scholarly journals Global Banking and Firm Financing: A Double Adverse Selection Channel of International Transmission

2021 ◽  
Vol 2021 (1323) ◽  
pp. 1-70
Author(s):  
Leslie Shen ◽  
Keyword(s):  
Information Asymmetry ◽  
Adverse Selection ◽  
Financial Systems ◽  
International Transmission ◽  
Global Banking ◽  
Firm Financing ◽  
Bank Funding ◽  
Local Risk ◽  
Monetary Policy Shock ◽  
Global And Local

This paper proposes a "double adverse selection channel" of international transmission. It shows, theoretically and empirically, that financial systems with both global and local banks exhibit double adverse selection in credit allocation across firms. Global (local) banks have a comparative advantage in extracting information on global (local) risk, and this double information asymmetry creates a segmented credit market where each bank lends to the worst firms in terms of the unobserved risk factor. Given a bank funding (e.g., monetary policy) shock, double adverse selection affects firm financing at the extensive and price margins, generating spillover and amplification effects across countries.

scholarly journals Depreciation Choice and Future Operating Performance

2019 ◽  
Vol 9 (1) ◽  
pp. 89
Author(s):  
Marcus L. Caylor ◽  
Scott Whisenant
Keyword(s):  
Information Asymmetry ◽  
Adverse Selection ◽  
Operating Performance ◽  
Signaling Theory ◽  
Cash Flows ◽  
Future Prospects ◽  
Future Earnings ◽  
Accounting Choices ◽  
Straight Line ◽  
Accelerated Depreciation

In this study we test the argument that information asymmetry and the problems of adverse selection provide incentives for managers to use accounting choices to signal relatively higher future prospects. Specifically, we contend that firms use accelerated depreciation to credibly signal higher future earnings and cash flows, consistent with signaling theory. Compared to straight-line depreciation, accelerated depreciation reduces earnings in the earlier years of asset lives and produces more variability in earnings. Despite these drawbacks, hundreds of firms voluntarily use accelerated depreciation for at least some of their depreciable assets. Our results indicate that the use of accelerated depreciation foreshadows higher future earnings and cash flows for horizons of one, two, and three years ahead.

The industrialization of translation

2012 ◽  
Vol 1 ◽  
pp. 143-168 ◽  
Author(s):  
Keiran J. Dunne
Keyword(s):  
Information Asymmetry ◽  
Adverse Selection ◽  
Large Scale ◽  
Quality Uncertainty ◽  
Related Services ◽  
Service Business ◽  
Price Pressure ◽  
Development Of Expertise ◽  
Uncertainty Information

Much has written by scholars on translation as product and as process, but relatively little attention has been paid to translation as a commercial service, business or industry. This article proposes a modest step in this direction by using microeconomics as a window through which to examine the industrialization of translation, focusing on causes, consequences and challenges. It begins by analyzing the outsourcing of translation and translation-related services. It then considers consequences of large-scale outsourcing, including quality uncertainty, information asymmetry, adverse selection, price pressure and perceived commoditization. Finally, the article explores challenges posed by these developments, including signaling and screening, the productivity imperative and the development of expertise. The article concludes with an overview of potential areas of research to be explored in this track in future issues.

scholarly journals Uncertainty in Twenty-First-Century CMIP5 Sea Level Projections

2015 ◽  
Vol 28 (2) ◽  
pp. 838-852 ◽  
Author(s):  
Christopher M. Little ◽  
Radley M. Horton ◽  
Robert E. Kopp ◽  
Michael Oppenheimer ◽  
Stan Yip
Keyword(s):  
Sea Level ◽  
Model Uncertainty ◽  
Internal Variability ◽  
Climate System ◽  
First Century ◽  
The Arctic ◽  
Management Approach ◽  
Local Risk ◽  
Twenty First Century ◽  
Global And Local

Abstract The representative concentration pathway (RCP) simulations included in phase 5 of the Coupled Model Intercomparison Project (CMIP5) quantify the response of the climate system to different natural and anthropogenic forcing scenarios. These simulations differ because of 1) forcing, 2) the representation of the climate system in atmosphere–ocean general circulation models (AOGCMs), and 3) the presence of unforced (internal) variability. Global and local sea level rise projections derived from these simulations, and the emergence of distinct responses to the four RCPs depend on the relative magnitude of these sources of uncertainty at different lead times. Here, the uncertainty in CMIP5 projections of sea level is partitioned at global and local scales, using a 164-member ensemble of twenty-first-century simulations. Local projections at New York City (NYSL) are highlighted. The partition between model uncertainty, scenario uncertainty, and internal variability in global mean sea level (GMSL) is qualitatively consistent with that of surface air temperature, with model uncertainty dominant for most of the twenty-first century. Locally, model uncertainty is dominant through 2100, with maxima in the North Atlantic and the Arctic Ocean. The model spread is driven largely by 4 of the 16 AOGCMs in the ensemble; these models exhibit outlying behavior in all RCPs and in both GMSL and NYSL. The magnitude of internal variability varies widely by location and across models, leading to differences of several decades in the local emergence of RCPs. The AOGCM spread, and its sensitivity to model exclusion and/or weighting, has important implications for sea level assessments, especially if a local risk management approach is utilized.

