What drives corporate default risk premia? Evidence from the CDS market

This paper studies the evolution of the default risk premia for European firms during the years surrounding the recent credit crisis. We employ the information embedded in Credit Default Swaps (CDS) and Moody’s KMV EDF default probabilities to analyze the common factors driving this risk premia. The risk premium is characterized in several directions: Firstly, we perform a panel data analysis to capture the relationship between CDS spreads and actual default probabilities. Secondly, we employ the intensity framework of Jarrow et al. (2005) in order to measure the theoretical effect of risk premium on expected bond returns. Thirdly, we carry out a dynamic panel data to identify the macroeconomic sources of risk premium. Finally, a vector autoregressive model analyzes which proportion of the co-movement is attributable to financial or macro variables. Our estimations report coefficients for risk premium substantially higher than previously referred for US firms and a time varying behavior. A dominant factor explains around 60% of the common movements in risk premia. Additionally, empirical evidence suggests a public-to-private risk transfer between the sovereign CDS spreads and corporate risk premia.

Eficiência e concentração na indústria bancária

O objectivo deste trabalho é a análise da eficiência produtiva e dos efeitos da concentração sobre os custos bancários, tendo por base a indústria bancária portuguesa. O carácter multiproduto da empresa bancária sugere a necessidade de se adoptar formas multiproduto da função custo (tipo Fourier). Introduzimos variáveis de homogeneidade e de estrutura que permitem o recurso a formas funcionais uniproduto (Cobb-Douglas) à banca. A amostra corresponde a 22 bancos que operavam em Portugal entre 1995-2001, base não consolidada e dados em painel. Para o estudo da ineficiência recorreu-se ao modelo estocástico da curva fronteira (SFA), para as duas especificações. Na análise da concentração, introduziram-se variáveis binárias que pretendem captar os efeitos durante quatro anos após a concentração. Tanto no caso da SFA como no da concentração, os resultados encontrados são sensíveis à especificação funcional adoptada. Concluindo, o processo de concentração bancário parece justificar-se pela possibilidade da diminuição da ineficiência-X. This study addresses the productive efficiency and the effects of concentration over the banking costs, stressing its focus on the Portuguese banking market. The multiproduct character of the banking firm suggests the use of functional forms as Fourier. The introduction of variables of structure and of homogeneity allows the association of the banking activity (multiproduct) with a single product function (Cobb-Douglas type). The sample covers 22 banks which operated in Portugal from 1995-2001, non consolidated base with a panel data structure. The study about inefficiency is elaborated through the stochastic frontier model (SFA), for the two specifications selected. As a methodology to analyze the concentration, we introduced binary variables, which intend to catch the effects through four years after the concentration process. The results obtained, through SFA and concentration approach, are influenced by the kind of specifications selected. Summing up, the concentration process of the Banking Industry sounds to be justified by the possibility of the X-inefficiency.

Pricing of exchange traded funds

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

Psychological pressure in competitive environments: Evidence from a randomized natural experiment

Much like cognitive abilities, emotional skills can have major effects on performance and economic outcomes. This paper studies the behavior of professionalsubjects involved in a dynamic competition in their own natural environment. Thesetting is a penalty shoot-out in soccer where two teams compete in a tournamentframework taking turns in a sequence of five penalty kicks each. As the kicking order is determined by the random outcome of a coin flip, the treatment and control groups are determined via explicit randomization. Therefore, absent any psychological effects, both teams should have the same probability of winning regardless of the kicking order. Yet, we find a systematic first-kicker advantage. Using data on 2,731 penalty kicks from 262 shoot-outs for a three decade period, we find that teams kicking first win the penalty shoot-out 60.5% of the time. A dynamic panel data analysis shows that the psychological mechanism underlying this result arises from the asymmetry in the partial score. As most kicks are scored, kicking first typically means having the opportunity to lead in the partial score, whereas kicking second typically means lagging in the score and having the opportunity to, at most, get even. Having a worse prospect than the opponent hinders subjects' performance.Further, we also find that professionals are self-aware of their own psychological effects. When a recent change in regulations gives winners of the coin toss the chance to choose the kicking order, they rationally react to it by systematically choosing to kick first. A survey of professional players reveals that when asked to explain why they prefer to kick first, they precisely identify the psychological mechanism for which we find empirical support in the data: they want to lead in the score inorder to put pressure on the opponent.

Economic integration and corruption: The corrupt soul of the European Union

We study the link between corruption and economic integration. We show that if an economic union establishes a common regulation for public procurement, the country more prone to corruption benefits more from integration. However, if the propensities to corruption are too distinct, the less corrupt country will not be willing to join the union. This difference in corruption propensities can be offset by a difference in efficiency. We also show that corruption is lower if integration occurs. A panel data analysis for the European Union confirms that more corrupt countries are more favorable towards integration but less acceptable as potential new members.

