Why and how FDI stocks are a biased measure of MNE affiliate activity

Many international business (IB) studies have used foreign direct investment (FDI) stocks to measure the aggregate value-adding activity of multinational enterprises (MNE) affiliates in host countries. We argue that FDI stocks are a biased measure of that activity, because the degree to which they overestimate or underestimate affiliate activity varies systematically with host-country characteristics. First, most FDI into countries that serve as tax havens generate no actual productive activity; thus FDI stocks in such countries overestimate affiliate activity. Second, FDI stocks do not include locally raised external funds, funds widely used in countries with well-developed financial markets or volatile exchange rates, resulting in an underestimation of affiliate activity in such countries. Finally, the extent to which FDI translates into affiliate activity increases with affiliate labor productivity, so in countries where labor is more productive, FDI stocks also result in an underestimation of affiliate activity. We test these hypotheses by first regressing affiliate value-added and affiliate sales on FDI stocks to calculate a country-specific mismatch, and then by regressing this mismatch on a host country's tax haven status, level of financial market development, exchange rate volatility, and affiliate labor productivity. All hypotheses are supported, implying that FDI stocks are a biased measure of MNE affiliate activity, and hence that the results of FDI-data-based studies of such activity need to be reconsidered. [ABSTRACT FROM AUTHOR]

Modelling the Performance of Irish Credit Unions, 2002 to 2010

This study undertakes a modeling based performance assessment of all Irish credit unions between 2002 and 2010, a particularly turbulent period in their history. The analysis explicitly addresses the current challenges faced by credit unions in that the modeling approach used rewards credit unions for reducing undesirable outputs (impaired loans and investments) as well as for increasing desirable outputs (loans, earning assets and members’ funds) and decreasing inputs (labour expenditure, capital expenditure and fund expenses). The main findings are: credit unions are subject to increasing returns to scale; technical regression occurred in the years after 2007; there is significant scope for an improvement in efficiency through expansion of desirable outputs and contraction of undesirable outputs and inputs; and that larger credit unions, that are better capitalised and pay a higher dividend to members are more efficient than their smaller, less capitalised, and lower dividend paying counterparts.

Cooperative traits of technology adoption: Website adoption in Irish credit unions

The purpose of this paper is to examine website adoption and its resultant effects on credit union performance in Ireland. Credit union specific factors influence adoption as does the socio-economic profile of the population from where the credit union draws its membership. Website adoption results in a reduction in the spread between the loan and dividend rate with this primarily driven by a fall in the loan rate. Given that the adoption of a website, albeit with limited functionality, translates into cost benefits this augurs well for the current restructuring process underway for Irish credit unions which has as one of its objectives the upgrade of credit union ICT sophistication.

US Credit Unions: Survival, Consolidation and Growth

This study uses hazard function estimations and time-series and cross-sectional growth regressions to examine the impact of exit through merger and acquisition (M&A) or failure, and internally-generated growth, on the firm-size distribution within the US credit union sector. Consolidation through M&A was the principal cause of a reduction in the number of credit unions, but impact on concentration was small. Divergence between the average internally-generated growth of smaller and larger credit unions was the principal driver of the rise in concentration.

Corporate Governance in Canadian and US Credit Unions

This report, a collaborative effort between the Filene Research Institute and the Credit Union Central of Canada, with participation from the Desjardins Group, follows on two recent governance projects: Tracking the Relationship Between Credit Union Governance and Performance and a three-part series by Professor Robert Hoel about how boards can add more value. Beyond these, the academic literature of corporate governance is well developed, so this study includes an in-depth review of financial institution governance research and calls out the differences between credit unions and other firms. Also, because surveys can only go so far in teasing out insights, the authors followed up with a dozen interviews with credit unions of all sizes across all three major North American credit union systems.

Because the report is survey-based, large swaths of the findings compare major and minor details of different (and often not-so-different) approaches to governance in the three systems and among differently sized credit unions. From those comparisons, some interesting differences emerge. For example, as a federated system, Desjardins excels at some aspects of board development and system governance in ways that the more atomized US and Canadian credit union systems do not.

Irresponsible Lending?: A Case Study of a U.K. Credit Industry Reform Initiative

There are major concerns about the level of personal borrowing, particularly sourced from credit cards. This paper charts the progress of an initiative to create a Responsible Lending Index (RLI) for the credit industry. The RLI proposed to voluntarily benchmark lending standards and promote best practice within the credit industry by involving suppliers of credit, customer representatives and regulators. However, despite initial support from some banks, consumer bodies and the Chair of the Treasury Select Committee, it failed to gain sufficient support from financial institutions in its original format. The primary reasons for this were related to the complexity of building such a robust index and the banks trade body’s fear of exposing its members to public scrutiny. A revised alternative, the Responsible Lending Initiative, was proposed which took into account these concerns. However, the Association of Payment Clearing Service (APACS), the trade body of the credit industry, then effectively destroyed the proposal. This article describes an attempt to address the challenges in the credit card industry with the initiation of the RLI, reflected in stakeholder discourse and in the context of a wider concern expressed by the involved stakeholders in terms of the need for greater responsibility in the banking industry’s lending practices.