On Minimizing Risk in Incomplete Markets Option Pricing Models

1998 ◽  
Vol 01 (02) ◽  
pp. 227-233 ◽  
Author(s):  
Ola Hammarlid
Keyword(s):  
Incomplete Markets ◽  
Option Price ◽  
Market Model ◽  
Risk Minimization ◽  
Pricing Options ◽  
Fair Game ◽  
Local Risk ◽  
Game Condition ◽  
Stock Portfolio ◽  
Global And Local

I study the Bouchaud–Sornette, Schweizer and Schäl way of pricing options, presenting the methodology in accordance with Bouchaud–Sornette. The definitions of the wealth balance and risk from trading in options and stocks are presented. The problem of finding a risk minimizing strategy in an incomplete market model where a perfect hedge is not possible is analyzed. Using this strategy according to the approach of Bouchaud and Sornette the option is priced by a fair game condition. In this article I establish the equivalence between global and local risk minimization and prove an option price conjecture of Wolczyńska. I also investigate optimality for a stock portfolio with extra profit.

scholarly journals EQUITY RECYCLING VS FINANCIAL CONSTRAINTS

2014 ◽  
pp. 76-82
Author(s):  
S. I. Lutsenko
Keyword(s):  
Capital Structure ◽  
Information Asymmetry ◽  
Adverse Selection ◽  
Financial Constraints ◽  
Random Effect ◽  
Point Of View ◽  
Financial Policy ◽  
Process Of Change ◽  
Major Factors ◽  
The Given

The influence of major factors on financial policy of the Russian companies is considered. The author researches process of change of an equity (recycling) in the conditions of financial con-straints. The given work tries to give the answer to a question - whether there is a redistribution of an equity in the company. The models considered in work are tested for a subject of a choice of the most adequate, from the point of view, forecasting. For each of models three kinds of specifications are estimated: pooled regression, regression with a random effect and regression with the fixed ef-fect. Task of the presented work is penetration into an essence of financial policy of the Russian companies: whether there is a dividend payout of shareholders in process an equity recycling or the received incomes go on development the companies (reinvesting). Novelty of the presented work consists in consideration an equity recycling as mechanism with which help the Russian companies direct the income of an equity on its shares repurchase and accumulations of profit for the reinvesting. Equity recycling gives the chance to reserve the companies certain level of a debt for the further use as a financing sources. Besides, influence of other sources of financing is considered in the conditions of financial constraints. The Russian companies resolve a problem of adverse selection (a choice of the cheapest sources of financing — profit). The author notices that low information asymmetry allows the companies to choose cheaper sources of financing. The mechanism an equity recycling gives the chance to the companies to regulate the debt level, actively correcting capital structure.

Cancellable Insider Trading Plans: An Analysis of SEC Rule 10b5-1*

2019 ◽  
Vol 32 (12) ◽  
pp. 4947-4996 ◽  
Author(s):  
Stephen L Lenkey
Keyword(s):  
Information Asymmetry ◽  
Adverse Selection ◽  
Insider Trading ◽  
Rational Expectations ◽  
Portfolio Diversification ◽  
Rational Expectations Equilibrium ◽  
Optimal Trading ◽  
Large Subset ◽  
Sufficient Degree ◽  
Editorial Decision

Abstract Rule 10b5-1 enables insiders to preplan future trades before becoming informed. Within a strategic rational expectations equilibrium framework, I characterize an insider’s unique optimal trading plan, which balances portfolio diversification against exploitation of the rule’s selective termination option. Because the rule reduces adverse selection and provides insurance against bad outcomes, the rule generally improves welfare for both the insider, who later becomes informed, and uninformed outsiders, provided there exists a sufficient degree of information asymmetry. Eliminating the rule’s selective termination option results in an even greater welfare improvement under a large subset of parametric conditions. Received March 9, 2018; editorial decision January 11, 2019 by Editor Wei Jiang.

