The Economics of Imperfect Markets - The Effects of Market Imperfections on Economic Decision-Making

Preface

Contents

Contributors

Introduction

Part I Imperfections in Financial Markets

1 What Can Cash Shortfalls and Windfalls Tell Us About Finance Constraints?

Introduction

Regression Discontinuity

A Model of Pension Funding

Technology and Financing

Simulations

Model Calibration

Simulation Results

Conclusion

References

2 Non-Tobin's q in Tests for Financial Constraints to Investment

Introduction

Background: q and Investment

Tobin's q

Non-Tobin's q

Model

Frictionless Capital Adjustment

Costly Capital Adjustment

A Tractable Special Case

Estimation

Concluding Remarks

Appendix: Proof of Theorem 1

References

3 Cash Holdings, Firm Value and the Role of Market Imperfections. A Cross Country Analysis

Introduction

The Demand for Cash and Near-Cash Assets

Trade Off Theory

Pecking Order Theory

Agency Cost Theory

Empirical Specification

The Investment-to-Total Asset and the Market-to-Book Value Ratios

Firm Size

Debt Issue

Cash Flow

Cash Flow Volatility

Debt Maturity

Collection and Credit Periods

EPL

Data and Estimation Results

Firm Value and Labor Regulations

Data and Estimation Results

Concluding Remarks

References

4 Multiple Bank Relationships and the Main Bank System: Evidence from a Matched Sample of Japanese Small Firms and Main Banks

Introduction

Data Characteristics and Descriptive Statistics of Bank-Firm Relationships

Determinants of Multiple Bank Relations and the Impact of Main Bank Relations on Loan Contracts

Determinants of Multiple Bank Relations Under the Main Bank System

Impact of a Main Bank Relationship on the LoanContract Terms

Estimation Results and Their Implications to Main Bank Relationship

Determinants of Multiple Bank Relationship under Main Bank System

Impact of Main Bank Relationship on Loan Contracts

Concluding Remarks

References

5 The Role of Fixed Assets in Reducing Asymmetric Information

Introduction

Related Literature

Model

Without Collateral

With Collateral

Conclusion

References

6 Financial Development and Long-Run Growth: Cross-Sectional Evidence Revised

Introduction

Empirical strategy

Estimation Results

Column 2 vs. Column 1

Column 3 vs. Column 1

Column 4 vs. Column 1

Column 5 vs. Column 1

Column 6 vs. Column 1

Column 7 vs. Column 1

Column 8 vs. Column 1

Conclusions

References

Part II Imperfections in Real Markets

7 Investment, Productivity and Employment in the Italian Economy

Introduction

Augmented Saltari-Travaglini Model with Investment in the Objective Function

Estimation

A More General Specification of Core Model: Saltari-Travaglini-Wymer model

Conclusions

Appendix 1. Saltari–Travaglini model. Formal Derivation via Hamiltonian Optimisation of a Profit Function

Data Appendix

References

8 The Macroeconomics of Imperfect Capital Markets: Whither Saving-Investment Imbalances?

Introduction

The Macroeconomics of Imperfect Capital Markets:An Overview

Brief Historical Foundations – Wicksell and Keynes

Modern Foundations of Imperfect Capital Markets

Underinvestment and Overinvestment

Macroeconomic Implications

Whither Saving-Investment Imbalances?

Some Macroeconomics of Saving-Investment Imbalances:The Baseline Model

Preliminary Tools and Discussion

The Model

Steady State

System's Dynamics and the Role of Expectations

Endogenizing the Nominal Interest Rate

A Wicksellian Bank Mechanism

The Dynamic LM

The Speculative LM

A Glance at Monetary Policy

Conclusions

References

9 The Effects of Uncertainty and Sunk Costs on Firms' Decision-Making: Evidence from Net sEntry, Industry Structure and Investment Dynamics

Introduction

Role of Uncertainty and Sunk Costs

Real-Options Literature

Financing Constraints Literature

Real-Options Versus Financing Constraints

Uncertainty and the Dynamics of Net Entry

Uncertainty and Investment Expenditures

Discussion and Some Implications for Public Policy

Data Appendix

References

10 Investment and Trade Patterns in a Sticky-Price, Open-Economy Model

Introduction

Equilibrium Conditions

Investment, Trade and ToT

Quantitative Findings

Model Calibration

Model Exploration

Concluding Remarks

Appendix: Dataset

References

11 The Anticompetitive Effects of the Antitrust Policy

Introduction

Antitrust policy I: Monetary Fines

Antitrust Fines and the Cost of Deviating

Cyrenne (1999)

Harrington (2004)

Antitrust Fines and Cartel Formation

McCutcheon (1997)

Bartolini and Zazzaro (2008)

Antitrust policy II: Leniency Programmes

Leniency During Investigation

Motta and Polo (2003)

Leniency (Only) before Investigation

Ellis and Wilson (2001)

Spagnolo (2000)

Concluding Remarks

References