Open Market Sales Research Articles

Corporate finance, collateralized borrowing, and monetary policy

We construct a monetary model in which entrepreneurs facing uncertainty in input costs and returns of projects may finance investment internally and with bank credit. Entrepreneurs using money as a down payment and bonds as collateral can reduce the default probability. Working through these key channels, lower nominal policy rates and open market sales can reduce the real lending rate. The central bank’s private asset purchases improve availability of credit and compress risk spreads. Our model identifies the risk-reducing channel of private asset purchases—the policy functions as if the government had supplied more bonds, and the increased collateralizable bonds are allocated more to corporate borrowings with a higher lending risk. Risk-retention requirements associated with asset purchases are essential to welfare. As uncertainty with respect to input costs and investment returns intensifies, the central bank should lower the optimal risk-retention rate to encourage lending and reduce business failures.

Business Valuation Cases in Brief

Business Valuation Cases in Brief

Food Security in Bangladesh: Concerns and Remedies

Bangladesh is a densely populated nation where a significant proportion of people live below the poverty line. Yet it has garnered a great deal of international attention over the past decade due to its remarkable achievements in increasing agricultural productivity, achieving food self-sufficiency, and ensuring sustainable food security for its large population. The primary task for the government is to ensure food security. During the past decade, the government has launched free food distribution, food-friendly programs, open market sales, and test alleviation programs as part of its food security program. In addition, projects based on digital technology have been implemented to enhance the monitoring and data management capabilities of the Ministry of Food. As a result, food accessibility and usage have increased. But the COVID-19 pandemic and the Russia-Ukraine war have generated a food crisis due to a lack of food accessibility, stability, and proper utilization. This study seeks to identify and assess the threats to food security in Bangladesh by identifying the significant challenges and promising areas for future development.

Assets fair value measurement in Russia: A comparative analysis, issues and solutions

Subject. The article discusses the assumptions and methods for measuring the fair value of assets for various purposes in the Russian practice. Objectives. The study analyzes and examines the application, concept and methods for the fair value measurement. We also suggest how entities should avoid errors in financial and administrative decision-making processes, when referring to the fair value. Methods. In this study, we rely upon the methods of synthesis, deduction, induction, and analysis of relevant special literature and regulatory documents. Results. The Russian practices of fair value were found to have several practical applications, which differ by purpose, substance and generation techniques, which cause identical assets to be different in value, and incorrect financial decisions. The assumption on the open market sale or sale between a certain seller and buyer, and the application/non-application of the best use principle were discovered to serve as key criteria and reasons generating the fair value, which causes its measurements to differ. The article provides the rationale for ensuring the consistency of the substance and methodology for the fair value generation for various purposes in the Russian regulatory documents or using the alternative terminology to denote the value generated differently from the fair value at the initial source. Conclusions. The conclusions can serve for further formulating theoretical principles for fair value measurements in financial accounting of profit-making entities and public institutions. They also can be used to measure the fair value of pledges, converge or develop new regulatory documents in Russia in terms of the substance and methodology for measuring the fair value, preventing errors in financial and administrative decision-making based on the fair value of assets, which is measured for various purposes.

DHEA in bone: the role in osteoporosis and fracture healing.

Dehydroepiandrosterone (DHEA) is a metabolic intermediate in the biosynthesis of estrogens and androgens with a past clouded in controversy and bold claims. It was once touted as a wonder drug, a fountain of youth that could cure all ailments. However, in the 1980s DHEA was banned by the FDA given a lack of documented health benefits and long-term use data. DHEA had a revival in 1994 when it was released for open market sale as a nutritional supplement under the Dietary Supplement Health and Safety Act. Since that time, there has been encouraging research on the hormone, including randomized controlled trials and subsequent meta-analyses on various conditions that DHEA may benefit. Bone health has been of particular interest, as many of the metabolites of DHEA are known to be involved in bone homeostasis, specifically estrogen and testosterone. Studies demonstrate a significant association between DHEA and increased bone mineral density, likely due to DHEA's ability to increase osteoblast activity and insulin like growth factor 1 (IGF-1) expression. Interestingly, IGF-1 is also known to improve fracture healing, though DHEA, a potent stimulator of IGF-1, has never been tested in this scenario. The aim of this review is to discuss the history and mechanisms of DHEA as they relate to the skeletal system, and to evaluate if DHEA has any role in treating fractures.

