Even before the Great Recession, US employment growth was unimpressive. Between 2000 and 2007, the economy gave back the considerable employment gains achieved during the 1990s, with a historic ...contraction in manufacturing employment being a prime contributor to the slump. We estimate that import competition from China, which surged after 2000, was a major force behind both recent reductions in US manufacturing employment and—through input-output linkages and other general equilibrium channels—weak overall US job growth. Our central estimates suggest job losses from rising Chinese import competition over 1999–2011 in the range of 2.0–2.4 million.
Credit record panel data from 1999-2010 indicates that the likelihood of home equity extraction (borrowing, on average, about $40,000 against one's home) peaked in 2003 when mortgage rates reached ...historic lows. We estimate a 27 percent rise in extraction in response to a 100 basis point rate decline, and that house price growth amplifies this relationship. Differential responses to interest rates and home price appreciation by borrower age and credit score provide new evidence of financial frictions. Finally, equity extractions are associated with higher default risk, consistent with the use of borrowed funds for consumption or illiquid investment.
Credit-Induced Boom and Bust Di Maggio, Marco; Kermani, Amir
The Review of financial studies,
11/2017, Letnik:
30, Številka:
11
Journal Article
Recenzirano
Odprti dostop
This paper exploits the federal preemption of national banks in 2004 from local laws against predatory lending to gauge the effect of the supply of credit on the real economy. First, the preemption ...regulation resulted in an 11 % increase in annual lending in the 2004–2006 period, which is associated with a 3.3 % rise in annual house price growth rate and a 2.2% expansion of employment in nontradable sectors. This was followed by a sharp decline in subsequent years. Furthermore, we show that the increase in the supply of credit reduced delinquencies during boom years, but increased them in bust years.
The growing number of voluntary standards for governing transnational arenas is presenting standards organizations with a problem. While claiming that they are pursuing shared, overarching ...objectives, at the same time they are promoting their own respective standards that are increasingly similar. By developing the notion of ‘standards markets’, this paper examines this tension and studies how different social movement and industry-driven standards organizations compete as well as collaborate over governance in transnational arenas. Based on an in-depth case study of sustainability standards in the global coffee industry, we find that the ongoing co-existence of multiple standards is being promoted by the interplay between two countervailing mechanisms: convergence and differentiation. In conjunction, these mechanisms are enabling the emergence and persistence of a market for standards through what we describe as meta-standardization of sustainable practices. Meta-standardization leads to convergence at the ‘rules of the game’ level, but allows also differentiation at the attributes level, which is enabling parties to create and maintain their own standards. Our study helps to advance the understanding of transnational governance by explaining the dynamics of competing and collaborating non-state actors in constituting a standards market.
We develop a model of performance evaluation and fund flows for mutual funds in a family. Family performance has two effects on a member fund's estimated skill and inflows: a positive common-skill ...effect, and a negative correlated-noise effect. The overall spillover can be either positive or negative, depending on the weight of common skill and correlation of noise in returns. Its absolute value increases with family size, and declines over time. The sensitivity of flows to a fund's own performance is affected accordingly. Empirical estimates of fund flow sensitivities show patterns consistent with rational cross-fund learning within families.
Investment consultants advise institutional investors on their choice of fund manager. Focusing on U.S. actively managed equity funds, we analyze the factors that drive consultants' recommendations, ...what impact these recommendations have on flows, and how well the recommended funds perform. We find that investment consultants' recommendations of funds are driven largely by soft factors, rather than the funds' past performance, and that their recommendations have a significant effect on fund flows. However, we find no evidence that these recommendations add value, suggesting that the search for winners, encouraged and guided by investment consultants, is fruitless.
This study examines how target corporate social responsibility affects the economic gains for acquirers, as reflected in market reaction to an acquisition announcement, from two distinct ...perspectives: stakeholder preservation versus stakeholder appropriation. The stakeholder preservation perspective suggests that positive market reaction to an acquisition stems from potential new value creation by honoring implicit contracts and maintaining good relationships with target stakeholders. By contrast, the stakeholder appropriation perspective posits that positive market reaction is primarily derived through wealth transfer to acquirers by defaulting on implicit contracts with target stakeholders. Using a data set of acquisitions in the United States, we find that target corporate social responsibility is positively associated with acquirer abnormal returns upon an acquisition announcement. Moreover, stakeholder value congruence between the merging firms strengthens this positive relationship, whereas business similarity between them weakens it. These findings align with the stakeholder preservation perspective and challenge the stakeholder appropriation perspective.
Abstract
This paper analyzes how trading after shareholder meetings changes the composition of the shareholder base. Analyzing daily trades, we find that mutual funds reduce their holdings if their ...votes are opposed to the voting outcome. Trading volume is high even when stock prices do not change, peaks on the meeting date, and remains high up to four weeks after shareholder meetings. The results support models based on differences of opinion that predict that shareholders’ beliefs may diverge more after observing voting outcomes. Hence, trading after meetings creates a more homogeneous shareholder base, which has important implications for corporate governance.
In this paper, we examine the effect of a major health care reform in Massachusetts on a broad set of financial outcomes using credit report data. We exploit variation in the impact of the reform ...across counties and age groups using pre-reform insurance coverage as a measure of the potential effect of the reform. We find that the reform reduced the amount of debt that was past due, improved credit scores, reduced personal bankruptcies and reduced third-party collections. Our results show that health care reform has implications that extend well beyond the health of those who gain insurance coverage.
Research has documented that most of retail and institutional investors exhibit a strong preference for stocks issued by nearby listed firms (i.e. Local Home Bias). This phenomenon shapes corporate ...market value and the cost of funding. In this paper, we investigate whether the Local Home Bias is enhanced in family firms as a consequence of their symbiotic connection with the local community. Using a dataset of 2,951 Italian firm-year observations (1,481 are family firms) over the period 1999–2011, we find that Local Home Bias is not a widespread phenomenon and mainly occurs in founding family firms where the founder serves as CEO. The Local Home Bias is absent in non-family firms or in family firms where the owner has acquired control through a market transaction. Overall, results suggest that locally committed family firms trigger investor preference for local stocks and, in doing so, exploit the dedicated local clientele which shrinks the cost of funding. Ultimately, we argue the social contributions of family firms to the local community could even have opportunistic traits and a non-trivial economic effect.
PDF
