Credit cycle dependent spread determinants in emerging sovereign debt markets

We address credit cycle dependent sovereign credit risk determinants. In our model, the spread determinants' magnitude is conditional on an unobservable endogenous sovereign credit cycle as represented by the underlying state of a Markov regime switching process. Our explanatory variables are motivated in the tradition of structural credit risk models and include changes in asset prices, interest rates, implied market volatility, gold price changes and foreign exchange rates. We examine daily frequency variations of U.S. dollar denominated Eurobond credit spreads of four major Latin American sovereign bond issuers (Brazil, Colombia, Mexico and Venezuela) with liquid bond markets during March 2000 to June 2011. We find that spread determinants are statistically significant and consistent with theory, while their magnitude remarkably varies with the state of the credit cycle. Crisis states are characterized by high spread change uncertainty and high sensitivities with respect to the spread change determinants. We further document that not only changes of local currencies, but also changes of the Euro with respect to the U.S. dollar are significant spread drivers and argue that this is consistent with the sovereigns' ability to pay.

Economic effects of the external debt crisis for Pakistan

Pakistan experienced an external debt crisis in 1998. There is robust evidence of the significant positive effects of the growth rate of real long-term external debt and negative effects of the growth rate of total debt servicing as a percentage of exports on real GDP growth in short and long-run.

American defence policy and the challenge of austerity : some implications for Southeast Asia

This article examines the Obama administration’s attempt to rebalance U.S. strategy towards the Asia-Pacific region with special emphasis on Southeast Asia. It argues that America’s regional pivot is occurring at a time of unprecedented domestic fiscal austerity caused by a staggering level of national debt.

The U.S. domestic budget crisis, the current “declinist” debate, concern over the rise of China, and the impact of sequestration on American defence spending are analysed and their implications for Southeast Asia are assessed. The article suggests that the most serious aspect of the U.S. debt crisis may be its impact upon American strategic resilience and geopolitical confidence.

Thus, while many ASEAN nations have welcomed the U.S. strategic pivot as a valuable reinforcement of their security, they remain unsure that it is a sustainable policy. In the future, it is likely that reassuring ASEAN of the longevity of the U.S. commitment to the Asia-Pacific will require of Washington a skilled blend of budgetary reform, military presence, and sustained diplomatic effort.

The impact of ownership structure on corporate debt policy : two stage least square simultaneous model approach for post crisis period : evidence from Kuala Lumpur Stock Exchange

Ownership concentration as a governance mechanism has received considerable attention among academician, practitioners as well as policy makers because large-block shareholders are increasingly active in their demands that corporations adopt effective governance mechanisms to control managerial decisions, which include corporate debt policy. Earlier study on the agency model of the firm widely recognizes that the managerial ownership and external debt play an important role in mitigating agency conflicts and enhancing firm value. They also found that increase in the external monitors, for example the institutional investors, can actually play a useful role in limiting agency problems in the firm. This paper, using 100 Composite Index companies from Brusa Malaysia between 1998 to 2002 explores the impact of institutional holdings on managerial ownership and debt policy in an integrated framework by using a simultaneous equations estimation procedure (2SLS). The findings show that there is a significant impact of institutional ownership which serves effective control mechanism on managerial ownership and corporate debt policy as hypothesized. Findings of such evidence suggest that institutional holding thus have played an important role in managers' strategic management decision and reduce agency conflict. In addition, corporate debt policy too is governed by managerial ownership and exhibited a negative relation.

A crisis of leadership : towards an anti-sovereign ethics of organisation

A common reaction to crises experienced within or brought about by business is to identify a corollary ‘crisis of leadership’ and to call for better (stronger, more thoughtful or, indeed, more ethical and responsible) leaders. This paper supports the idea that there is a crisis of leadership – but interprets it quite differently. Specifically, I argue that the most ethically debilitating crisis is the fact that we look to leadership to solve organisational ethical ills. There is, I argue, a pressing need to conceptualise a business ethics that is not constrained by the straitjacket of official hierarchy – a need to denaturalise ‘leadership’ as the normal or rightful locus of ethical regulation and renewal in business organisation. To this end, I explore a Levinasian ethico-politics of responsibility and proximity as the basis of an alternative, anti-sovereign, ethics of organisation.