Government Equity Investments in Coronavirus Rescues: Why, How, When?

Governments around the world are attempting to support individuals’ incomes, rescue distressed businesses, and preserve employer-employee relationships damaged in the coronavirus pandemic by adopting fiscal stimulus programs of unprecedented scale. Although the bulk of this spending will involve direct payments to individuals or some type of direct lending or loan guarantees to businesses, large sums will (and should) take the form of government purchases of equity in distressed firms — either by direct purchase or by exercising warrants attached to rescue loans. We discuss why we think these equity injections will be necessary, but only in a limited number of cases; how they should be structured; when investments should be made and, almost as important, exited. We summarize (and tabulate) both the modest recent history of governments rescuing non-financial firms with equity injections and the voluminous research examining the efficacy of governments rescuing failing banks using equity investments. We highlight the dangers that would likely arise if governments permanently retain and vote the equity stakes purchased during the current crisis. Where equity investments must be made, we argue that these should: (1) be effective, in being large enough to be decisive; (2) be passive after the initial injection, when some financial restrictions should be imposed; (3) be temporary and preferably self-liquidating through open-market sales or redemptions; (4) provide taxpayers an upside claim if and when the rescued firm recovers; (5) be restricted to exchange-listed companies in all but extreme cases; and (6) be timely, as speed is crucial. In most cases, the default instrument to employ should be either non-voting preferred stock or warrants that convert into immediately marketable common shares, and we present a numerical example of how a preferred stock-with-warrants equity investment could pay off handsomely for taxpayers if rescued companies recover even partially.

What does it cost to ensure salt marsh migration? Using hedonic modeling to inform cost-effective conservation

The preservation of salt marshes under rapid sea-level rise (SLR) typically requires the conservation of marsh transgression zones—undeveloped uplands onto which marshes can migrate. Optimal planning for conservation of this type requires information on the expected benefit of marsh conservation and the cost of land suitable for marsh migration in particular areas. While information is available on marsh benefits within the literature, prior research provides little insight on associated land conservation costs. The coastal hedonic pricing literature focuses primarily on developed land, and there are no models designed to predict the cost of conserving land suitable for marsh migration. This paper develops a hedonic property value model to predict cost and explore price patterns associated with purchases of undeveloped land suitable for salt marsh migration under SLR. The model is illustrated using a case study from the Eastern Shore of Virginia, with a dataset consisting of open-market sales of undeveloped land from 2014 to 2017. Particular attention is paid to characteristics that determine marsh migration potential such as coastal distance, elevation and connectivity. Results demonstrate the insight for conservation planning that can be provided by models of this type and the errors associated with the use of simplified proxies to predict conservation costs of land suitable for marsh migration.

Working of Contractionary Monetary Policy: A Diagrammatic Presentation

Monetary policy is central bank’s policy to govern the money supply and interest rates in the economy to influence output, employment, and prices. The main instruments of monetary policy include open market operations, repo rate, reserve requirements for banks etc. Monetary policy has many objectives like controlling inflation, promoting growth and employment and ensuring stability in exchange rate and Balance of Payments. Monetary policy is considered to be a very effective tool especially in controlling the inflation. The central bank usually adopts a contractionary monetary policy to contain the prices. A contractionary monetary policy is the one in which the central bank increases the interest rate, CRR and resorts to open market sales of government securities with the goal of reducing the aggregate demand in the economy. This contraction in aggregate demand helps in controlling the prices. The current paper strives to diagrammatically explain the working of a contractionary monetary policy for checking the inflation. The first section explains the concept of monetary policy. The second section elucidates the meaning of contractionary monetary policy. The third section illustrates the derivation of aggregate demand curve. The fourth section enlists some of the most common reasons for inflation whereas the final section explains the working of the contractionary monetary policy using diagrams.

