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Chazi, Rao & Syed: Tapping Funds for Development – A Case for Sukuk Financing

islamfin

ABSTRACT: It is a well-known fact that the infrastructure in many African countries is woefully inadequate. This has persisted for many decades despite the fact that these countries are rich in natural resources. We argue that Islamic bonds may provide a panacea for this chronic

Mizuno: Corporate Governance, Institutional Investors, and Firm Performance in France

france

ABSTRACT: Using data of firms making up SBF120 during 2005 and 2010, this paper examines the influence of institutional investors on corporate governance and the relationship between institutional investors and firm performance in France. Institutional investors have become active in strengthening corporate governance with an

Skeel: What is a Lien? Lessons from Municipal Bankruptcy

reliques_01

From the Introduction: As the initial shock of Detroit’s bankruptcy filing has worn off, and the parties have attempted to tackle the major issues that stand in the way of a successful reorganization, an unlikely issue seems to keep coming up: what exactly is a

Vitale: Optimal Monetary Policy for a Pessimistic Central Bank

Marriner_S._Eccles_Federal_Reserve_Board_Building

ABSTRACT: We extend Svensson’s (Svensson, 1997) model of optimal monetary policy to the case in which the monetary authorities are pessimistic. With respect to his formulation we show that: i) the inflation forecast is not longer an explicit intermediate target; ii) the monetary authorities move

Nunes & Andrade de Lima: Investments of Brazilians’ Pension Funds

images

ABSTRACT: The economic world has changed dramatically since the big crisis in 2008. The damages caused by this event were numerous and took different impacts around the world. This new context could bring to Brazilians’ pension funds a different asset allocation. This paper tries to

Chazi, Rao & Syed: Tapping Funds for Development – A Case for Sukuk Financing

islamfin

ABSTRACT:

It is a well-known fact that the infrastructure in many African countries is woefully inadequate. This has persisted for many decades despite the fact that these countries are rich in natural resources. We argue that Islamic bonds may provide a panacea for this chronic problem. This paper presents alternative Sukuk structures that can be considered for this purpose. It is our firm belief that if properly structured, Sukuk can be used as a catalyst for the development of infrastructure projects in African countries.

Available for download here.

 

Mizuno: Corporate Governance, Institutional Investors, and Firm Performance in France

france

ABSTRACT:

Using data of firms making up SBF120 during 2005 and 2010, this paper examines the influence of institutional investors on corporate governance and the relationship between institutional investors and firm performance in France. Institutional investors have become active in strengthening corporate governance with an eye of enhancing corporate value since early 2000s. They exercise the voting rights at the general shareholders’ meeting and some of them engage in dialogue with investee companies. The results suggest that corporate governance was enhanced by institutional investors. However, it was found that there is not a statistically significant difference between the changes in share ownership of institutional investors and firm performance. By classifying the firms into three groups based on the change in the ownership share of institutional investors during 2005-2010, I observe that the mean value of ROE in group 3 is higher than in other groups, indicating that the group with the highest increase of institutional investor’s ownership during the period shows better performance than other groups. This implies that institutional investors select firms for investment based on the expected performance of ROE.

 

Available for download here.

 

Skeel: What is a Lien? Lessons from Municipal Bankruptcy

reliques_01

From the Introduction:

As the initial shock of Detroit’s bankruptcy filing has worn off, and the parties have attempted to tackle the major issues that stand in the way of a successful reorganization, an unlikely issue seems to keep coming up: what exactly is a lien? In ordinary bankruptcies, this question is not much in dispute. The parties may disagree on the value of the collateral securing the principal lender’s security interest, but it generally is clear whether the lender or other creditors do indeed have a property interest or its equivalent.