Merah and Breivik: a mirror effect of a European identity crisis

While the cases of Anders Behring Breivik and Mohamed Merah clearly demonstrate the impact of social networks and the role of the Internet and prison on the radicalization process, the killings in Norway and France in fact expose larger issues that exist within contemporary Europe, including profound identity crises manifesting as Islamist extremism in some quarters and far-right extremism in others. This article discusses the individual pathways towards extremism of Merah and Breivik, the interconnectivity of two extremisms and how these can be understood as mirrored manifestations of an identity crisis in Europe.

Sovereign risk and the impact of crisis: evidence from Latin America

We utilize the default by Argentina in 2001 and the Global Financial Crisis in 2008, as natural experiments, to monitor the complex interactions between sovereign bonds when subjected to endogenous and exogenous shocks. By forming pairs of Latin American sovereign bonds, bundled into similar maturity class, the analysis highlights the complex nature of risk shifting, and the temporal nature of the volatility transmission and sharing mechanisms in the lead up to, and after, a crisis period. The results show that shorter maturity groups and longer maturity groups behave in fundamentally different ways in terms of volatility transmission, while one or two leading countries act as regional benchmarks. The dynamics are consistent with temporal but segmented investor preferences, with the arrival of crisis contributing to a breakdown in the previous relationships. In addition, there is additional economic benefit from utilizing knowledge of the volatility structure underlying the historic transmission channels to improve the portfolio outcomes of market participants.

Wealth effect of auditor switch during crisis and non-crisis period : the Malaysian experience

This study examines the auditor switch effect on share prices among listed companies in Malaysia, mainly the Second Board companies during economic crisis and the economic growth period. Data on companies listed on the KLSE that reported switching of auditors were gathered from the respective companies’ annual reports for the period of 1990 until 1999. Daily stock prices and the Second Board Index for an interval of 200 days windows were extracted from the KLSE Daily Dairy. The wealth effect of auditor’s switch was investigated using the market model event study methodology. The general findings of the study imply that it is consistent with the theory, the market reacts positively to news involving switching to higher prestige audit firms before the economic crisis but reacted negatively during the economic crisis. News involving switching to lower prestige auditors received negative reaction both before and during the crisis. This study postulate that the negative reaction to switches during the economic crisis (either to higher prestige or to lower prestige auditors) may be due to cost cutting exercise rather than obtaining qualified audit reports.

The macroeconomics of sovereign wealth funds

The dramatic growth in sovereign wealth funds (SWFs) has implications which are still emerging for national economies and globally. This paper considers why SWFs have become key international financial institutions for some countries, particularly developing ones. This adds to the literature on second best development strategies (Hausmann and Rodrik 2003), here applying it to SWFs. A macroeconomic approach is taken towards the phenomenon of reserves accumulation and motives for SWFs. These are evaluated in terms of the pattern of balance of payments and inferred trade and exchange policies. The role of SWFs in promoting country growth and international stability is considered in view of the global financial crisis (GFC).

Asymmetric recognition of good and bad news at Malaysian capital market : a pre and crisis analysis

The aim of this paper is to analyze the asymmetric recognition of good and bad news on reported earnings of Malaysian-listed firms. The study uses both descriptive and regression analyses to ascertain whether there is a contemporaneous relationship between news (good and bad) and reported earnings. The analysis is based on a sample of 150 firms listed on the Bursa Malaysia Index over a period of 10 years, from 1990 to 2000. Two regression models were adopted based on Basu (1997) and Giner and Rees (2001). The first model aims to capture asymmetric recognition of good and bad news into reported earnings while the latter model is developed to capture both asymmetric recognition of information shock and permanent earnings effect on contemporaneous earnings. The evidence from this study reported the steady increase in earnings per share till 1997. However, a drastic decline was observed for the period 1997 to 1999 because of Asian financial crisis. The findings from the regression model one suggested that the asymmetric recognition of good news was more prominent during the good time compare to bad time and vice versa. The findings from model two also suggested that autoregressive effect of permanent effect was very prominent both for crisis and non crisis periods.