Game Analysis of the Adverse Selection Formation Mechanism on Engineering Quality Risk Based on Information Asymmetry

2013 ◽  
Vol 328 ◽  
pp. 334-337
Author(s):  
Jian Xun Deng
Keyword(s):  
Information Asymmetry ◽  
Adverse Selection ◽  
Formation Mechanism ◽  
Information Economics ◽  
High Strength ◽  
Strength Level ◽  
Engineering Project ◽  
Construction Market ◽  
Quality Risk ◽  
Countermeasures And Suggestions

The paper makes a deep analysis of the adverse selection formation mechanism under the condition of information asymmetry through the establishment of adverse selection game model in construction market. The paper seeks the root of the construction market risk based on the perspective of information economics. Due to asymmetric information, the adverse selection makes the low strength level engineering quality responsible units expel the high strength level engineering quality responsible units form the construction market , and greatly increases the risk of the construction market, which will make it difficult for construction engineering quality to be guaranteed, and lead to engineering project quality risk. The paper puts forward some effective countermeasures and suggestions to avoid construction market quality risk from both sides of the construction information symmetry angle.

Mining Algorithm for the Core Node in the Complex Network of E-Commerce

2014 ◽  
Vol 556-562 ◽  
pp. 4577-4581
Author(s):  
Bing Xiao
Keyword(s):  
Information Asymmetry ◽  
Complex Network ◽  
Adverse Selection ◽  
Moral Hazards ◽  
The Core ◽  
Core Node ◽  
Mining Algorithm ◽  
Selection For ◽  
Risk Protection ◽  
Key Nodes

Through digging out the core suppliers and core customers from the numerous suppliers and customers in the complex network of E-commerce, it contributes to reducing the adverse selection for the consumers and moral hazards for the operators caused by information asymmetry. Meanwhile, it is very meaningful for the credit risk protection in the complex network of E-commerce. On the basis of the references to the White and Smyth algorithms, in this paper, improvements from the White and Smyth algorithms are made herein, combining several features of the E-commerce complex network such as competitiveness, incomplete information and unsymmetrical information. In addition, an algorithm for mining the key nodes in E-commerce complex network is put forward, and applications are explained by instances.

scholarly journals Resetting PPP in Infrastructure Model in India Post-COVID-19 Pandemic

2021 ◽  
pp. 001946622097667
Author(s):  
Sandeep G. Kudtarkar
Keyword(s):  
Qualitative Research ◽  
Information Asymmetry ◽  
Adverse Selection ◽  
Contract Management ◽  
Management Skills ◽  
Public Infrastructure ◽  
Private Partnership ◽  
Socioeconomic Environment ◽  
Project Level

This article has set out to understand why a large number of public–private partnership (PPP) projects delayed stalled and terminated in the largest PPP program in India. Based on quantitative and case-study-based qualitative research, this study finds that the incomplete nature of PPP contracts, uncertainty and information asymmetry leads to adverse selection, moral hazard, opportunism and holdup of the PPP projects. The inefficacious and inequitable allocation of risks among stakeholders and lack of contract management skills in project authorities exaggerated the problems, and the final outcome is a large number of failed projects and no participation from private developers in future projects defeating the very purpose of adopting the PPP model to build public infrastructure. This study proposes a 20-point conceptual institutional framework suggesting policy and project-level measures for effective execution of the future PPP program in India and developing countries with similar socioeconomic environment post-COVID-19 pandemic amid recessionary conditions.

scholarly journals Optimal Contracts for Agents with Adverse Selection

2020 ◽  
Vol 2020 ◽  
pp. 1-17
Author(s):  
Chao Li ◽  
Zhijian Qiu
Keyword(s):  
Information Asymmetry ◽  
Adverse Selection ◽  
Mixed Model ◽  
Selection Model ◽  
Individual Agent ◽  
High Type ◽  
Optimal Contracts ◽  
Effort Level ◽  
Different Types ◽  
Separating Equilibrium

Due to information asymmetry, adverse selection exists largely in the multiagent market. Aiming at these problems, we develop two models: pure adverse selection model and mixed adverse selection and moral hazard model. We make the assumption that a type of agent is discrete and effort level is continuous in the models. With these models, we investigate the characters that make an optimal contract as well as the conditions under which the utility of a principal and agents can be optimized. As a result, we show that, in the pure adverse selection model, the conditions to reach the optimal utility of a principal and individual agents are that a principal needs to design different contracts for different types of agents, and an individual agent chooses the corresponding type of contracts. For the mixed model, we show that incentive constraint for agents plays a very important role. In fact, we find that whether a principal provides high-type contract or a separating equilibrium contract depends on the probability of existence of low-type agents in the market. In general, if a separating equilibrium contract is issued, then information asymmetry will cause the utility of the high-type agents to be less than that of the case in full information.

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