Christopher J. Green

Finance and Development

In this valuable new book, a distinguished group of authors takes stock of the existing state of knowledge in the field of finance and the development process. Each chapter offers a comprehensive survey and synthesis of current issues. These include such critical subjects as savings, financial markets and the macroeconomy, stock market development, financial regulation, foreign investment and aid, financing livelihoods, microfinance, rural financial markets, small and medium enterprises, corporate finance and banking.

Pecking order or trade-off hypothesis? Evidence on the capital structure of Chinese companies

This study tests the pecking order and trade-off hypotheses of corporate financing decisions using a cross-section of the largest Chinese listed companies. The study is built on Allen (1993), Baskin (1989) and Adedeji (1998) to set up three models in which trade-off and pecking order theories give distinctively different predictions: (1) the determinants of leverage; (2) the relationship between leverage and dividends; and (3) the determinants of corporate investment. In model 1, a significant negative correlation is found between leverage and profitability; in model 2 a significant positive correlation between current leverage and past dividends is found. These results broadly support the pecking order hypothesis over trade-off theory. However, model 3 is inconclusive. Overall, the results provide tentative support for the pecking order hypothesis and demonstrate that a conventional model of corporate capital structure can explain the financing behaviour of Chinese companies.

Regulatory lessons for emerging stock markets from a century of evidence on transactions costs and share price volatility in the London Stock Exchange

This paper draws regulatory lessons for emerging stock markets from an empirical study of the relationship between transactions costs and share price volatility in the London Stock Exchange. We concentrate our analysis on direct pecuniary costs of trading, namely transactions taxes (stamp duty) and brokerage charges, which derive directly from regulation. In a novel contribution to the transactions cost literature, we identify stock market performance with various measures of market volatility, and distinguish among market volatility, fundamental volatility and excess volatility; we also propose some simple ways of identifying the separate impact of transactions costs on these volatility measures. Our findings suggest that changes in transactions costs have a significant and dependable eAect on share price volatility but the sign of this eAect depends critically on the concept of volatility being measured. Among the important lessons for emerging stock markets is that transactions costs are an important factor in share market volatility and the regulatory regime therefore needs to take account of the impact of regulation on such costs. This is particularly important for those emerging stock markets that rely on stamp duty or other transactions taxes as a regulatory tool. ” 2000 Elsevier Science B.V. All rights reserved.

Enrichment and cultivation of prokaryotes associated with the sulphate–methane transition zone of diffusion‐controlled sediments of Aarhus Bay, Denmark, under heterotrophic conditions

The prokaryotic activity, diversity and culturability of diffusion-controlled Aarhus Bay sediments, including the sulphate-methane transition zone (SMTZ), were determined using a combination of geochemical, molecular (16S rRNA and mcrA genes) and cultivation techniques. The SMTZ had elevated sulphate reduction and anaerobic oxidation of methane, and enhanced cell numbers, but no active methanogenesis. The prokaryotic population was similar to that in other SMTZs, with Deltaproteobacteria, Gammaproteobacteria, JS1, Planctomycetes, Chloroflexi, ANME-1, MBG-D and MCG. Many of these groups were maintained in a heterotrophic (10 mM glucose, acetate), sediment slurry with periodic low sulphate and acetate additions (~2 mM). Other prokaryotes were also enriched including methanogens, Firmicutes, Bacteroidetes, Synergistetes and TM6. This slurry was then inoculated into a matrix of substrate and sulphate concentrations for further selective enrichment. The results demonstrated that important SMTZ bacteria can be maintained in a long-term, anaerobic culture under specific conditions. For example, JS1 grew in a mixed culture with acetate or acetate/glucose plus sulphate. Chloroflexi occurred in a mixed culture, including in the presence of acetate, which had previously not been shown to be a Chloroflexi subphylum I substrate, and was more dominant in a medium with seawater salt concentrations. In contrast, archaeal diversity was reduced and limited to the orders Methanosarcinales and Methanomicrobiales. These results provide information about the physiology of a range of SMTZ prokaryotes and shows that many can be maintained and enriched under heterotrophic conditions, including those with few or no cultivated representatives.

