Upcoming Seminars

24 July

Dr Nikos Nikiforakis

University of Melbourne

Feuds in the Laboratory?

Punishing free riders might promote cooperation, but it can also lead to feuds. We use a public good game with punishment opportunities to investigate whether the institution of feuds is efficiency enhancing. Treatments differ with respect to whether a punishment can trigger a feud. In the main treatment (Feud) the number of punishment stages is endogenously determined and avoiding revenge is impossible. Participants are generally found to employ strategies that avoid the break out of feuds. While the possibility of a feud affects punishment and contribution patterns, total earnings are not significantly different from treatments where punishment opportunities do not exist or where punishment opportunities exist, but there is no possibility of escalation.

7 August

Dr Shams T. Pathan

Monash University

Strong Boards, CEO Power and Bank Risk-Taking

This study examines the relevance of bank board of directors on bank risk-taking. Using a sample of 212 large bank holding companies over 1997-2004 (1,534 observations), this study finds that strong bank boards (boards reflecting more of bank shareholders interest by construction) positively affect bank risk-taking. In contrast, CEO power (CEO’s ability to control board decision) negatively affects bank risk-taking. These results are consistent with the bank contracting environment and robust to several proxies for bank risk-takings and different estimation techniques.

14 August

Abstract:

Due to contractual incompleteness, ownership plays a key role in the agents’ incentives to make relationship specific investments. However, there has been little progress in understanding how competition between the agents affects their investment decision within the incomplete contracts model. This article explores this interaction by introducing imperfect competition into the incomplete contracts paradigm, extending the Hart, Shleifer and Vishny (1997) model. We examine private and public market structures. We find that in markets exhibiting high product substitutability and elasticity of demand, introducing additional agents worsens the incomplete contracts distortions. In markets with low product substitutability, distortions are reduced with additional agents. This provides insight into important questions on the optimal market and firm structures, and public-private partnerships. An application to workers compensation is provided.

21 August

Abstract:

Commercial piracy, where a firm illegally reproduces and sells copies of legitimate products thereby competing with the original producer, has emerged as one of the leading global challenges faced by software businesses, entertainment industry, law enforcement agencies, and international trade partners. The threat is so real as to force the Bush Administration to launch an inter-agency initiative called the Strategy Targeting Organized Piracy (STOP) in October 2004. The existing literature, which addresses this issue at a theoretical level, is significantly lacking in empirical support of the theoretical propositions due to the unavailability of data. In this paper we use laboratory experiments to compare two forms of enforcement strategies to counter copyright infringement. Specifically, we compare the case of a regulator being responsible for identifying and penalizing the pirating firm (Treatment 1) to the case of the original producer investing in an anti-copying technology (Treatment 2). Our results suggest that there is under investment in monitoring by the regulators in the absence of any input from the original producer. Investment in anti-copying technology by the original producer is significantly more likely to restrict entry by the pirating firm interestingly through higher monitoring by the regulator. Social welfare is however significantly lower in Treatment 2. The results from this experiment will contribute to our knowledge of possible policies and strategies to counter copyright infringement.

28 August

Abstract:

I study a simple market microstructure model in a competitive setting where rational risk neutral investors anticipate becoming liquidity sellers at some future date. That is, being forced to sell with a certain probability. The IPO price must compensate buyers for expected transaction costs due to adverse selection. The insights of the model are as follows. First, investor’s distribution of liquidity selling needs affects adverse selection cost and hence the IPO price. Second, the marginal investor receives, in equilibrium, an excess return that covers his expected transaction costs. Third, anticipated dissemination of information to the public, just before secondary market trading takes place, lowers uniformly the adverse selection costs. Fourth, the model helps to explain the observed return differences for growth and value stocks in terms of transaction costs. Fifth, the IPO price depends on the issuer’s specific allocation of stocks to investors with different liquidity selling needs.