Monetary Policy, Macroprudential Policy, and Financial Stability

This review reexamines from a theoretical perspective the role of monetary and macroprudential policies in addressing the build-up of risks in the financial system. We construct a stylized general equilibrium model in which the key friction comes from a moral hazard problem in firms’ financing that banks’ equity capital serves to ameliorate. Tight monetary policy is introduced by open market sales of government debt, and tight macroprudential policy by an increase in capital requirements. We show that both policies are useful, but macroprudential policy is more effective in fostering financial stability and leads to higher social welfare.

Monetary Policy, Macroprudential Policy, and Financial Stability

This paper reexamines from a theoretical perspective the role of monetary and macroprudential policies in addressing the build-up of risks in the financial system. We construct a stylized general equilibrium model in which the key friction comes from a moral hazard problem in firms' financing that banks' equity capital serves to ameliorate. Tight monetary policy is introduced by open market sales of government debt, and tight macroprudential policy by an increase in capital requirements. We show that both policies are useful, but macroprudential policy is more effective in terms of financial stability and leads to higher social welfare.

An integrated application of Kano’s model and AHP to Korean online open market services

With the advancement in wireless and mobile technologies, online open markets decrease intermediate distribution margins and play the key intermediary role between sellers and consumers. While offline store sales remain stagnant, online open market sales have been growing steadily. We investigated the service quality of Korean online open market providers such as “Gmarket”, “Auction”, and “11st”, based on an integrated application of Kano’s model and the Analytic Hierarchy Process (AHP). The contributions of this study are as follows: (1) We conducted acritical review of previous literature to develop each analysis method. (2) We categorized the service quality factors of the Korean open market using Kano’s model and identified the most important service quality factor by AHP analysis. (3) Then, we conducted a comparison between the results from the Kano model and AHP analysis. (4) Lastly, based on the results of the integrated application of both Kano model and AHP analysis, this study provided specific implications for improving the service quality of the online open market in Korea.

A Comparative Analysis of Different Tools of the People’s Bank of China in Effectiveness

We evaluate and compare the effects of a monetary policy shock implemented by one certain tool of the people’s bank of China ,say, open market operation, the required reserve ratio and interest rates, through constructing a mixed identification method that combines the pure sign restrictions method with some zero restrictions in a structural VAR model. We find, (i) a shock induced by open market sales or raising the required reserve ratio brings a stronger negative effect on real output, comparing with a shock induced by raising interest rate.(ii) a shock caused by raising interest rate has a bigger probability to bring price a persistent declining course. Our result implies the Chinese authority should give a priority to the instrument of interest rate when trying to tame inflation in the future.

Combating Poverty Through an Attack on Calorie Deficits: A Mechanism Design Approach

This article tries to add some more value to the discussions on food security taken up by Jean Dreze and recently by Reetika Khera and other authors such as Indira Hirway and Madhura Swaminathan through a series of articles. It marshals information on availability and requirements for food grain with emphasis on the ‘Below Poverty Line’ (BPL) households and ‘Vulnerable but Above Poverty Line’ households. The latter are those below the World Bank’s $2 at PPP (purchasing power parity) per capita per day threshold but above the poverty line of $1.25 PPP per capita per day threshold when the reference year is 2005 (or in other words earning an income in India inadequate for buying a consumption bundle that $2 would have bought in the United States in 2005 but more than adequate for purchasing a reference consumption basket that $1.25 would have bought). The mentioned information is supplemented by that on diversion of food grain from the Targeted Public Distribution System (TPDS) in India at the national as well as state level; errors in targeting the poor through the TPDS, as revealed by region specific studies; the design of various public distribution programmes at the state level; the national income distribution which has important implications for the potential magnitude of fiscal resources that can be generated for running a Public Distribution System (PDS) which offers greater food security for the poor and vulnerable; and finally the difference in the nature of urban and rural poverty with its implications for food subsidy policy. It reveals that the nation produces enough food grains to meet the food grain requirements of the country’s entire population and the problem is therefore essentially one of improper distribution and leakage rather than of inadequate production. It then goes on to point out that while the use of the TPDS to provide subsidized rations to certified BPL card holders and unsubsidized rations to others might be well intentioned and meant to target scarce fiscal resources and essential calories to the needy, such targeting has left much to be desired with a large number of BPL cards being appropriated by the APL population (and we have no way of knowing whether these families belong to the vulnerable category or non-vulnerable category) to compound the large physical diversions which can be largely be attributed to corrupt practices by transporters and dealers of TPDS outlets. However, there is hope as certain states have shown reasonable success in implementing the public distribution system – one primary example is Tamil Nadu which has universalized the system to overcome the problems of wrong identification of the poor, intentional or otherwise, and at the same time minimized diversions. The above information is collated and analysed to recommend a very simple solution: entitling every household to subsidized rations on the basis of its ration card but almost ensuring that the rich and the affluent, without any need for the mentioned subsidies and used to consuming fine varieties of grain, not avail of these for self consumption by providing only coarse and nutritious rice, wheat or millets through Fair Price Shops (in economic theory this principle is known as ‘mechanism design’, so christened because those “who need a particular scheme” and those “who do not” identify themselves, thus rendering identification by an under informed and error prone external source unnecessary). Of course, the possibility of the rich and affluent using their ration cards to avail of their entitlements of coarse grains for profitable resale still exists even if they themselves prefer to consume finer varieties of grain. Similarly, there is the very real possibility of TPDS outlet managers coercing the vulnerable to accept provisions that are below their maximum entitlements and then diverting the rest to the open market for sales to these very sections of the population. All these problems can be solved if the TPDS outlets deal in provision of only certain coarse varieties of food grain and the sale of these varieties is banned in the open market. Information regarding the banned varieties can be distributed to the civil society and the population at large through an information dissemination programme. Thus, it would be highly probable that any open market sale of a variety distributed through the TPDS would get reported and punished and therefore diversion would be minimised. Therefore, errors in targeting of subsidies would be avoided and the food requirements of the vulnerable population would be met at minimal fiscal cost to the government.

