Adverse selection costs and the dealers\u27 bid-ask spread around earnings announcements : differential information and signal quality.

This study examines the behavior of the bid-ask spread and the adverse selection cost component surrounding second quarter earnings and subsequent dividend announcements of Over-The-Counter firms. It examines the efficiency of such announcements in reducing the relative information asymmetry in a firm\u27s environment, given that the adverse selection cost component of the spread is positively associated with a dealer\u27s perception of the relative level of information asymmetry. Specifically, the study analyzes the relationship between the adverse selection cost component of the spread and (i) the quality of earnings, and (ii) the pre-disclosure information environment of the firm. Initial results indicate a decrease in the dealers\u27 perception of the relative information asymmetry in the pre-announcement period possibly due to the abstain or disclose rule of the Security Exchange Commission. Further, there is evidence of a decrease in the adverse selection costs in the post-announcement period as new information gets impounded by the market. The study demonstrates that the market maker perceives an increase in the level of informed trading in the event period of the low quality of earnings firms versus high quality of earnings firms. Further, contrary to expectations based on Miller and Rock (1985), there is evidence to indicate that subsequent dividend signals are not efficient in reducing the perceived levels of information asymmetry for earnings signals that are noisy. The cross-sectional results for the differential information portfolios are sensitive to the choice of the quality of earnings measure. Adverse selection costs demonstrate increases surrounding the dividend signal of high differential firms with no significant change surrounding the earnings announcement. There is also evidence of reduced adverse selection costs associated with the earnings signal of low and medium differential firms with weak evidence of increases for the dividend signal. A positive relationship between adverse selection costs and the timing of earnings reports and unexpected earnings was also indicated. These findings suggest that earnings announcements are useful in reducing the information asymmetry between investors, conditional on the quality of the signal and the pre-disclosure information environment of the firm

Laudato Si’ and the Papal View of Ecological Debt: An Empirical Exploration

In 2015, Pope Francis released his second papal encyclical, Laudato Si’: On Care for Our Common Home (Francis, 2015), the central idea of which is the Holy Father’s concern for the future of our planet, our common home, and to seek sustainable and integral development. The purpose of this article is to examine critically and empirically the specific notion of ecological debt as described in the encyclical (Francis, 2015: 51 and 52), beginning with a historical background on the origins and use of the term. We then touch upon the Pope’s discussion of ecological debt and his indictment of multinational corporations (MNCs) in Laudato Si’, which resonate with the so-called pollution haven hypothesis (PHH) which states that pollutionintensive industries in developed countries relocate their “dirty” industries to developing countries with relatively lax environmental regulations. In a similar vein, we propose that a rise in total greenhouse gases is associated with the resource extraction and commodity export-based activities of MNCs in developing countries where such activities and their resultant pollution are subject to less stringent regulations due to imperatives for economic growth. This creates an ecological debt when commodity exports from developing countries to more developed ones come at the cost of the environment in the former. Our article thus connects Laudato Si’ with PHH, enabling us to examine empirically the Pope’s statement that the “export of raw materials to satisfy markets in the industrialized North has caused harm locally” (Francis, 2015: 51)

Laudato Si’ and the Papal View of Ecological Debt: An Empirical Exploration

In 2015, Pope Francis released his second papal encyclical, Laudato Si’: On Care for Our Common Home (Francis, 2015), the central idea of which is the Holy Father’s concern for the future of our planet, our common home, and to seek sustainable and integral development. The purpose of this article is to examine critically and empirically the specific notion of ecological debt as described in the encyclical (Francis, 2015: 51 and 52), beginning with a historical background on the origins and use of the term. We then touch upon the Pope’s discussion of ecological debt and his indictment of multinational corporations (MNCs) in Laudato Si’, which resonate with the so-called pollution haven hypothesis (PHH) which states that pollutionintensive industries in developed countries relocate their “dirty” industries to developing countries with relatively lax environmental regulations. In a similar vein, we propose that a rise in total greenhouse gases is associated with the resource extraction and commodity export-based activities of MNCs in developing countries where such activities and their resultant pollution are subject to less stringent regulations due to imperatives for economic growth. This creates an ecological debt when commodity exports from developing countries to more developed ones come at the cost of the environment in the former. Our article thus connects Laudato Si’ with PHH, enabling us to examine empirically the Pope’s statement that the “export of raw materials to satisfy markets in the industrialized North has caused harm locally” (Francis, 2015: 51)

The relevance of value-at-risk disclosures: evidence from the LTCM crisis

Purpose – Previous studies have established that the failure of the hedge fund, long-term capital management (LTCM), was associated with significant negative abnormal returns for many US banks, especially around September 2, 1998, when LTCM announced its failure. This study attempts to examine whether bank value-at-risk (VaR) disclosures were used by investors to assess the potential trading loss that a bank could suffer at that time. Design/methodology/approach – This study examines whether there was any association between disclosed VaR and the magnitude of abnormal returns and trading volume surrounding the announcement date. Findings – The results indicate that there was no such association which suggests that investors did not use the VaR information to assess the potential trading losses of exposed banks. Banks that formed part of the LTCM bailout consortium and those with larger amounts of notional derivatives faced the largest negative reaction at the time of the failure announcement. Originality/value – VaR disclosures are costly to prepare and complex to interpret. The study finds no benefits of VaR disclosures to bank investors.Capital, Disclosure, Value analysis

External Debt and Capital Flight in the Indian Economy

This paper estimates Indian capital flight at US $88 billion (in 1997 dollars) over the 1971-97 period, a sum that is roughly 20$448 billion real external debt disbursed to the country over the same time period. There is also evidence of a strong year-to-year correlation between debt inflows and flight-capital outflows. The paper explores the nature of this association between capital flight and external debt in the Indian economy. An analysis by Boyce (1992, World Development, 20, pp. 335-349) for the Philippines revealed the presence of contemporaneous bi-directional causality, in other words, a financial revolving door relationship between external debt and capital flight in that economy. The research question addressed by this paper is whether such a financial revolving door relationship exists in India, given its higher level of external indebtedness and lower debt-to-GNP ratio as compared with the Philippines. Utilizing a simultaneous equation model to examine the association between capital flight and external debt in the Indian economy, the paper confirms the existence of a financial revolving door relationship between the two endogenous variables.

Institutional quality, knowledge spillovers and entrepreneurship

We examine the impact of institutional quality on early stage and formal entrepreneurial activity and on knowledge spillovers. We use four institutional variables – the protection of property rights, business freedom, financial depth, and corruption as proxies for institutional quality. Results suggest that financial institutions matter for formal and early-stage entrepreneurship. Corruption deters formal entrepreneurship, but the presence of corrupt institutions positively influences the conversion of early-stage entrepreneurial entities into formal business ventures. The presence of scientific knowledge in the public domain encourages the knowledge spillover process to early stage entrepreneurs but is retarded by a strong legal and regulatory environment.entrepreneurship; institutional quality; knowledge spillovers; early stage entrepreneurial activity; formal entrepreneurial activity; institutional variables; rights protection; property rights; business freedom; financial depth; corruption; financial institutions; corrupt institutions; entrepreneurial entities; business ventures; scientific knowledge; public domain; entrepreneurs; legal environments; regulatory environments; economic policies; emerging economies; international development.