The Eurodollar Market and Monetary Theory

Niehans, Jürg; Hewson, John

doi:10.2307/1991917

Cited by 66 publications

(23 citation statements)

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“…By expanding to overseas locations, particularly London, and providing offshore facilities via the Euromarkets, the impact of the IET and VFCRP could be mitigated. 7 Grubel (1989) later argued that escape from 5 See for example, Hewson (1975), Niehans and Hewson (1976). 6 Williams (1997) provides a detailed discussion of the relationship between the theories of the multinational enterprise and theories of multinational banking.…”

Section: Development Of Defensive Expansion Theorymentioning

confidence: 99%

The Defensive Expansion Approach to Multinational Banking: Evidence to Date

Williams¹

2002

Financial Market

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This paper integrates the defensive expansion hypothesis in multinational banking with the internalisation approach to the multinational enterprise. This framework is then used to structure a review of the literature to date regarding the proposition that multinational banks follow their clients abroad, otherwise called the defensive expansion hypothesis. Both theoretical and empirical issues relevant to the study of the defensive expansion hypothesis are canvassed. The paper concludes that the defensive expansion hypothesis is best modelled using firm level data, and that investment measures are a preferred proxy for following clients. Furthermore, studies considering the defensive expansion hypothesis should control for the effects of parent firm size and economic cycles. The paper concludes that defensive expansion increases multinational size, but has little impact upon multinational bank profits. There is some evidence that defensive expansion impacts upon the type of organisational form adopted by the multinational bank in the host nation.

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Section: Development Of Defensive Expansion Theorymentioning

confidence: 99%

The Defensive Expansion Approach to Multinational Banking: Evidence to Date

Williams¹

2002

Financial Market

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“…Each firm signals its type through the maturity of its debt, and distinguishes itself from other firms of the same type through the size of its promised debt payment. In this regard, the result exemplifies the "maturity matching" debt policy strategy prescribed in most basic corporate finance textbooks.6 Apart from risk-avoidance arguments to justify maturity matching, such as those found in Neihans and Hewson [11]7, such a policy appears to have little theoretical support in the existing literature.8 The insight our example provides is that even ignoring stochastic term structure considerations, the debt maturity decision may be of importance because it conveys information about some aspect of the firm's future earnings. Moreover, this decision is an intrinsic part of the firm's overall capital structure policy.…”

Section: As We Mentioned Previously a Characteristic Of This Model Imentioning

confidence: 62%

“…Since this is not a particularly appealing restriction-and because it leads to an equilibrium that is Pareto dominated by the separating equilibrium-we shall not present details of the 6 For example, see Weston and Brigham [22] and Van Horne [20]. 'Actually, the Niehans and Hewson [11] analysis is in the context of financial intermediaries choosing asset and liability maturities to seek an optimal tradeoff between term structure risk and the gains from exploiting possibly "lopsided" relationships between yields on bonds of varying maturities. 8 In a perfect capital market framework, it is difficult to create a plausible scenario in which debt maturity structure matters.…”

Section: As We Mentioned Previously a Characteristic Of This Model Imentioning

confidence: 99%

Screening, Market Signalling, and Capital Structure Theory

Lee¹,

Thakor²,

Vora³

1983

The Journal of Finance

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This paper develops an equilibrium model in which informational asymmetries about the qualities of products offered for sale are resolved through a mechanism which combines the signalling and costly screening approaches. The model is developed in the context of a capital market setting in which bondholders produce costly information about a firm's a priori imperfectly known earnings distribution and use this information in specifying a bond valuation schedule to the firm. Given this schedule, the firm's optimal choices of debt-equity ratio and debt maturity structure subsequently signal to prospective shareholders the relevant parameters of the firm's earnings distribution.OUR OBJECTIVES IN this paper are threefold. First, we discuss an alternative equilibrium mechanism for resolving the informational asymmetry problem in a "lemons" type market in which some agents are a priori better informed than others. This mechanism, recently proposed by Thakor [19], is distinct from and yet integrates the salient features of the screening (see Stiglitz [17] and Viscusi [21]) and signalling (Bhattacharya [41]) paradigms. Second, we demonstrate that the equilibrium notion developed is relevant to the determination of an interior optimal capital structure for a firm in a world of imperfect information. This application of our model involves firms with intertemporally distributed cashflows which vary cross-sectionally and are not necessarily independent and identically distributed (i.i.d.) through time. We use this multiperiod setting to address our third objective, which is to explain a firm's debt maturity decision. Essentially, our argument is that when both the size and timing of a firm's future earnings are indistinguishable ex ante from other firms in the economy, the firm's capital structure and debt maturity choices could simultaneously function as signals of these a priori unknown parameters of its earnings.The market structure we consider is similar to that in Thakor [19].' There are sellers, each of whom offers a variety of products with qualities dependent upon a common set of exogenous attributes unique to the seller, and buyers who are unaware of these attributes. Buyers interested in one of the products offered * Associate Professor of Finance, University of Santa Clara; Associate Professor of Finance, Indiana University; and Assistant Professor of Finance, Pennsylvania State University, respectively. We wish to acknowledge with thanks the helpful suggestions of an anonymous referee. I A feature that distinguishes our model from Thakor's [191 is that we consider vector-valued signals, whereas Thakor [191 looks at scalar signalling. Like the signalling model of Spence [14, 15, 161 and the screening model of Stiglitz [17], our model primarily examines a feasible mechanism that can be deployed to resolve informational asymmetry problems that could otherwise lead to market failure (Akerlof [1]). 1508The Journal of Finance generate costly information about the attributes of the seller and use this information to deter...

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“…Moreover, US banks circumvented these restrictive measures by establishing overseas subsidiaries in Europe. Given its established, strong and innovative financial services sector, London provided an ideal market for this business (Machlup, 1970;Niehans & Hewson, 1976).…”

Section: Regulation Of the Japanese Banking Sectormentioning

confidence: 99%

Bank regulation and the process of internationalisation: A study of Japanese bank entry into London

Howcroft

ul-Haq

Hammerton³

2010

The Service Industries Journal

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The paper provides a theoretical insight into bank regulation and the process of internationalisation by examining the concepts of regulatory push and market pull within the context of Japanese bank entry into London during the 1980s. Rugman and Verbeke's [(1998). Corporate strategy and international environmental policy. Journal of International Business Studies, 29(4), 819 -833] Consistency of Home and Host Government Goals model is utilised to structure the discussion, which centres on a situation where there is a conflict of goals between multinational enterprises (MNEs) and the home government but goal alignment between MNEs and the host government. As such the paper examines a relatively under-researched aspect of internationalisation and concludes that in certain circumstances internationalisation can occur despite great 'psychic distance'. The paper also argues that although bank regulation can lead to a conflict situation it can also be conducive to the development of a strong home base and the development of firm specific advantages.

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The Eurodollar Market and Monetary Theory

Cited by 66 publications

References 0 publications

The Defensive Expansion Approach to Multinational Banking: Evidence to Date

The Defensive Expansion Approach to Multinational Banking: Evidence to Date

Screening, Market Signalling, and Capital Structure Theory

Bank regulation and the process of internationalisation: A study of Japanese bank entry into London

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