The impact of long-term brand development strategies on brand value of companies operating in high-technology markets

The objective of the current research is to investigate brand value generation. The study is conducted in the context of high-technology companies. The research aims at finding the impact of long-term brand development strategies, including advertising investments, R&D investments, R&D intensity, new products developed and design. The empirical part of the study incorporated collection of primary and secondary data on 36 companies operating in high-technology sector and being rated as top companies with the most valuable brands by Interbrand consultancy. The data contained information for six consequent years from 2008 to 2013. Obtained data was analyzed using the methods of fixed effect and random effect model (panel data analysis). The analysis showed positive effect of advertising and R&D investments on brand value of high-technology companies in the long run. The impact of remaining three strategies was not approved and further investigation is required.

Indústria e crescimento econômico: evidências para países desenvolvidos e em desenvolvimento

The work develops an empirical investigation on the relevance of industry / GDP, manufacture / GDP and industrial employment / total employment on long run growth using panel data. The results indicate the existence of a direct and significant relation for industry (manufacture) share to GDP and industrial employment for long run growth. The annual impact on growth of a 10% increase, over a five year period, in the industry share to GDP (manufacture share to GDP) ranges from 0.19% to 0.32% (0.2% to 0.4%) and for the industrial employment / total employment it varies from 0.3% to 0.5%.

Effects of bank supervision and regulation on bank risk

In the last few decades, banking has strongly internationalized and become more complex. Hence, bank supervision and regulation has taken global perspective, too. The most important international regulation are the Basel frameworks by the Basel committee on banking supervision. This study examines the effects of bank supervision and regulation, especially the Basel II, on bank risk and risk-taking. In order to separate and recognize the efficiency of these effects, the co-effects of many supervisory and regulatory tools together with other relevant factors must be taken into account. The focus of the study is on the effects of asymmetric information and banking procyclicality on the efficiency of the Basel II. This study tries to find an answer, if the Basel II, implemented in 2008, has decreased bank risk in banks of European Union member states. This study examines empirically, if the volatility on bank stock returns have changed after the implementation of the Basel II. Panel data consists of 62 bank stock returns, bank-specific variables, economic variables and variables concerning regulatory environment between 2003 and 2011. Fixed effects regression is used for panel data analysis. Results indicate that volatility on bank stock returns has increased after 2008 and the implementation of the Basel II. Result is statistically very significant and robustness has been verified in different model specifications. The result of this study contradicts with the goal of the Basel II about banking system stability. Banking procyclicality and wrong incentives for regulatory arbitrage under asymmetric information explained in theoretical part may explain this result. On the other hand, simultaneously with the implementation of the Basel II, the global financial crisis emerged and caused severe losses in banks and increased stock volatility. However, it is clear that supervision and regulation was unable to prevent the global financial crisis. After the financial crisis, supervision and regulation have been reformed globally. The main problems of the Basel II, examined in the theoretical part, have been recognized in order to prevent problems of procyclicality and wrong incentives in the future.

The M curve and the performance of Spanish international new ventures

In this paper we address three challenges. First, we discuss how international new ventures (INVs) are probably not explained by the Uppsala model as there is no time for learning about foreign markets in newly born and small firms. Only in the longer term can INVs develop experiential learning to overcome the liability of foreignness as they expand abroad. Second, we advance theoretically on previous research demonstrating that the multinationality−performance relationship of INVs follows a traditional S-shaped relationship, but they first experience a ‘born global illusion’ which leads to a non-traditional M curve. Third, using a panel data analysis for the period 1994–2008 we find empirically that Spanish INVs follow an inverted U curve in the very short term, where no learning takes place, but that experience gained over time yields an M-curve relationship once learning takes place.

Mandatory and voluntary information disclosure and the effects on financial analysts: evidence from China

Purpose – This paper aims to make a comparison, different from existing literature solely focusing on voluntary earnings forecasts and ex post earnings surprise, between the effects of mandatory earnings surprise warnings and voluntary information disclosure issued by management teams on financial analysts in terms of the number of followings and the accuracy of earnings forecasts. Design/methodology/approach – This paper uses panel data analysis with fixed effects on data collected from Chinese public firms between 2006 and 2010. It uses an exogenous regulation enforcement to minimise the endogeneity problem. Findings – This paper finds that financial analysts are less likely to follow firms which mandatorily issue earnings surprise warnings ex ante than those voluntarily issue earnings forecasts. Moreover, ex post, they issue less accurate and more dispersed forecasts on former firms. The results support Brown et al.’s (2009) finding in the USA and suggest that the earnings surprise warnings affect information asymmetries. Practical implications – This paper justifies the mandatory earnings surprise warnings policy issued by Chinese Securities Regulatory Commission in 2006. Originality/value – Mandatory earnings surprise is a unique practical regulation for publicly listed firms in China. This paper, for the first time, provides empirical evaluation on the effectiveness of a mandatory information disclosure policy in China. Consistent with existing literature on information disclosure by public firms in other countries, this paper finds that, in China, voluntary information disclosure captures more private information than mandatory information disclosure on corporate earnings ability.