4 September

Abstract:

In customary international and public law, “takings” resulting from regulations designed to protect the public good are generally excluded from compensation rules; this exclusion is known as a police powers carve-out (PPCO). Increasingly, this PPCO is being challenged, particularly in international investment law. This paper analyzes the efficient properties of a PPCO in a model with endogenous regulation, investment and entry. We design a one-parameter family of carveout/ compensation schemes that induce efficient regulation and firm level investment even when the regulator suffers fiscal illusion and the social benefit from regulation is private information to the regulator. We show that offering a carve-out reduces the subsidy to risky industry implicit in compensation rules; thus, a carve-out can mitigate the entry problem.

Abstract:

The purpose of this study is to show that organizational efficiency depends on culture and in particular on trust. First, I define trust using economics tools. Then I discuss basic properties of trust and important determinants of the degree of trust. Next, I criticize neoclassical economics and show how it improperly claims that culture and trust are unnecessary for efficiency. I examine in detail the neoclassical assumptions of production functions and transaction costs to demonstrate that they are responsible for ignoring the importance of culture and trust for organizational efficiency. I claim that neoclassical economics does not consider true organizational efficiency but market efficiency only. Neoclassical economics is criticized for not having a full-fledged theory of organization or production. Finally, I demonstrate that trust and culture determine the type of Nash equilibrium that arises in game situations within organizations. This reveals that trust and culture affect efficiency. I emphasize that not only given societal and organizational cultures but also cultural efforts such as persuasion and communication promote efficiency.

18 September

Abstract:

This paper provides an analysis of a non-cooperative pairwise bargaining game between agents in a network. We establish that there exists an equilibrium that generates a coalitional bargaining division of the reduced surplus that arises as a result of externalities between agents. That is, we provide a non-cooperative justification for a cooperative division of a noncooperative surplus. The resulting division is akin to the Myerson-Shapley value with properties that are particularly useful and tractable in applications. We demonstrate this by examining firmworker negotiations and buyer-seller networks.

25 September

Abstract:

Empirical studies have found that cannabis commonly precedes consumption of drugs like amphetamine, ecstasy, cocaine or heroin, and as a result a causal linkage between cannabis and subsequent hard drug use has been hypothesized. Despite mixed empirical evidence and a limited understanding of possible transmission mechanisms, the causal gateway hypothesis has been influential in formulating a strict drug policy in many western countries. Individual differences in proneness and accessibility, however, provide alternative, non-causal explanations for the observed “staircase” pattern and yield potentially different policy implications. We propose a Bayesian estimation and predictive framework to analyze the effects and relative importance of previous cannabis use, proneness and accessibility factors on hard drug initiation and to explore potential policy implications, using data from a unique 2006 survey of young adults in Norway. We present a novel modeling approach that is motivated by the gateway transmission channels proposed in the literature and allows for a partially heterogeneous effect of previous cannabis use on hard drug uptake and a more flexible correlation pattern for the unobservables. We find that all three effects contribute to the observed higher drug use pattern among cannabis users, previous cannabis use being the most influential one. We also find that the latter is driven by various transmission channels (heterogeneous gateway effect).

29 September

Nonparametric regression techniques hold out the promise of more flexible modeling of data in many areas of physical, biological and social sciences. However, their use is hampered by the “curse of dimensionality” which imposes enormous data requirements as the number of explanatory variables increases. After summarizing two of the most commonly used methods for mitigating the “curse”, this paper outlines a new approach which exploits data on derivatives. In economics, such circumstances arise in the joint estimation of cost and factor demand functions, or when production function data are combined with data on factor prices. The ideas are illustrated using empirical examples from energy economics.

2 October

This seminar is sponsored by the NCER Seminar Series

Abstract:

This paper presents new methods for formally comparing the accuracy of estimators of the quadratic variation of a price process. I provide conditions under which the relative average accuracy of competing estimators can be consistently estimated (as T → infinity) from available data, and show that existing tests from the forecast evaluation literature may be adapted to the problem of ranking these estimators. The proposed methods eliminate the need for specific assumptions about the properties of the microstructure noise, and the need to estimate quantities such as integrated quarticity or the noise variance, and facilitate comparisons of estimators that would be difficult using methods from the extant literature, such as those based on different sampling schemes (calendar-time vs. tick-time). In an application to high frequency IBM stock price data between 1996 and 2007, I find that tick-time sampling is generally preferable to calendar-time sampling, and that the optimal sampling frequency is between 15 seconds and 5 minutes, when using standard realised variance.