Climate change and heritage : responding to the crisis

Climate change poses a major threat to heritage of all kinds. Yet much of the work so far on climate change and heritage replicates aspects of the global heritage system, tending to emphasise a European perspective and focusing on the preservation of tangible heritage. We call for a broader understanding of climate change, particularly as it affects heritage in the developing world, especially that of indigenous peoples and small Island states. This is also a call for political engagement by heritage practitioners. We argue that in the struggle against climate change heritage practitioners can make a worthwhile contribution by arguing for a de-commodified form of heritage practice emphasizing the involvement of local communities and recognition of their cultural resources; that resists being coopted into economic growth strategies unless they supplant other forms of unsustainable development; that focuses on heritage as an alternative way of viewing resources and their use.

How the financial crisis sundered the dream of the autonomous subject

The article discusses the effect of the 2008 economic meltdown on self-reliance. Banks are noted to have honored credit default swaps and purchase mortgages as collateralized debt obligations (CDO) with the option of buy back at face value. Also discussed are the Wall Street Bailout, the Australian banking system and the overseas debt of Australia.

Agency issues surrounding A-REITS and the global financial crisis

 This thesis examines the optimal balance of debt and equity undertaken by Australian Real Estate Investment Trusts, the incentive-driven pay structure utilized to compensate management, and the factors of A-REIT composition and performance that appeal to large, powerful shareholders who are able to influence market prices.

Financialisation of official development assistance

Official Development Assistance is a significant global enterprise. Organsiations engaged in funding and implementing ODA (the bilateral donors, multilateral organsiations such as the World Bank and IMF) have unprecedented political and economic influence over a large number of sovereign developing countries. This paper analyses if, and how financialisation impacts on development aid, and implications for effective aid policy agendas, drawing on and linking critical debate on finacialisation, and ODA. Subsequent to the Global Financial Crisis (GFC) and the persistence of the European Monitory Crisis (EMC), specific needs of developing countries became increasingly sub-ordinated to political and ideological power relations between ‘real’ economics and financial economics otherwise known as financialisation. The paper finds ‘financialisation’ as the ideological, political and economic catalyst for economic growth potentially confusing long-term development to combat poverty, and a short term need to overcome the lack of financial capacity in developing recipient countries. Sustainable economic development requires developing countries to forsake the pursuit of financialisation and to re-delineate their national finance, trade and investment regimes, and re-state it in a balanced manner as to take into account their unique economic development needs rather that the donor agencies’ demands and to advance their own ‘real’ economies.

Conceptualizing The Schmittian ‘Exception’ in the European Union: from the ‘Opt-Out’ Procedure(S) to indirect forms of secessionism

Too often, legal and sociopolitical scholars concerned with European policies anddecision-making procedures focus their efforts only on the official essence ofconventional opt-out forms of nonparticipation in the European integration process,such as those established in the Treaty of Lisbon. Yet, far from being just an internalmatter, the independentist instances which informed the Scottish referendum had asignificant impact on delicate issues of EU law, biopolitics, political anthropology,political theology, and foreign policy which deserve to be properly addressed. Thenecessity of conducting such an analysis is self-evident, and mainly related to thepossibility that the Scottish experience may be soon replicated, with different results,in the Italian regions of Venetia, Sardinia, and Lombardy, and in the Spanishcommunity of Catalonia. Delving into this dimension through Schmitt’s politicaldecisionism and adopting a comparative and interdisciplinary approach thattranscends the limits of pure positivistic and analytical lines of inquiry, this paperpresents a country’s choice to leave the EU or stop cooperating with it through thedirect opt-out mechanisms officially regulated in its Treaties, or through indirectforms of secessionism, in terms of an ‘exceptional’ act of sovereign will.