Estrutura de mercado e esforço tecnológico

A relação entre estrutura de mercado e inovação tecnológica é um tema amplamente discutido, mas não existe concordância entre os autores que a estudam. Um dos aspectos que tornam o entendimento desta relação importante é seu possível impacto na praxis da política antitruste, já que esta assume que a concorrência perfeita é a estrutura de mercado que maximiza o bem-estar. Esta dissertação investiga o impacto da concentração de mercado (HHI) nos gastos em atividades inovativas para o caso dos setores industriais brasileiros através de uma análise de dados em painel. A partir de informações sobre os gastos em diferentes atividades inovativas e de características da indústria testa-se a hipótese de que a concorrência influencia os gastos em P&D internos às firmas na forma de um U invertido, como prevêem Scherer e Ross (1989) e Aghion et al. (2002). Os principais resultados encontrados indicam que essa relação em U invertido realmente existe e que o índice de concentração que maximiza os gastos em P&D interno é, em torno de, 0,30 de HHI. Apesar disso, quando efeitos específicos da indústria são controlados, o poder de explicação do HHI decai. Um segundo resultado importante é que quando se examina as atividades inovativas com menor risco associado, como capacitação tecnológica, a relação entre concentração e gastos inovativos é negativa.

Decentralization and education performance: a first view to the Brazilian process

This paper analyses the impact of the decentralization in educational system that is taking place in Brazil in the last decade, as a result of several laws that encourage municipalities to invest in fundamental education. The proficiency tests undertaken by the government allows to follow some public schools in two points in time. Therefore we were able to create an experimental group with the schools that were under state system in the SAEB exam and have migrated to the municipality system by the time of Prova Brasil and a control group with the schools that were under the state system between the two exams and compare the difference in their results using a fixed effect panel data analysis. The difference in difference estimator indicates that there is no significant change in the performance of the students.

A competitividade internacional de firmas transnacionais na nova geografia econômica das nações em processo de integração político-econômica regional: uma análise longitudinal de empresas globais em macrorregiões supranacionais

Devido ao fenômeno da globalização, alguns aspectos em Economia Internacional e Política têm sido amplamente debatidos entre os estudiosos de Negócios Internacionais, dada a extensão do seu impacto sobre a competitividade operacional e estratégica das empresas multinacionais. Em conjunto com a realidade mais regional da maioria dos acordos preferenciais de comércio e de investimentos – que promovem uma integração regional mais profunda dos mercados, ao contrário do teórico mercado "global" – as abordagens teóricas mais globalizantes em estratégia de negócios internacionais têm sido mais questionadas. Enquanto alguns estudiosos, como Pankaj Ghemawat, (2007), propõem abordagens para a chamada "semi-globalização"; outros, por exemplo, com Alan Rugman e Alain Verbeke (inter alias 2004, 2007), por outro lado, defendem abordagens regionalistas mais restritas em negócios internacionais e estratégia de empresas internacionais. Tais posições sobre o desempenho das empresas transnacionais, no entanto, não foram amplamente testadas, deixando, assim, outras questões relevantes sem soluções. Assim sendo, identificou-se um espaço na literatura quanto à questão de as regiões – em vez de países individualmente considerados – serem ou não relevantes ao desempenho global das empresas multinacionais e em que medida. Nesse sentido, foi utilizada uma metodologia quantitativa longitudinal a fim de avaliar a evidência histórica da repercussão de presença em regiões selecionadas e/ou países sobre o desempenho das empresas transnacionais. Foram coletados dados no Compustat Global (2009) com vistas a uma análise econométrica de dados em painel. Nossos resultados consistem, brevemente, em três aspectos. Em primeiro lugar, quando ambas as variáveis (país e região) são simultaneamente consideradas influentes sobre o desempenho, existe significância estatística. Em segundo lugar, ao contrastar ambas as variáveis (país e região) entre si, em relação ao maior nível de impacto no desempenho, ainda que tenhamos encontrado relevância estatística para os países individualmente considerados, suspeitou-se de algum problema nos dados brutos. Em terceiro lugar, ao assumir uma correlação positiva entre o desempenho da empresa multinacional e do número de regiões geográficas onde essas corporações possuem operações significativas, foi encontrada significância estatística. Nossa conclusão, portanto, consiste no fato de que, dado que a maioria dos países são signatários de pelo menos um acordo de integração regional, as regiões devem ser o foco principal dos negócios internacionais e estratégia corporativa internacional, tanto nos propósitos teóricos (tendo em vista as conclusões desta pesquisa e a literatura sobre o assunto), quanto nos aspectos práticos (em vez de da customização da gestão e da estratégia para cada país individual).

How does foreign capital participation affect brazilian companies' performance?: investigation of foreign direct investment's impact on host country

In this dissertation, we investigate the effect of foreign capital participations in Brazilians companies’ performance. To carry out this analysis, we constructed two sets of model based on EBITDA margin and return on equity. Panel data analysis is used to examine the relationship between foreign capital ownership and Brazilian firms’ performance. We construct a cross-section time-series sample of companies listed on the BOVESPA index from 2006 to 2010. Empirical results led us to validate two hypotheses. First, foreign capital participations improve companies’ performance up to a certain level of participation. Then, joint controlled or strategic partnership between a Brazilian company and a foreign investor provide high operating performance.