6 October

Abstract:

Children of affluent parents get more schooling than children of poorer parents, which seems to imply that reducing income inequality would reduce inequality in schooling. Similarly, one of the best predictors of an individual’s income is his educational attainment, which seems to imply that reducing inequality in schooling will reduce income inequality. In the United States income inequality increased over the last generation. Inequality in educational attainment increased after 1980s as did inequality across states in per pupil expenditures. Within states school spending became more equal, but probably the cost of higher spending. Economic theory unambiguously predicts that all else equal an increase in income inequality will lead to an increase in inequality of educational attainment. Empirical estimates suggest that this happened in the United States but that the magnitude of in effect was small primarily because government education policies reduced the benefit of inequality for children from affluent families and reduced the negative consequences of inequality for children from low-income families. Economic theory also unambiguously predicts that all else equal an increase in inequality of educational attainment will result in greater inequality of earnings. However, making the same amount of high quality schooling available to all children would do little to reduce the overall variation in economic success among adults in the United States and other rich countries. The relationship between income inequality and inequality of schooling could be much stronger in less developed countries.

16 October

Abstract:

What does it mean to ‘think like an economist? Almost 30 years ago the American Economic Association presented an outline of the skills they thought need to be exhibited by someone who was thinking ‘like an economist’. Many of these skills, such as creativity, problem solving, looking for simple explanations to complex questions, and applying economic concepts to novel situations, are difficult to achieve. Nonetheless, individuals who are able to exhibit such skills could be considered to be thinking like an economist. One task of economics lecturers’ is to teach individuals who are ‘students’ of economics. One aim is to assist some of these students to begin to ‘think like an economist’. In some programs the ultimate aim is that students of economics ‘become’ economists.

Recently, developments in educational research have begun to explore the link between learning and identify transformation. It is argued that what is required for such transformations is that students must fundamentally shift the way in which they view the world. This may be done by acquiring certain threshold concepts that fundamentally change the way an individual identifies issues and attempts to solve problems. Economics has been one discipline area, among several, that appears to be well served by this approach to examining student learning. This presentation will outline the fundamental idea behind threshold concepts. It will also provide examples from economics that have been researched and discussed in the educational literature. Finally, some potential applications of threshold concepts for university lecturers and higher education policy will be discussed.

23 October

Principals vs. Principles: What Do Managers Do When Governance Is Slack?

Abstract:

The separation of ownership and control in corporations opens up the potential for moral hazard. Thus it is conventional wisdom that managers who are not closely monitored pursue personal goals rather than maximize shareholder wealth. Yet little is known about what these goals are, despite the importance of understanding manager behavior when designing corporate governance rules. This paper provides new insights into managers’ personal preferences by studying the variations in corporate environmental and social performance associated with different corporate governance provisions. I employ a unique dataset on corporate governance and corporate social responsibility and exploit variations in takeover defenses to analyze differences in managers’ behavior. I find that with weaker governance, more resources are allocated into environmentally and socially responsible objectives and away from core responsibilities. These findings support a theory that ethical principles are important for the subjective well-being of managers.

30 October

Analyzing US divestitures: The impact of corporate governance

Abstract:

We analyze the impact of corporate governance quality on divestiture decisions and the resulting market reaction. We extend the literature using an innovative control sample of firms displaying characteristics often associated with divestitures indicating that these firms may face the same incentives to divest but chose not to. Our results suggest that divesting firms have better quality internal corporate governance mechanisms and face more rigorous external pressures. In comparison, only internal mechanisms are significant determinants of the divestiture wealth effects. Finally, we discover significantly larger announcement returns
for divestitures made after the introduction of the Sarbanes-Oxley Act (2002).

