Suchergebnisse

Addresses the impact of state regulatory policies on the roles of inward foreign investment in the manufacturing sector. Notes the similarities between the 2 small open economies and the different roles played by the foreign investors. Finds that some pull factors and conversion factors may be responsible for the differences between the 2 islands. (Abstract amended)

DESPITE THE VAST NUMBER OF STUDIES ON THE GUNS VERSUS BUTTER TRADE-OFF, POLITICAL SCIENTISTS STILL DO NOT KNOW WHETHER GUNS COME AT THE EXPENSE OF BUTTER. IN THIS PAPER, THE AUTHORS ENDEAVOR TO CLARIFY SOME OF THE MAJOR CONCEPTUAL, MEASUREMENT, AND STATISTICAL PROBLEMS ASSOCIATED WITH THIS LINE OF RESEARCH.

This paper shows that improving financial efficiency may reduce real efficiency. While the former depends on the total amount of information available, the latter depends on the relative amounts of hard and soft information. Disclosing more hard information (e.g. earnings) increases total information, raising financial efficiency and reducing the cost of capital. However, it induces the manager to prioritize hard information over soft by cutting intangible investment to boost earnings, lowering real efficiency. The optimal level of financial efficiency is non-monotonic in investment opportunities. Even if low financial efficiency is desirable to induce investment, the manager may be unable to commit to it. Optimal government policy may involve upper, not lower, bounds on financial efficiency.