Unfunded pension liabilities and sponsoring firm credit risk: an international analysis of corporate bond spreads

This paper tests empirically whether pension information derived by corporate pension accounting disclosures is priced in corporate bond spreads. The model represents a hybrid of more traditional accounting ratio-based models of credit risk and structural models of bond spreads initiated by Merton (1974). The model is fitted to 5 years of data from 2002 to 2006 featuring companies from the US and Europe. The paper finds that while unfunded pension liabilities are priced in the overall sample, they are not priced as aggressively as traditional leverage. Furthermore, an extended model shows that the pension–credit risk relation is most evident in the US and Germany, where unfunded pension liabilities are priced more aggressively than traditional forms of leverage. No pension–credit risk relation is found in the other countries sampled, notably the UK, Netherlands and France.

Benchmark Status in Fixed-Income Asset Markets

What is a benchmark bond? We provide a formal theoretical treatment of this concept that relates endogenously determined benchmark status to the location of price discovery and we derive its implications. We describe a rich but little used econometric technique for identifying the benchmark that is congruent with our theoretical framework. We apply this in the context of the US corporate bond market and to the natural experiment that occurred when benchmark status was contested in the European sovereign bond markets after the introduction of the Euro. We show that France provides the benchmark at most maturities in the Euro-denominated sovereign bond market and that IBM provides the benchmark in the 10 year maturity in the US corporate bond market.

Law, Politics and Financial Development: The Great Reversal of the U.K. Corporate Debt Market

This article examines the role of creditor protection in the development of the U.K. corporate bond market. This market grew rapidly in the late nineteenth century, but in the twentieth century it experienced a reversal, albeit with a short-lived post-1945 renaissance. Such was the extent of the reversal that the market from the 1970s onwards was smaller than it had been in 1870. We find that law does not explain the variation in the size of this market over time. Alternatively, our evidence suggests that inflation and taxation policies were major drivers of this market in the post-1945 era. Copyright © The Economic History Association 2013

This Time is Different: Causes and Consequences of British Banking Instability over the Long Run

This paper addresses three questions: (1) How severe were the episodes of banking instability
experienced by the UK over the past two centuries? (2) What have been the macroeconomic
indicators of UK banking instability? and (3) What have been the consequences of UK banking
instability for the cost of credit? Using a unique dataset of bank share prices from 1830 to 2010
to assess the stability of the UK banking system, we find that banking instability has grown more
severe since the 1970s. We also find that interest rates, inflation, lending growth, and equity
prices are consistent macroeconomic indicators of UK banking instability over the long run.
Furthermore, utilising a unique dataset of corporate-bond yields for the period 1860 to 2010, we
find that there is a significant long-run relationship between banking instability and the creditrisk
premium faced by businesses.

Putting a Price on Prisoner Release: The History of Bail and the Future of Parole

In this article, we argue that the history of bail foretells the future of parole. Under a plancalled the Conditional Post-Conviction Release Bond Act (recently passed into law inthree states), US prisoners can secure early release only after posting ‘post-convictionbail’. As with pre-trial bail, the fledgling model would require prisoners to pay a percent-age of the bail amount to secure their release under the contractual responsibility of acommercial bail agency. If release conditions are breached, bounty hunters are legallyempowered to seize and return the parolee to prison. Our inquiry outlines the origins of this post-conviction bond plan and the research upon which it is based. Drawing on the‘new penology’ framework, we identify several underlying factors that make for a ripeadvocacy environment and set the stage for widespread state-level adoption of this planin the near future. Post-conviction bail fits squarely within the growing policy trendstoward privatization, managerialism, and actuarial justice. Most importantly, though,advocates have the benefit of precedent on their side, as most US states have longrelied on a system of commercial bail bonding and private bounty hunting to manageconditional pretrial release.

Price Discovery in the Dual-Platform US Treasury Market

Inter-dealer trading in US Treasury securities is almost equally divided between two electronic trading platforms that have only slight differences in terms of their relative liquidity and transparency. BrokerTec is more active in the trading of 2-, 5-, and 10-year T-notes while eSpeed has more active trading in the 30-year bond. Over the period studied, eSpeed provides a more pre-trade transparent platform than BrokerTec. We examine the contribution to ‘price discovery’ of activity in the two platforms using high frequency data. We find that price discovery does not derive equally from the two platforms and that the shares vary across term to maturity. This can be traced to differential trading activities and transparency of the two platforms.

What price harmony? Teachers' methods of delivering an ethos of tolerance and respect for diversity in an integrated school in Northern Ireland

The aim of the paper is to explore teachers’ methods of delivering an ethos of tolerance, respect
and mutual understanding in one integrated secondary school in Northern Ireland. Drawing on
interviews with teachers in the school, it is argued that most teachers make ‘critical choices’
which both reflect and reinforce a ‘culture of avoidance’, whereby politically or religiously contentious
issues are avoided rather than explored. Although teachers are well-intentioned in making
these choices, it is shown that they have the potential to create the conditions that maintain or even
harden psychological boundaries between Catholics and Protestants rather than dilute them.

General rules for predicting where a catalytic reaction should occur on metal surfaces: A density functional theory study of C-H and C-O bond breaking/making on flat, stepped, and kinked metal surfaces

To predict where a catalytic reaction should occur is a fundamental issue scientifically. Technologically, it is also important because it can facilitate the catalyst's design. However, to date, the understanding of this issue is rather limited. In this work, two types of reactions, CH4 CH3 + H and CO C + 0 on two transition metal surfaces, were chosen as model systems aiming to address in general where a catalytic reaction should occur. The dissociations of CH4 - CH3 + H and CO --> C + O and their reverse reactions on flat, stepped, and kinked Rh and Pd surfaces were studied in detail. We find the following: First, for the CH4 Ch(3) + H reaction, the dissociation barrier is reduced by similar to0.3 eV on steps and kinks as compared to that on flat surfaces. On the other hand, there is essentially no difference in barrier for the association reaction of CH3 + H on the flat surfaces and the defects. Second, for the CO C + 0 reaction, the dissociation barrier decreases dramatically (more than 0.8 eV on Rh and Pd) on steps and kinks as compared to that on flat surfaces. In contrast to the CH3 + H reaction, the C + 0 association reaction also preferentially occurs on steps and kinks. We also present a detailed analysis of the reaction barriers in which each barrier is decomposed quantitatively into a local electronic effect and a geometrical effect. Our DFT calculations show that surface defects such as steps and kinks can largely facilitate bond breaking, while whether the surface defects could promote bond formation depends on the individual reaction as well as the particular metal. The physical origin of these trends is identified and discussed. On the basis of our results, we arrive at some simple rules with respect to where a reaction should occur: (i) defects such as steps are always favored for dissociation reactions as compared to flat surfaces; and (ii) the reaction site of the association reactions is largely related to the magnitude of the bonding competition effect, which is determined by the reactant and metal valency. Reactions with high valency reactants are more likely to occur on defects (more structure-sensitive), as compared to reactions with low valency reactants. Moreover, the reactions on late transition metals are more likely to proceed on defects than those on the early transition metals.