Having more potential raiders weakens the takeover threat

We argue in this paper that a more active market for corporate control may weaken the takeover threat. We show that an increase in the number of potential raiders tends to decrease the probability of a takeover. This in turn weakens managerial incentives. The lower managerial effort level that results in equilibrium negatively affects the ex ante value of the firm.

Monetary policy and market power in banking

Applying a spatial competition model to banking, we analyze the effects of the choice of a monetary policy rule by the central bank on banks' market power as measured by the Lerner index. We show that a procyclical monetary policy may reinforce the countercyclical movement of the Lerner index. That is, this measure of competitiveness of the banking sector may vary more over the business cycle due to the monetary policy rule.

Having more potential raiders weakens the takeover threat

We argue in this paper that a more active market for corporate control may weaken the takeover threat. We show that an increase in the number of potential raiders tends to decrease the probability of a takeover. This in turn weakens managerial incentives. The lower managerial effort level that results in equilibrium negatively aspects the ex ante value of the firm.

Centralised wage bargaining and regional unemployment

This paper studies regional labour markets in a country with centralised wage bargaining. We use a four-stage theoretical model with two regions and one sector. In the first stage the union and employer federation engage in Nash bargaining at the national level according to a Right To Manage (RTM) model. In the second stage the individual employers determine the number of employees they want to hire given the outcome of the national wage bargaining. In the third stage individuals decide whether or not they want to migrate to another region and if they want to participate in the labour market or not. In the fourth stage the product market clears. In this model, depending on the parameters, the change in participation and the level of migration determine the distribution of unemployment over the regions.

Tunneling and Propping: A Justification for Pyramidal Ownership

This paper presents a formal model of tunneling and propping in a pyramidal ownership structure. Tunneling refers to controlling shareholders shifting funds from one firm to another in the same pyramid. Propping is tunneling that is done to save the receiving firm from bankruptcy. We compare the pyramidal ownership structure to the horizontal ownership structure, in which shifting funds between firms is not possible. We show that tunneling may justify the pyramidal structure only with myopic investors or in combination with propping.Tunneling, Propping, Pyramids, Ownership Structure, Business Groups

Bank behavior and the interbank rate in an oligopolistic market

The well-known Klein-Monti model of bank behavior considers a monopolistic bank. We demonstrate that this model’s results on the comparative static effects of a change in the exogenous interbank market interest rate do not necessarily hold in oligopolistic Cournot or Stackelberg generalizations. Introducing asymmetries in the cost functions of the banks, or in their way of conduct, may imply counterintuitive effects on the individual banks’ volumes of loans and deposits. Keywords: Bank behavior, Cournot oligopoly, Stackelberg oligopoly