6 November

Why is there a spike in the job finding rate at benefit exhaustion?

Abstract:

Putting a limit on the duration of unemployment benefits tends to speed up the job search. The exhaustion of benefits creates a ``spike" in the job finding rate. In our study we present a theoretical model in which these spikes are caused by delays in acceptance, which are more likely to occur for permanent jobs than for temporary jobs. We use a dataset on Slovenian unemployment spells in which clear spikes in job finding rates occur. We show that indeed spikes are more likely to occur in transitions from unemployment to permanent jobs.

24 January

Associate Professor Muhammad Imansyah

Lambung Mangkurat University

A comparison of the impact of 1997 financial crisis to the economic structure between Indonesia and Australia: an input-output analysis

The financial crises hit several Asian countries including Indonesia in 1997. The impact of the crisis severely damaged the Indonesian economy, but only slightly affected the neighbouring Australian economy. The paper examines the impact of the crisis on the economic structure of the Indonesian and Australian economies after mark of the currency crisis. Structural decomposition analysis is used to identify the impact of the currency crisis. This method can decompose the source changes from proportionate changes in technology and prices.

In Indonesia, prices rose markedly at the onset of the crisis. The total proportionate change index decreased reflecting decline in productivity during 1995-1998 in the Indonesian economy. The magnitude is quite significant. On the other hand, in the Australian economy the impact of the Asian crisis was minor in terms of economic structure. Observed structural changes arose more from price changes rather than from technological changes.

31 January

Dr David Matesanz Gómez

University of Oviedo

New (econophysics) tools in financial time series: the case of the exchange rate in the nineties

Abstract:

Using data from a sample of 28 representatives countries, we propose a classification of currency crises consequences based on the ultrametric analysis of the real exchange rate movements time series, without any further assumption. By using the matrix of synchronous linear correlation coefficients and the appropriate metric distance between pairs of countries, we were able to construct a hierarchical tree of countries. This economic taxonomy provides relevant information regarding liaisons between countries and a meaningful insight about the contagion phenomenon.

7 February

Dr Maria A. García-Valiñas

University of Oviedo

Water services and residential prices: public or private management

Abstract:

In this paper we try to explain differences in the average price of domestic water supply services in Spain, paying special attention to the effects of service privatisation on residential price levels. We base our empirical analysis on the application of a 'treatment effects' model on a sample of 53 major urban municipalities. This model accounts for the fact that municipalities do not randomly distribute themselves between a group using strictly public ownership and management and a group where all or part of the service has been delegated to a private firm. We find that, once this endogeneity is taken into account, there seems to be a positive and significant effect of privatisation on water price levels.

14 February

Professor Rudolf Winter-Ebmer

Linz University

Clash of Career and Family: Fertility Decisions after Job Displacement

This seminar is sponsored by the NCER Seminar Series.

Abstract:

In this paper we investigate how fertility decisions respond to unexpected career interruptions which occur as a consequence of job displacement. Using an event study approach we compare the birth rates of displaced women with those of women unaffected by job loss after establishing the pre-displacement comparability of these groups. Our results reveal that job displacement reduces average fertility by 5 to 10% in both the short and medium term (3 and 6 years) and that these effects are largely explained by the response of white collar women. Using an instrumental variable approach we provide evidence that the reduction in fertility is not due to the income loss generated by unemployment but arises because displaced workers undergo a career interruption. These results are interpreted in the light of a model in which the rate of human capital accumulation slows down after the birth of a child and all specific human capital is destroyed upon job loss.