Box-Scheme Based Delivery System of Locally Produced Organic Food: Evaluation of Logistics Performance

The local food systems such as fruit and vegetable box-schemes are gaining new profitable niche markets as the demand for local food is increasing. This paper presents the study made on box-scheme based local food supply system in Sweden, the Roslagslådan network, in which three distributors of locally produced organic food (LPOF) were the main actors. The objective of the study was to investigate the Roslagslådan LPOF supply network and evaluate its logistics performance. The study was based on literature review, interview, field measurement and route simulation and optimisation (in terms of route distance and driving time) analysis. The geographic information system (GIS) software was used to map the locations of the distributing companies and their delivery points (customer locations) while Route LogiX software was used for the simulation and optimisation analyses of routes for collection and distribution of LPOF, mainly vegetables and herb-based products. From the quantified information, the three companies distributed, on average about 134 boxes of LPOF to about 116 delivery points, once in two weeks period mainly during August-October. The distribution via Roslagslådan network was supplemented with other means of selling: on farm sale, open market sales and selling via supermarket. The route optimisation analysis resulted in significant savings in route distance and delivery time. The savings in distance were up to 76%, 23% and 32% for Company-1, Company-2 and Company-3 respectively while the corresponding savings in delivery time were up to 75%, 10% and 16%. This reduction in distance and time led to positive improvement toward the environmental and economical issues enhancing the sustainability of local food systems.

International Currency Portfolios

This paper develops a theory of international currency portfolios that holds in general equilibrium, and that is therefore not subject to the criticisms directed at the portfolio balance literature of the 1980s. It shows that, under plausible assumptions about fiscal policy, the relationship between the rates of return of different currency bonds is not correctly described by an arbitrage relationship but instead also depends on outstanding bond stocks. Other findings are: (1) There is a monotonically increasing relationship between domestic interest rates and the portfolio share of domestic currency denominated assets. This relationship is steep at low levels of government debt, and almost flat at high levels of government debt. (2) Optimal private sector foreign currency positions are negative, and their size is decreasing in exchange rate volatility. Under volatile exchange rates large negative aggregate net foreign asset positions can only be rationalized by assuming large public sector borrowing from foreign governments. (3) For a baseline economy with zero net foreign assets, open market sales of domestic government debt lead to valuation gains (losses) when the country as a whole has a short (long) position in foreign currency. (4) A fiscal theory of exchange rate determination is compatible with general equilibrium in a two-country world. (5) Equilibria are determinate when both fiscal and monetary policy are passive.