Not so in Detroit. Some of Detroit’s general obligation bondholders believed that their bonds could not be restructured, due to Detroit’s promise to use its “full faith and credit” to assure repayment. Even after it became clear that ordinary GO bonds are simply unsecured claims in bankruptcy, the holders of “unlimited tax” GO bonds insisted that they have a lien on Detroit’s ad valorem taxes, and this lien must be recognized in bankruptcy. The beneficiaries of Detroit’s two major pensions have insisted that they too are fully protected, due to a provision in the Michigan constitution stating that accrued pensions cannot be “diminished or impaired.”  In 2006, Detroit entered into a swap transaction designed to stabilize the interest rate it paid on bonds that were issued to plug a gap in its pension funding. The swap transaction was restructured three years later to give the counterparties a lien on Detroit’s casino revenues. This transaction too has raised lien-related issues.

One of the objectives of this Article is simply to sort through these issues, and to determine which of these creditors do have liens or lien-like protection. Answering this question will require an exploration of two related sets of concerns. First, what is the relationship between liens and lien substitutes—such as priorities and exceptions from bankruptcy’s automatic stay? As similar as liens and priorities are, the bankruptcy laws have long drawn a sharp distinction between state-created liens, which are honored in bankruptcy; and state-created priorities, which are not. We will want to consider why this is so.

The second question is the question in my title: what is a lien? The dictionary defines a lien as the “right to take and hold or sell the property of a debtor as security or  repayment for a debt.” Not a bad definition, but whether a purported lien actually is a lien is not always clear, especially in the municipal context. Shortly before the little town of Central Falls, Rhode Island filed for bankruptcy, the Rhode Island legislature passed a statute giving general obligation bondholders a lien on all of a municipality’s ad valorem taxes and general revenues—that is, on nearly all of the municipality’s revenues. Blanket liens are hardly unheard of; most small businesses and many large ones have lenders who have a security interest in most or all of their assets. Yet despite using the language of liens, the Rhode Island statute seems to function more like a priority rule than a traditional lien. The breadth of the statute raises the question whether a court should decline to honor a statutory lien if it does not serve the functions of a traditional lien.

Available for download here.

Vitale: Optimal Monetary Policy for a Pessimistic Central Bank

Marriner_S._Eccles_Federal_Reserve_Board_Building

ABSTRACT:

We extend Svensson’s (Svensson, 1997) model of optimal monetary policy to the case in which the monetary authorities are pessimistic. With respect to his formulation we show that: i) the inflation forecast is not longer an explicit intermediate target; ii) the monetary authorities move their instruments to hedge against the worst economic shocks, do not expect the inflation rate to mean revert to its first-best level and apply a more aggressive Taylor rule; and iii) the inflation rate is less volatile. Our conclusions also hold when the monetary authorities observe inflation and output gap with a time lag. Our analysis extends the analysis of van der Ploeg (van der Ploeg, 2009), as we allow for time-discounting of future social welfare losses due to deviations of output and inflation from first-best values.

Available for download here.

Nunes & Andrade de Lima: Investments of Brazilians’ Pension Funds

images

ABSTRACT:

The economic world has changed dramatically since the big crisis in 2008. The damages caused by this event were numerous and took different impacts around the world. This new context could bring to Brazilians’ pension funds a different asset allocation. This paper tries to show the Brazilians’ pension funds asset allocation and the characteristics of this system with crossing data to many bibliographic research sources. The data collected and analyzed demonstrate that, in spite of last depression, the Brazilian’s pension funds still hold a very conservative asset allocation and have a powerful amount of resources when we compare with GDP.

 

Available for download here.

Jimenez-Martin: The incentive effects of minimum pensions

pension

ABSTRACT:

The main purpose of minimum pension benefit programs and old-age social assistance programs is to guarantee a minimum standard of living after retirement and thus to alleviate poverty in old age. In many developing and developed countries, the minimum pension program is a key welfare program and a major influence on the retirement decisions of low-income workers and workers with erratic work histories. The design of many minimum pension programs tends to create strong incentives for low-income workers to retire as soon as they become eligible for the program, which is often earlier than the normal retirement age.