21 February

Professor Janice How

Auckland University

Agency Conflicts and Corporate Payout Policies: A Global Study

Abstract:

We investigate the extent to which agency problems appear to be resolved, globally, by corporate dividend payout policies. In so doing, we assess the generalisability of conclusions reached by La Porta, Lopez-de-Silanes, Shleifer and Vishny (2000) with respect to other time periods and to the inclusion of an increasingly popular form of corporate distribution, namely share repurchases. We also investigate whether incorporating firm level proxies for agency costs improve our understanding beyond assuming all companies within a given country face the same costs. Based on a large sample of 31,233 firms in 48 countries over the period 2001-2006, our results mostly support the generalisability of the outcome model, as described by La Porta, Lopez-de-Silanes, Shleifer and Vishny, finding that it is robust over time and to the inclusion of share repurchases along with cash dividends in the payout ratio. However, when firm level proxies for agency costs are added to the structural equation, we find a more complex relationship between payouts to shareholders and agency problems. There is a form of "pecking order" in investors' ability to extract cash from firms. Although investors are able to use their legal powers to extract cash (whether as dividends or share repurchases) from firms in high protection countries, their ability is hindered when agency costs at the firm level are high. In poor protection countries, investors seem to take whatever cash they can get, even though the amount may be small, regardless of investment opportunities and firm level agency conflicts.

6 March

Dr Susan Thorp

University of Technology Sydney

Discounting and consumption over an uncertain horizon: draw-down plans for family trusts

Abstract:

Individuals, endowments and trusts face uncertain lifetimes. When the planning horizon of an entity is stochastic and Pareto distributed, hyperbolic discounting and time-varying consumption rates are optimal. We derive expressions for the optimal rate of consumption (draw-down) from wealth for family trusts facing positive probabilities of extinction at each generation. Using birth statistics for the UK, we compute family extinction probabilities and show that they are well-approximated by a Pareto distribution, hence family trusts will discount hyperbolically. Numerically optimised consumption paths for family trusts with CRRA preferences are decreasing but always higher than for infinitely-lived trusts.

13 March

Associate Professor Kalvinder Shields

University of Melbourne

Abstract:

A modelling framework is proposed in which the real time informational context of decision-making is properly reflected. Comparisons are drawn with ‘standard’ estimated models that incorrectly omit market-informed insights on future macroeconomic conditions and inappropriately incorporate information that was not available at the time. An analysis of quarterly US data 1968q4-2006q1 shows that neither diagnostic tests applied to the standard models nor typical impulse response analysis are able to expose the misspecification clearly. Estimated real time models considerably improve out-of sample forecasting performance, provide more accurate ‘nowcasts’ of the current state of the macroeconomy and provide more timely indicators of the business cycle. A case study highlights the use of information in recognising the US recessions of 1990q3 — 1991q2 and of 2001q1 — 2001q4.

17 March

Katrien Stevens

University College London

Abstract:

This study investigates how shocks in economic conditions at entry into the labour market affect low and medium-skilled workers' wages over the lifecycle. Wage and career determination models have varying predictions for this relationship: standard neo-classical models predict only temporary effects on wages while e.g. signalling, job search and human capital models predict at least some degree of persistence in the effect of an initial adverse shock on wages. We use detailed German employment data in which we follow a large sample of workers from entry up to 19 years in the labour market. Particularities of the education system provide support for an exogenous timing of labour market entry. Long-term effects of initial economic conditions on wages are identified using variation in unemployment rates over time and across regions. We find that wages are adversely affected in the first years in the labour market: entering the labour market in a recession (9% versus 4% unemployment) implies 3-6% lower wages in the first 4 years of the career, but these negative effects fade out over the next 3 years. The choice of timing and location of labour market entry, neither persistence in economic conditions is driving the findings. Higher unemployment rates at entry also have a negative impact on the probability of employment, again only in the early career. This suggests that labour market outcomes of less-skilled workers are not very vulnerable to adverse economic conditions at the start of the career.

20 March

Dr Stefan Trück

Macquarie University

Abstract:

This paper considers rating dynamics and duration times of credit migration behaviour. In particular we investigate the generally stated assumption that rating transitions follow a continuous, time homogeneous Markov chain. One of the essential properties of the model is that durations in states have an exponential distribution. By examining a large database of rating migrations, we show that the exponential distribution may not be an adequate assumption about the probability distribution for the duration. We then propose alternative parametric and nonparametric distributions for the rating dynamics. Further, by using a continuous time simulation study we show the effects of the choice of the probability distribution on the calibration of the PD term structure as well as Value-at-Risk figures of exemplary loan portfolios.

