Thin Capitalization Rules and Entrepreneurial Capital Structure Decisions

Tax planners often choose debt over equity financing. As this has led to increased corporate debt financing, many countries have introduced thin capitalization rules to secure their tax revenues. In a general capital structure model we analyze if thin capitalization rules affect dividend and financing decisions, and whether they can partially explain why corporations receive both debt and equity capital. We model the Belgian, German and Italian rules as examples. We find that the so-called Miller equilibrium and definite financing effects depend significantly on the underlying tax system. Further, our results are useful for the treasury to decide what thin capitalization type to implement.

Centralization versus Delegation in an Experimental Capital Budgeting Setting

In an experiment, we model two stylized facts about capital budgeting practice, budgetary slack creation and delegation of decision-making authority. In our setting, under centralization, headquarters announces a budget, the division manager gives a cost report, and headquarters decides on the project. Under delegation, headquarters allocates a budget to the manager, and the manager is authorized to make the investment decision. We argue that the ability of headquarters to commit to a budget moderates the effect of delegation, and we find evidence in favor of our argument as there is an interaction effect of delegation and commitment to budgets. The effects of delegation are particularly strong when budgets are non-binding as delegation serves as a substitute for commitment in this case. This leads to smaller expenditures and to a higher headquarters’ payoff under delegation than under centralization. In contrast, when headquarters can commit to the budget, the descriptive data are consistent with our conjectures about the effects of honesty preferences, but the effects are too small to be significant.

Social inequality and smoking in young Swiss men: intergenerational transmission of cultural capital and health orientation

OBJECTIVES Smoking is related to income and education and contributes to social inequality in morbidity and mortality. Socialisation theories focus on one's family of origin as regards acquisition of norms, attitudes and behaviours. Aim of this study is to assess associations of daily smoking with health orientation and academic track in young Swiss men. Further, to assess associations of health orientation and academic track with family healthy lifestyle, parents' cultural capital, and parents' economic capital. METHODS Cross-sectional data were collected during recruitment for compulsory military service in Switzerland during 2010 and 2011. A structural equation model was fitted to a sample of 18- to 25-year-old Swiss men (N = 10,546). RESULTS Smoking in young adults was negatively associated with academic track and health orientation. Smoking was negatively associated with parents' cultural capital through academic track. Smoking was negatively associated with health orientation which in turn was positively associated with a healthy lifestyle in the family of origin. CONCLUSIONS Results suggest two different mechanisms of intergenerational transmissions: first, the family transmission path of health-related dispositions, and secondly, the structural transmission path of educational inequality.

Gentrification alpine : Lorsque le village de montagne devient un arrondissement métropolitain. Les nouveaux résidents partagés entre amour du paysage et capital symbolique

Cet article aborde la transformation de régions de montagne en lieux de résidence remplaçant des secteurs économiques plus anciens (agriculture, industrie manufacturière, tourisme) dans les montagnes européennes. Il se place dans la perspective du développement régional et de son impact sur les ressources régionales fixes, le « capital territorial ». Cette nouvelle tendance affecte les montagnes européennes de deux manières, et participe à la formation de régions métropolitaines qui combinent centres métropolitains et environnements de loisirs fondés sur les attraits du paysage pour constituer de nouvelles entités intégrées. Au cours du processus, le paysage devient un bien de consommation nouveau et rare, qui joue un rôle dans l’accumulation du capital investi. L’article établit que les concepts d’esthétique du paysage et d’agréments ne suffisent pas à expliquer cette nouvelle dynamique, car ils méconnaissent les processus spatio-économiques ainsi que le rôle de la marchandisation du paysage pour les nouveaux résidents. Ces nouveaux résidents ont un profil plus « multilocal » que migrant. La multilocalité et l’usage sélectif des produits du paysage freinent le processus d’intégration, crucial pour entretenir et développer le capital territorial. On peut poser que la présence non permanente des nouveaux résidents risque d’affaiblir et non de renforcer les structures locales existantes. Il semble donc nécessaire de déployer des efforts particuliers auprès de chaque groupe de nouveaux résidents pour que de simples résidents à temps partiel deviennent des acteurs régionaux (au moins à temps partiel). De plus, le concept du développement régional centré sur les acteurs innovants doit être remis en question dans la mesure où l’aspect « consommation » domine le rapport du paysage.

The career resources model: An integrative framework for career counsellors

Changes in the nature of work and organizations have led to an increased need for self-directed career management (SDCM). However, there is no consensus in the literature of what constitutes SDCM and many related concepts have been proposed. Integrating previous research across different conceptualizations of SDCM, the paper proposes four critical career resources which are essential for career development in the modern context: human capital resources, social resources, psychological resources, and identity resources. Implications of this framework for counselling practice are presented.

