641 research outputs found
DO EXTERNAL FUNDS YIELD LOWER RETURNS ? RECENT EVIDENCE FROM EAST ASIAN ECONOMIES
Using a large firm level panel data set from four Asian countries, this paper compares the returns to various internal and external funds. A novel feature of our analysis is that we distinguish between financially constrained and unconstrained firms and determine selectivity-corrected estimates of rates of return to internal and external funds in markets characterised by information problems. Results derived from a unique random effects panel data model with selection and unobserved heterogeneity suggest evidence of significant misallocation, especially in external financing of investment. While these results contrast some of the existing results, they seem to complement the moral hazard arguments put forward by the macro literature on the recent Asian crisis.Efficiency, Misallocation of capital, Returns to internal and external funds, Debt and equity, Financial constraint, Random effects model with selection
Spillovers from FDI and Skill Structures of Host-Country Firms
This paper uses panel data across UK manufacturing from 1983 to 1992, to test whether inward flows of FDI have contributed to increasing trends in the employment of relatively higher skilled individuals. Moreover, the paper isolates the effect on domestic firms, and shows that this effect is a function of the size of the foreign productivity advantage. The results show, that even after controlling for the factors most commonly used to explain relative employment shifts – namely technological change and import intensity, that FDI has a role to play in influencing employment trends.multinationals; spillovers; relative employment
Productivity and Labour Demand Effects of Inward and Outward FDI on UK Industry
We relate the technological and factor price determinants of inward and outward FDI to its potential productivity and labour market effects on both host and home economies. This allows us to distinguish clearly between technology sourcing and technology exploiting FDI, and to identify FDI which is linked to labour cost differentials. We then empirically examine the effects of different types of FDI into and out of the United Kingdom on domestic (i.e. UK) productivity and on the demand for skilled and unskilled labour at the industry level. Inward investment into the UK comes overwhelmingly from sectors and countries which have a technological advantage over the corresponding UK sector. Outward FDI shows a quite different pattern, dominated by investment into foreign sectors which have lower unit labour costs than the UK. We find that different types of FDI have markedly different productivity and labour demand effects, which may in part explain the lack of consensus in the empirical literature on the effects of FDI. Our results also highlight the difficulty for policy makers of simultaneously improving employment and domestic productivity through FDI
Evolution of Capital Strcture in East Asia: Corporate Inertia or Endeavours?
The present paper examines the capital structure adjustment dynamics of listed non-financial corporations in seven East Asian countries during 1994-2002. Compared to firms in the least affected countries, average leverages were much higher among firms in the worst affected countries while the average speeds of adjustment were lower. This general ranking is robust to various alternative specifications and sample selections. We argue that this pattern is closely linked to weaknesses in regulatory environment and lack of access to alternative sources of finance in the worst affected countries.
Domestic wage determination: Regional Spillovers and inward investment
This paper evaluates the extent of inter- industry, and inter-regional wage spillovers across the UK. A large literature exists suggesting that wages elsewhere affect wage determination and levels of satisfaction, but this paper extends the analysis to examine the effects of inward investment in the process. Thus far the specific effect of foreign wages on domestic wage determination has not been evaluated. Using industry and regional level panel data for the UK the paper reports evidence that such wage spillovers do occur, and that they are more widespread for skilled, than for unskilled workers and also lower in areas of high unemployment.Wage determination; regional spillovers; alternative wage
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How does ownership structure affect capital structure and firm performance? Recent evidence from east Asia
The present paper empirically examines the effects of ownership
structure on capital structure and firm valuation in four East Asian countries worst
affected by the last Crisis. In doing so, we distinguish ownership from both control
and management and also allow for the simultaneity between capital structure and
firm valuation in the sample countries. Results obtained from 3SLS estimates with
error components confirm and extend the findings of Claessens et al. (2002) and
particularly highlight the contrasting behaviour of family firms and non-family firms
with/without a Cronyman
Dynamic Adjustment of Corporate Leverage: Is there a lesson to learn from the Recent Asian Crisis?
Much of the macro literature on the recent Asian crisis argues that a major cause was over borrowing and over investment encouraged by poor supervision and the resulting moral hazard problem. Surprisingly however there is little firm-level evidence to corroborate this. The present paper examines the extent to which firms in these countries had deviated from their optimal levels of leverage and also the determinants of their ability to adjust their capital structure. Results obtained using the Worldscope firm-level panel data for the four of the worst affected countries suggest that higher quality firms had lower optimal leverage while firms with excess capital stock had higher optimal leverage required to finance this capital expenditire. Further, there are signs of corporate inertia in the worst affected countries exhibiting very slow adjustment processes in their capital structure. This result holds even for those firms potentially better placed to control their levels of leverage. These results seem to strengthen the moral hazard argument of bad loans in poorly regulated and supervised East Asian economies.Moral hazard, Optimum leverage, Dynamic model, Speed of adjustment
How Ownership Structure Affects Capital Structure and Firm Performance? Recent Evidence from East Asia
Despite the seminal work of Claessens et al. (2002), role of ownership structure on capital structure and firm performance in East Asian corporattions remains much unexplored. Within the framework of Bajaj et al. (1998), the present paper empirically examines the effects of a controlling manager and degree of monitoring (a measure of moral hazard) on capital structure and firm performance among a sample of Korean and Indonesian firms. In doing so, we not only allow for simultaneity between capital structure and firm performance (a la Berger and di Patti, 2003), but also the non-linearity in these relationships. Our empirical results in essence depend on whether a firm is run by a family and also whether there is a manager who is also a controlling owner. There is evidence that family ownership could mitigate the problem of moral hazard though it could exacerbate the problem of over-lending in our samples. Also the effects of ownership structure on firm performance cannot be delineated from its effects on leverage. As such, the results presented here confirm and extend the essential findings of Claessens et al. (2002) and Bajaj et al. (1998).Asian Crisis, Corporate Governance, Capital structure, Firm performance, Expropriation of minority shareholders, 3SLS estimates, Simultaneity bias, Non-linearity.
How Ownership Structure Affects Capital Structure and Firm Performance? Recent Evidence from East Asia
Despite the seminal work of Claessens et al. (2002), who highlighted the role of ownership structure on firm performance in East Asia, the relationship between capital structure and ownership remains much unexplored. This is important, given recent empirical and theoretical work linking capital structure and performance. The novelty of the present paper is that in examining the effects of ownership concentration on capital structure and firm performance, it not only allows for simultaneity between capital structure and firm performance, but also controls for one possible source of moral hazard related to the higher voting rights relative to cash flow rights. The paper clearly establishes that results are rather country-specific and the effects of ownership structure on firm performance cannot be delineated from its effects on leverage. More interestingly, these results highlight that higher voting rights could pose some moral hazard problem if there is a controlling manager shareholder called Cronyman in our analysis. Evidently family ownership could mitigate some of these moral hazard problems, though it could exacerbate the problem of over-lending. As such, the results presented here confirm and extend the essential findings of Claessens et al. (2002), though illustrate the importance of allowing for simultaneity between capital structure and firm performance.
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