The Efficiency of Foreign and Domestic Banks in Central and Eastern Europe: Evidence on Economies of Scale and Scope

We model the efficiency of domestic and foreign banks in Central and Eastern Europe, in terms of economies of scale and scope. We estimate and test the model on a panel of 273 foreign and domestic banks located in nine European transition economies during 1995-99. The main findings are threefold. First, overall, banks in the sample economies exhibit a reasonable degree of efficiency. Second, we generally reject the hypothesis that foreign banks are more efficient than domestic banks in these economies. Third, foreign ownership is hardly an important factor in reducing the banks’ total costs.

How do Small Firms in Developing Countries Raise Capital? Evidence from a Large-Scale Survey of Kenyan Micro and Small-Scale Enterprises

We utilize a unique comprehensive dataset, drawn from the 1999 baseline survey of some 2000 micro and small-scale enterprises (MSEs) in Kenya. We analyze the financing behavior of these enterprises within the framework of a heterodox model of debt-equity and gearing decisions. We also study determinants of the success rate of loan applications. Our results emphasize three major findings. First, MSEs in Kenya obtain debt from a wide variety of sources. Second, debt-equity and gearing decisions by MSEs and their success rates in loan applications can all be understood by relatively simple models which include a mixture of conventional and heterodox variables. Third, and in particular, measures of the tangibility of the owners assets, and the owners education and training have a significant positive impact on the probability of borrowing and of the gearing level. These findings have important policy implications for policy makers and entrepreneurs of MSEs in Kenya.

Poland: a successful transition to budget sustainability?

Abstract In this paper we evaluate the sustainability of the current fiscal policy regime in Poland, using as framework the intertemporal budget constraint (IBC). Consistency of fiscal policy with the IBC is evaluated using unit root and cointegration tests. In contrast to much previous research on fiscal sustainability, we take account of the possible role of seignorage from money creation as a source of government revenue, by conducting sustainability tests excluding, and then including, seignorage. We find evidence that Polish fiscal policy is sustainable, and that the fiscal regime is ‘expenditure-led’, adjusting tax revenues to the planned levels of government expenditures.

Corporate Financial Structures in India

We document the financial structure of a sample of Indian non-financial companies using a new and unique dataset consisting of a panel containing the published accounts of almost 900 companies that published a full set of accounts every year during 1989-99. In a new departure in the literature, the dataset includes quoted and unquoted companies. We compare the sources-uses approach to analyzing company financial structures with the asset-liability approach. We use both approaches to characterize and to compare the financial structures of Indian com panies over time; between quoted and unquoted companies; and between com panies which belong to a business group and those that do not. Finally, we compare our results to those obtained previously for India and for the industrial countries.

A cross‐section analysis of food insecurity in developing countries: Its magnitude and sources

Short‐term instability in food supplies continues to be a severe problem for many developing countries. From the viewpoint of an individual country, this problem arises primarily from fluctuations in domestic food production and in foreign exchange availability. The present paper aims to establish the magnitude and seriousness of the problem in a sample of 50 food deficit countries. It also aims to broaden the scope of discussion of the food security problem by taking into account the possibility that food insecurity may manifest itself in a country in a variety of ways which depend in part on the manner in which the domestic authorities respond to periodic shortfalls in food supplies.

The impact of the suspension of opening and closing call auctions: Evidence from the National Stock Exchange of India

A hotly debated issue in the market microstructure literature is the effectiveness of call auctions as against continuous trading systems. In this paper we investigate this issue by studying the impact of the suspension of opening and closing call auctions by the National Stock Exchange of India in 1999. We compare the volatility, efficiency and liquidity (VEL) of securities in the market before and after suspension, and estimate the value of the auctions to traders by carrying out an event study. Contrary to expectation, we find that VEL factors improved following the suspension, and the CARs were significant but were not uniformly positive or negative. As a partial explanation for these results, we find that less liquid stocks traded less in the auctions than did other securities, especially at the opening, and they experienced the most gains following the suspension. This suggests that less liquid stocks did not gain the expected benefits from the auctions, and therefore that it cannot be assumed that a call auction system will improve share trading in a less liquid emerging market. Future research in this area will need to pay attention to the composition of the shares being traded and to the nature of the trading process in different shares in the market.