Capital Accumulation in the Presence of Informal Credit Contracts: Does the Incentive Mechanism Work Better than Credit Rationing Under Asymmetric Information?

Credit markets with asymmetric information often prefer credit rationing as a profit maximizing device. This paper asks whether the presence of informal credit markets reduces the cost of credit rationing, that is, whether it can alleviate the impact of asymmetric information based on the available information. We used a dynamic general equilibrium model with heterogenous agents to assess this. Using Indian credit market data our study shows that the presence of informal credit market can reduce the cost of credit rationing by separating high risk firms from the low risk firms in the informal market. But even after this improvement, the steady state capital accumulation is still much lower as compared to incentive based market clearing rates. Through self revelation of each firm's type, based on the incentive mechanism, banks can diversify their risk by achieving a separating equilibrium in the loan market. The incentive mechanism helps banks to increase capital accumulation in the long run by charging lower rates and lending relatively higher amount to the less risky firms. Another important finding of this study is that self-revelation leads to very significant welfare improvement, as measured by consumptiuon equivalence.

A Generic Model of Financial Repression

The paper develops a growth model in an overlapping generations framework of a financially repressed small open economy, and analyzes the effects of financial liberalization. The following observations are made: An increase (decrease) of interest rate (reserve requirements) reduces (increases) the steady-state stock of capital and the trade balance, but improves (deteriorates) the level of foreign exchange reserves. However, financial liberalization, in any form, is always welfare-improving. The paper, thus, advocates financial liberalization policies to be oriented towards reduction of reserve requirements rather than interest rate deregulation, if foreign reserve holding is not in a critical position.

The Optimal Capital Structure of Banks: Balancing Deposit Insurance, Capital Requirements and Tax-Advantaged Debt

The capital structure and regulation of financial intermediaries is an important topic for practitioners, regulators and academic researchers. In general, theory predicts that firms choose their capital structures by balancing the benefits of debt (e.g., tax and agency benefits) against its costs (e.g., bankruptcy costs). However, when traditional corporate finance models have been applied to insured financial institutions, the results have generally predicted corner solutions (all equity or all debt) to the capital structure problem. This paper studies the impact and interaction of deposit insurance, capital requirements and tax benefits on a bankÇs choice of optimal capital structure. Using a contingent claims model to value the firm and its associated claims, we find that there exists an interior optimal capital ratio in the presence of deposit insurance, taxes and a minimum fixed capital standard. Banks voluntarily choose to maintain capital in excess of the minimum required in order to balance the risks of insolvency (especially the loss of future tax benefits) against the benefits of additional debt. Because we derive a closed- form solution, our model provides useful insights on several current policy debates including revisions to the regulatory framework for GSEs, tax policy in general and the tax exemption for credit unions.

Transfer Pricing in the Decentralized Multinational Corporation

This paper considers how the multinational corporation's transfer price responds to changes in international corporate effective tax rates. It extends the decentralized decision-making analysis of transfer pricing in the context of different tax rates. It adopts and extends Bond's (1980) model of the decentralized multinational corporation that assumes centralized transfer pricing. The direction of transfer price change is as expected, while the magnitude of change is likely to be less than predicted by the Horst (1971), centralized decision-making model. The paper extends the model further by assuming negotiated transfer pricing, where the analysis is partitioned into perfect and imperfect information cases. The negotiated transfer pricing result reverts to the Horst (1971), or centralized decision-making, result, under perfect information. Under imperfect information, the centralized decision-making result obtains when top management successfully informs division general managers or it successfully implements a non-monetary reward scheme to encourage division general managers to cooperate. Under simplifying assumptions, centralized decision-making dominates decentralized decision-making, while negotiated transfer pricing weakly dominates centralized transfer pricing.

Bankruptcy Costs, Liability Dollarization, and Vulnerability to Sudden Stops

Emerging market countries that have improved institutions and attained intermediate levels of institutional quality have experienced severe financial crises following capital flow reversals. However, there is also evidence that countries with strong institutions and deep capital markets are less affected by external shocks. We reconcile these two observations using a calibrated DSGE model that extends the financial accelerator framework developed in Bernanke, Gertler, and Gilchrist (1999). The model captures financial market institutional quality with creditors. ability to recover assets from bankrupt firms. Bankruptcy costs affect vulnerability to sudden stops directly but also indirectly by affecting the degree of liability dollarization. Simulations reveal an inverted U-shaped relationship between bankruptcy recovery rates and the output loss following sudden stops. We provide empirical evidence that this non-linear relationship exists.

