (DID) model show that the implementation of the “Shanghai-Hong Kong Stock Connect” program significantly increases the TFP of target companies, a conclusion that is still valid after a series of robustness tests. Further mechanism analyses shows that the program increases company TFP by both increasing a company's stock liquidity and information transparency and reducing the degree of financing constraints.

Using data from 180 countries and 24,833 publicly traded firms worldwide, this study examines how cultural and political factors influence the stringency of a government’s response to the COVID-19 pandemic and, in turn, the stock prices of firms and industries operating in a given country. Existing research demonstrates that government behavior during a pandemic can directly or indirectly affect stock prices. This study explores twelve political and cultural characteristics that might influence government policies. Interestingly, our results indicate that democratic and less long-term-oriented countries employ stricter responses to the pandemic. Furthermore, countries with higher individualism, coalition governments, and governments not battling for re-election appear to employ a smoothing strategy: although they implement stringent responses early on, they tend to react less aggressively when the number of COVID-19 cases increases. This study finds that increased stringency has a negative impact on corporate abnormal returns, especially during the early stages of the pandemic. Our study has important policy implications and offers valuable insights to investors: stock price reactions depend on political and cultural factors, industry, and firm characteristics. Most importantly, larger firms with more cash operating in collectivist and politically stable countries are more resilient.

This paper analyzes the conflict of interests between capitalists and workers concerning patent and monetary policy in a Schumpeterian growth model with cash-in-advance (CIA) constraints in the R&D sector, where capitalists own assets and workers supply labor. We find that (i) higher R&D productivity, lower CIA constraints, and a lower discount rate produce non-linear effects in the conflicts concerning the markup and the nominal interest rate, decreasing the former and increasing the latter in low-growth environments and having the opposite or no effects otherwise, (ii) the markup and the nominal interest rate have non-linear effects on the conflicts concerning the other similar to (i), (iii) considering less restrictive distributions of assets, labor supply, seigniorage revenues, monetary balances and financing of CIA constraints reduces, in general, the conflicts concerning the markup and interest rate. We conclude that policymakers will only be able to use patent and monetary policies to simultaneously promote economic growth and reduce the conflict of interest concerning the other if R&D productivity is sufficiently high. Otherwise, each policy can be used either to promote economic growth at the cost of exacerbating the conflicts of interest concerning the other or achieve the opposite effect.

In this paper, we assess the interaction between corruption, bank cost efficiency, and economic development. Existing literature on the subject normally focuses separately on the link between corruption, financial development, and growth, and finds ambiguous results, not distinguishing between different types of credit institutions. We use Italian disaggregated data from 2004 to 2012, considering cooperative and non-cooperative banks, to determine whether controlling corruption affects banks’ cost efficiency in Italian provinces and promotes economic development. Utilizing a panel autoregressive model, we find that controlling corruption magnifies the positive impact of banks’ cost efficiency on economic development. Evidence of a positive effect of the interaction is observed, particularly in the case of non-cooperative banks and for higher values of the Control of Corruption Index.

Debt levels, both private and public, were already at record highs before the Covid-19 pandemic and surged further in 2020. The high indebtedness raises concern that it will undermine future economic prospects. Contributing to the ongoing debate, we use the local projection method to dynamically study the behavior of economic activity and its main components after public and private debt surges. A new dataset on debt surges in 190 countries between 1970 and 2020 is used. Debt surges are followed by persistently weaker economic growth. However, this negative relationship does not always hold, as it depends on the type of debt surge: rapid increases in public debt have the most negative impact, particularly when an economy operates with a large positive output gap. Debt surges also tend to be followed by worse economic performance if the initial total debt levels are high. Public debt surges lead to weaker private and public investment. Surges in nonfinancial corporate debt are followed by lower private and public investment.

This paper investigates whether and how monetary policy shock (MPS) affects corporate innovation using a large sample of 3,082 Chinese listed firms over the period 2007–2019. We provide robust evidence that firms increase their innovative activities when faced with MPS. Further analyses show that firms in competitive industries or with less market power are more inclined to increase innovation in the event of MPS, and that the influence of MPS on corporate innovation is more pronounced for firms with more growth opportunities or better financial conditions. We also find that firms tend to increase innovation to a larger extent in expansionary periods than in contractionary ones.