27 March

Professor Monika Bütler

University of St Gallen

Abstract:

This paper analyzes a vote in which two identical but differently framed popular initiatives, both demanding a decrease in the legal age of retirement in Switzerland, led to differences in approval rates of nearly seven percentage points. Based on this unique natural experiment, the existence of framing effects is tested for and their determinants are identified outside of the stylized settings in laboratories. Nonetheless, the analyzed setting allows for considerably more control than usually available in the field: All party, government and interest group recommendations were symmetric for both initiatives, and the simultaneous vote rules out potential variation of individual preferences and compositional changes of the electorate over time. Using community and individual level data it is shown that the difference in approval rates is largely due to the different emphases in the initiatives' titles.

10 April

Professor Roger Craine

UC Berkeley

This seminar is sponsored by the NCER Seminar Series.

Abstract:

Between 2004-2006 the US Federal Reserve relentlessly increased the Federal Funds Target rate by ¼% at seventeen consecutive Federal Open Market Committee meetings. The Target rose from 1% to 5 ¼%. Short maturity yields dutifully followed the target, but long maturity yields (10 years or more) actually fell until by June 2006 they were less than short maturity yields. Alan Greenspan, Chairman of the Federal Reserve at the time, labeled the unusual behavior of the yield curve a conundrum. We find that unusually strong demand by foreigners for US bonds led to yields 1 ½% lower than they would have been otherwise. Monetary and macroeconomic surprises had almost no effect on long maturity yields.

In the future if foreigners switch their holdings to non-dollar denominated assets US yields will have to rise above what they would have been otherwise.

17 April

Dr Peter Verhoeven

Auckland University

Lintner's Partial-Adjustment Model of Corporate Dividends: A Cross-Country Analysis

Abstract:

We examine the dividend behavior of a sample of 6,190 firms across 25 countries from 1965 to 2006, using the partial-adjustment model proposed by Lintner (1956).  We find the Lintner model, where dividend changes are a function of current earnings and lagged dividends, is widely applicable around the globe.  By all measures, firms in the United States and Canada have the most aggressive dividend policy, exhibiting highly persistent and pronounced asymmetry in dividend payments such that dividends are less likely to be cut subsequent to a decline in earnings than to be increased following an earnings increase.  In contrast, firms in Austria and Japan have predominantly constant dividend payments, with low asymmetry and low target payout ratios.  Firms in emerging countries such as Korea, Thailand and Malaysia sit in the middle, showing low persistence, low asymmetry and moderate target payout ratios.  The amount of faith that can be placed on forecasts obtained from Lintner’s model varies with dividend behavior ― the more aggressive the dividend payments, the more confidence practitioners can place on Lintner’s forecasts. 

24 April

Dr George Wong

Monash University

Abstract:

This study examines the separate impact and joint effect of financial constraints and financial market mispricing on the sensitivity of investment to internal cash flows. Using a large sample of US manufacturing firms over the period 1971-2004, we find that financially unconstrained firms are more flexible in adjusting their sources of financing for corporate investment in response to financial market mispricing. Specifically, financially unconstrained firms tend to have lower (higher) investment-cash flow sensitivities in situations of overvaluation (undervaluation). This provides an explanation of why unconstrained firms have higher valuations than constrained firms.

1 May

Professor Abdulnasser Hatemi-J

Deakin University

Abstract:

The issue of model selection in applied research is of vital importance. Since the true model is not known, which model should be used is an empirical question. There might exist several competitive models. The standard approach to dealing with this is classic hypothesis testing using an arbitrarily chosen significance level based on the underlying assumption that a true null hypothesis exists. In this paper we investigate how successful this approach is in determining the correct model for different data generating processes using time series data. An alternative approach based on more formal model selection techniques such as information criteria or cross-validation is suggested and evaluated in the time series environment via Monte Carlo experiments.