Deductio Ad Absurdum: CEOs Donating Their Own Stock to Their Own Family Foundations

I study large charitable gifts by Chairmen and CEOs of public companies using their own company stock as the donation currency. Unlike open market sales, gifts of stock are not subject to insider trading law and have very lenient disclosure requirements.Consistent with their exemption from insider trading law, I find that CEOs' stock gifts occur just prior to significant drops in their firms' stock prices, a pattern that enables the donors to obtain increased personal income tax benefits. This timing is more pronounced when executives donate their own shares to their own family foundations, which I identify using foundations' IRS tax returns posted on Internet databases. Stock gifts are also strategically timed to occur prior to unfavorable quarterly earnings announcements and after positive earnings announcements.Evidence related to reporting delays and seasonal patterns suggests that some CEOs backdate stock gifts to their own family foundations in order to increase personal tax benefits.CEOs' family foundations hold donated stock for long periods rather than diversifying, permitting CEOs to continue voting the shares but violating standard prudent investor principles of risk reduction through diversification.These results highlight an odd juxtaposition of motives, suggesting that while making charitable contributions to support good works in society, CEOs use aggressive and perhaps fraudulent tax evasion strategies.

An Analysis of Insiders' Use of Prepaid Variable Forward Transactions

This study examines firm performance surrounding insiders' Prepaid Variable Forward (PVF) transactions to infer insiders' information when they enter these off-market contracts. PVFs allow insiders to hedge downside risk, share performance gains, and obtain immediate large-sum cash payments for investment or consumption. On average, PVF transactions cover 30% of a sample insider's firm-specific wealth ($22 million), which is substantially larger than a typical open-market sale. PVFs systematically follow strong firm performance and precede degraded stock and earnings performance. PVFs also precede periods of negative abnormal returns relative to potential alternative investments. The documented association between PVFs and performance declines does not appear to result from the market's response to transaction disclosure, participant self-selection, or general price reversals. Thus, evidence suggests that insiders use PVFs to diversify firm-specific holdings in anticipation of performance declines.

Interest Rate Signals, Stock Returns and FII Inflows: Exploring the Interlinkages

We look into the dynamic relationship between: monetary policy, stock market and FII inflows. Moving forward from the sparse literature on exploring the interlinkages between FII inflows and stock returns on one hand and between monetary policy and capital flows on the other, we have, for the first time, looked at two determinants of FII inflows in conjunction. We find that a conscientious monetary policy, actively engaged in stabilizing the foreign exchange market whilst maintaining a high interest rate regime through open market sale of government securities to attract capital flows, together with stock market returns determine FII inflows.

Open market operations and the federal funds rate

The conventional view is that the Fed controls the federal funds rate by altering the supply of liquidity in the overnight market by changing the supply of reserves relative to demand through openmarket operations (Taylor 2001; Friedman 1999). Openmarket operations are conducted by the Trading Desk of the Federal Reserve Bank of New York (the Desk). While the procedure that the Desk follows has evolved and continues to do so, the fundamental procedure has remained largely the same since at least the mid-to-late 1970s. Specifically, the Desk estimates (a) the demand for reserves that are required to achieve the FOMC’s operating objective and (b) the quantity of reserves that would be available if the Desk did nothing. If (a) exceeds (b), the procedure indicates that reserves be added through an open market purchase of government securities. If (a) is less than (b), the procedure suggests that the Desk drain reserves through an open market sale.

RELIABILITY OF MORTGAGE VALUATION FOR INSTITUTIONAL LENDING IN NIGERIA

The growing number of distressed banks in Nigeria and the recognition of mortgage valuation as a measure of investment performance of collaterals to mitigate the risks of loan underwriting process necessitates this study. It examined whether open market valuations of mortgage properties were a good proxies for their sale prices. Pooled data, involving 121 open market sales during the period 1994 to 2002, on property transactions in the study area with their corresponding contemporaneous valuations were gathered from the estate surveying and valuation firms, the lending institutions and the Nigerian Deposit Insurance Corporation. The data emanating therefrom were analysed with the aid of multiple regression models. The study revealed, amongst other things, that open market valuation for mortgage is a good proxy for their transaction price in the study area; although, the accuracy is not as good as what obtains in U.K, U.S.A. and Australia.