Minimum pensions are useful for reducing poverty in old age, but they can cause substantial distortions in the incentives to work (and to contribute to the system) as individuals age. When benefits are available at the early retirement age, the incentive effects can be substantial. By encouraging early retirement, such programs reduce the labor supply of workers approaching retirement age. The size of the effect depends on both eligibility conditions and the generosity of the minimum pension compared with the average wage. However, when minimum pension benefits are not available until after normal retirement age, they tend to have little incentive effect on retirement decisions.

 

Available for download here.

Gunasekar & Sarkar: Does Autonomy Matter in State Owned Enterprises? Evidence from Performance Contracts in India

private

ABSTRACT:

The empirical effect of enterprise autonomy on the performance of state-owned enterprises is surprisingly scant despite autonomy being a preferred reform instrument in many countries, and often chosen over privatization. Using longitudinal data on performance contracts for state-owned enterprises in India, this paper empirically examines whether granting increased autonomy to state-owned enterprises through such contracts positively impacts enterprise profitability. Further, using the unique reform experience of India as a natural experiment, whereby enterprise autonomy has been simultaneously pursued with partial privatization for a sub-set of enterprises, a unique contribution of the study lies in investigating whether ownership divestiture through partial privatization has any effect once enterprises are imparted managerial autonomy, or whether ownership per se matters. Classifying state owned enterprises into three types, namely those that have been granted autonomy, those with autonomy and partially divested ownership, and those with neither, the study finds robust evidence of a positive impact of managerial autonomy on enterprise profitability. Additionally, once autonomy is controlled for, the study finds at best a weak effect of partial privatization. These results raise doubt on earlier findings of a robust positive effect of partial privatization in India in studies that did not explicitly control for enterprise autonomy thereby raising the possibility that the positive privatization effect that showed up was in actuality, an autonomy effect.

 

Available for download here.

Ma & Villar: Internationalisation of emerging market currencies

Currency-Revaluation

ABSTRACT:

This note reviews the internationalisation of emerging market (EM) currencies. It summarises various indicators and discusses some possible drivers, drawing on both historical and recent experience. The potential costs and benefits of an EM currency having international status are briefly discussed.

Available for download here.

Cuervo-Cazurra, Inkpen, Musacchio & Ramaswamy: Governments as owners – State-owned multinational companies

Enterprise-BJTU1

ABSTRACT:

The globalization of state-owned multinational companies (SOMNCs) has become an important phenomenon in international business (IB), yet it has received scant attention in the literature. We explain how the analysis of SOMNCs can help advance the literature by extending our understanding of state-owned firms (SOEs) and multinational companies (MNCs) in at least two ways. First, we cross-fertilize the IB and SOEs literatures in their analysis of foreign investment behavior and introduce two arguments: the extraterritoriality argument, which helps explain how the MNC dimension of SOMNCs extends the SOE literature, and the non-business internationalization argument, which helps explain how the SOE dimension of SOMNCs extends the MNC literature. Second, we analyze how the study of SOMNCs can help develop new insights of theories of firm behavior. In this respect, we introduce five arguments: the triple agency conflict argument in agency theory; the owner risk argument in transaction costs economics; the advantage and disadvantage of ownership argument in the resource-based view (RBV); the power escape argument in resource dependence theory; and the illegitimate ownership argument in neo-institutional theory. After our analysis, we introduce the papers in the special issue that, collectively, reflect diverse and sophisticated research interest in the topic of SOMNCs.

 

Available for download here.

Yu: The Measurement of Financial Openness – From the Perspective of G20

ABSTRACT:

There are two complementary measures of capital account openness: restriction measure, which is based on government regulation, and openness measure, which is based on actual economic data. For regulating and improving the restriction measure, this paper introduces an evaluation criteria and the weights of each capital account, and compares financial openness especially capital account openness among G20 countries.

 

Available for download here.

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