8 May

Professor Michael Lemmon

University of Utah

Abstract:

In this paper, we demonstrate the advantage of broad-based stock option plans over cash compensation when the firm needs to finance both current and future investment in an environment where external finance is costly. Intuitively, the company obtains funds for investment in the current period by cutting fixed wages through the issuance of stock options. The company receives additional funds in later periods when it collects the cash proceeds and tax savings from option exercises. Importantly, the cash inflow arising from option exercises is correlated with improvements in the firm’s investment opportunities, thus providing funds in precisely those states of the world where the demand for investment is high. Option grants in the current period therefore allow the firm to relax both its current and future financing constraints and to increase investment in positive NPV projects. Consistent with the predictions of the model, we estimate that firms increase investment by $0.38 for each dollar of proceeds received from the exercise of stock options, and that the sensitivity
of investment to proceeds from option exercises is higher in firms likely to
face financing constraints.

15 May

Mr David Johnston

University of Melbourne

Abstract:

This paper addresses the question of when and to what extent individuals are affected by major positive and negative life events, including changes in financial situation, marital status, death of child or spouse and being a victim of crime. The key advantage of our data is that we are able to identify these events on a quarterly basis rather than on the yearly basis used by previous studies. We find evidence that life events are not randomly distributed, that individuals to a large extent anticipate major events and that they quickly adapt. These effects have important implications for the calculation of monetary values needed to compensate individuals for life events such as crime or death of spouse. We find that taking dynamic factors into account leads to considerably smaller compensation valuations, with the average criminal event being off-set by a windfall income gain of about $14,000 US, and the loss of a partner, which is the most expensive shock, being off-set by a windfall income gain of about $200,000 US.

18 May

Professor Paul B. McGuinness

Macquarie University and Chinese University of Hong Kong

Synopsis:

This seminar will focus on the ever-changing market environment surrounding Chinese state owned enterprise (SOE) issuers. Both H- share (Hong Kong) and A- share issuers (Shanghai) will be considered, as well as the offshore registered affiliates of such entities (i.e., ‘Red- Chips). Particular attention will be directed to recent developments in the A- and H- markets as well as to likely imminent market reforms. Market developments, like the Qualified Foreign Institutional Investor (QFII) and Qualified Domestic Institutional Investor (QDII) schemes, will also be examined as well as the ongoing ‘redesignation’ of non-tradable stock into tradable stock form (in the case of Mainland-incorporated issuers). Many of the key issues will be assessed through the prism of Chinese SOE banks, with six of China’s top seven banks having established concurrent A- and H- share listings in recent years. The listing of such entities was unprecedented. In terms of capital proceeds raised, ICBC’s dual A- and H- share IPO of late 2006 constitutes the largest IPO ever assembled anywhere in the world.

22 May

Dr Tariq Haque

University of Adelaide

Abstract:

Barberis and Shleifer (2003) develop a theoretical asset pricing model in which some investors classify similar stocks into distinct categories. Investors move into a category by selling off stocks of an alternate category causing negative lagged cross-correlation between categories. They suggest that trend chasing or behavioural factors are likely to cause these switches into and out of categories. We use daily returns to Australian industry categories to demonstrate this trend chasing or behavioural effect. We then use weekly returns to suggest switching may be caused by a strategic asset allocation decision to alter exposure to industry portfolios.

5 June

Professor Joseph Fan

Chinese University of Hong Kong

Abstract:

This paper studies internal capital market in emerging market business groups using Chinese data. We focus on two aspects of the internal capital market that are less prominent in the developed markets: a cross-financing to get over severe financing constraints that are often prevalent in emerging market economies, and the rampant expropriation of minority shareholders under the weak corporate governance environment. We document the existence and interaction of both in China and discuss the implication of the efficiency of internal capital markets in emerging market. We found that the internal capital market is the least inefficient when weak corporate governance induce more tunnelling activities and there is no big need for mitigating financing constraints. On the other hand, when the corporate governance is relatively stronger and firms have a pressing need to use the internal capital market to mitigate financing constraints, the efficiency of the internal capital market is the highest.