Monetary Policy, Exchange Rate Overshooting, and Endogenous Physical Capital

We develop an open economy macroeconomic model with real capital accumulation and microeconomic foundations. We show that expansionary monetary policy causes exchange rate overshooting, not once, but potentially twice; the secondary repercussion comes through the reaction of firms to changed asset prices and the firms' decisions to invest in real capital. The model sheds further light on the volatility of real and nominal exchange rates, and it suggests that changes in corporate sector profitability may affect exchange rates through international portfolio diversification in corporate securities.

Human Capital and Interethnic Marriage Decisions

Despite a longstanding belief that education importantly affects the process of immigrant assimilation, little is known about the relative importance of different mechanisms linking these two processes. This paper explores this issue through an examination of the effects of human capital on one dimension of assimilation, immigrant intermarriage. I argue that there are three primary mechanisms through which human capital affects the probability of intermarriage. First, human capital may make immigrants better able to adapt to the native culture thereby making it easier to share a household with a native. Second, it may raise the likelihood that immigrants leave ethnic enclaves, thereby decreasing the opportunity to meet potential spouses of the same ethnicity. Finally, assortative matching on education in the marriage market suggests that immigrants may be willing to trade similarities in ethnicity for similarities in education when evaluating potential spouses. Using a simple spouse-search model, I first derive an identification strategy for differentiating the cultural adaptability effect from the assortative matching effect, and then I obtain empirical estimates of their relative importance while controlling for the enclave effect. Using U.S. Census data, I find that assortative matching on education is the most important avenue through which human capital affects the probability of intermarriage. Further support for the model is provided by deriving and testing some of its additional implications.

Expectations, and Credibility in a Model of Monetary Policy

Recent monetary history has been characterized by monetary authorities which have been, alternatively hard and soft on inflation. In a vintage capital framework, investment decisions are not easily reversed. Therefore, expectations of policy as well as current policy are important to the investment decision. Here, a vintage capital model is used to assess the value of central bank credibility for a policy change. Policy in this model is assumed to be private information of the central banker. Agents learn about that policy which to study the ensuing transitional dynamics following a change in monetary policy regime.

Análisis de los factores explicativos de la rentabilidad de las empresas vinícolas de Castilla-La Mancha

El sector del vino experimenta, en las últimas décadas, un vertiginoso proceso de cambio y nuevas dinámicas, que están afectando el desempeño y estrategias de las empresas del sector: internacionalización creciente, caída de los mercados internos de los países tradicionalmente productores, entrada de capital exógeno, etc. La pericia que muestre la organización para adecuarse a la nueva situación se reflejará en la rentabilidad, indicador básico para juzgar la eficiencia en la gestión empresarial. En este estudio, a partir de una muestra representativa de empresas de Castilla-La Mancha, región española con la mayor dimensión vinícola mundial, se ha planteado un modelo econométrico novedoso integrado por variables de desempeño, definidas con la técnica de componentes principales. De los resultados obtenidos se infiere que la rentabilidad de las empresas proviene de: a) su estructura societaria (mayor si son empresas capitalistas que sociedades cooperativas), b) de su tamaño (mejor desempeño a mayor tamaño, aprovechando economías de escala), y c) estructura financiera (mayor rentabilidad si en la composición de la misma priman los recursos propios y liquidez). Por el contrario, la falta de financiación permanente para hacer frente al activo fijo y una dinámica comercial más orientada hacia las ventas de vino a granel a bajo precio, reducen significativamente los ratios de rentabilidad.

Manipulación de la crisis a través de la acumulación por desposesión en México

La acumulación por desposesión es un ejercicio de poder que se ha expresado en el devenir histórico del capitalismo, aunque la acumulación por desposesión, cobra fuerza ideológica a partir del modelo neoliberal y representa, sino la única forma, si la más importante actualmente para sostener o incrementar la acumulación de capital en la geografía glocal (lograr el establishment del sistema bancario y de las grandes corporaciones y centros de poder -BM-FMI y BCE). El rasgo económico-político que definiría dicha acumulación por desposesión, es que su instrumentación para llevarse a cabo, necesita obligatoriamente que el Estado y los dueños de capital (productivo, comercial, financiero) tengan el interés común “contubernio" de que los espacios receptores sirvan para que el capital incremente su capital; esto sólo se logra expropiando el derecho del trabajador de vivir dignamente con un empleo bien remunerado. En palabras de David Harvey (2003, 2004, 2204b, 2007a, 2007b 2007c) quien posibilita la acumulación por desposesión es la liberación de un conjunto de activos, incluida la fuerza de trabajo a un coste muy bajo y en algunos casos, nulo.