Using cointegration and Granger causality tests, examines thecausal relationship between defence spending and economic growth inmainland China over the period 1950‐1991. The…
Abstract
Using cointegration and Granger causality tests, examines the causal relationship between defence spending and economic growth in mainland China over the period 1950‐1991. The results show that defence spending is not cointegrated with the real economic growth rate, implying the lack of any long‐run equilibrium relationship between the two variables. In addition, Granger causality tests indicate causal independence between the two variables.
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The effectiveness of combination monetary feedback rule and fiscalpolicy under rational expectations is examined. The fiscal policy takesinto account not only a progressive tax…
Abstract
The effectiveness of combination monetary feedback rule and fiscal policy under rational expectations is examined. The fiscal policy takes into account not only a progressive tax structure but also government expenditure. The model consists of IS and LM relationships and a Lucas supply function. The model is solved analytically. Both the progressive tax structure and the combination monetary feedback provide an automatic but not immediate adjustment to reduce the expectation error. Therefore the behaviour of real output is influenced not only by the disturbance terms but also by the policy parameters of the progressive tax structure and the combination monetary feedback rule.
A general equilibrium model for mainland China′s open economy isformulated and used to examine the effect of stabilisation policy on theinternal and external balances. An…
Abstract
A general equilibrium model for mainland China′s open economy is formulated and used to examine the effect of stabilisation policy on the internal and external balances. An expansionary monetary or fiscal policy in particular through its effect on consumption and labour supply raises aggregate supply. However, the effect on the external balance is ambiguous. The issue of trade‐offs between internal and external balances does arise; if the effect on production is greater than that on consumption, the trade balance will not be ameliorated.
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Hsiu‐Ling Wu, Chien‐Hsun Chen and Fang‐Ying Shiu
This paper attempts to empirically examine the impact of financial development and bank characteristics on the operational performance of commercial banks in the Chinese…
Abstract
Purpose
This paper attempts to empirically examine the impact of financial development and bank characteristics on the operational performance of commercial banks in the Chinese transitional economy.
Design/methodology/approach
Pooled cross‐section (banks) and time‐series data are employed in the empirical estimation, with the sample comprising a total of 14 Chinese banks. The period under consideration extends from 1996‐2004. Fixed effects and random effects models are estimated.
Findings
Empirical results exhibit higher levels of moneterization that can translate into better ROA performance for banks. The longer a bank has been in existence, the worse its ROA performance is found to be. Rather than leading to improved profitability, Chinese banks' efforts to develop non‐traditional banking business actually have a negative impact on the ROA. The ROA performance of larger Chinese banks (in terms of assets) is found to be inferior to that of the smaller shareholding commercial banks.
Originality/value
Particular emphasis will be placed on the unique characteristics of China's banking industry during this period of institutional transformation.
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Yenpao Chen, Chien‐Hsun Chen and Shiau‐Lan Huang
This study aims to examine the earnings management behaviour of financially distressed listed companies in China for the period 2002‐2006.
Abstract
Purpose
This study aims to examine the earnings management behaviour of financially distressed listed companies in China for the period 2002‐2006.
Design/methodology/approach
The present study uses discretionary accruals to serve as a proxy variable for earnings management, with the type of ultimate ownership and the type of industry to which the company belongs functioning as independent variables.
Findings
The empirical results show that the desire to avoid continued special treatment (ST) status and the risk of being de‐listed leads firms to adopt different earnings management behaviour before and after being designated as an ST firm.
Research limitations/implications
The desire to avoid being de‐listed is as strong among managers of state‐owned companies as it is among private companies.
Practical implications
Implementing the effective regulation of corporate earnings management is therefore an issue of great importance. It is recommended that the government needs to take the degree of industry regulation into account when assessing regulations aimed at controlling earnings management.
Originality/value
In a transition economy like China, the state versus private ownership and the degree of government regulation in industry is likely to affect the earnings management of financially distressed companies. The study demonstrates that companies in less‐regulated industries tend to undertake more earnings management in the years both before and after they are designated as ST companies.
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Yenpao Chen, Chien‐Hsun Chen and Will C. Wu
This paper sets out to explore the effects that the setting‐up of an independent director system has on the operating efficiency of information electronics companies in China.
Abstract
Purpose
This paper sets out to explore the effects that the setting‐up of an independent director system has on the operating efficiency of information electronics companies in China.
Design/methodology/approach
This paper uses 87 Chinese listed electronics companies during the initial stages of the independent directors system from 1999 to 2002 as sample subjects, and employs a two‐stage procedure for empirical investigation.
Findings
The non‐parametric test results verify that there is no significant difference in the operating efficiency of Chinese electronics companies following the establishment of an independent director system. The Tobit regression results show that the establishment of an independent director system in the Chinese electronics industry does not influence overall technical efficiency (TE), pure technical efficiency (PE), or scale efficiency (SE).
Research limitations/implications
Whether the related schemes of the current corporate governance structure practised in China can achieve their expected results, as well as the possible future development direction of the governance structure, is of the utmost importance, and is a research subject worth examining in greater depth.
Practical implications
It is of the utmost urgency for such corporate governance to improve the selection mechanism for independent directors, to establish incentives and responsibility‐taking mechanisms for independent directors, and to amend the company law and securities law to perfect the rules of an independent director system.
Originality/value
By using DEA and the Tobit regression model, this study attempts to investigate whether China, in addition to fraud prevention, has improved corporate operating efficiency by introducing a system of independent directors.
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Examines empirically the effects of the rationing system, open inflationand budget deficits on rural and urban consumption behaviour in mainlandChina. Employs a dynamic…
Abstract
Examines empirically the effects of the rationing system, open inflation and budget deficits on rural and urban consumption behaviour in mainland China. Employs a dynamic error‐correction model. Estimates the model by ordinary least squares (OLS) based on annual data for the period 1952‐1991. Employs a Chow test to test for structural changes in rural and urban consumption. The empirical results show that an income variable captures the distribution effect of rationing and has a significant impact on rural and urban consumption. Open inflation tends to underestimate inflationary pressure and has no impact on consumption in rural and urban areas, whereas per capita budget deficits show a significant influence on rural consumption. The results of the Chow test indicate that economic policies and reforms have significantly changed the structure of consumption since 1979. One such change is the shift in the relative importance of consumer durable goods in total consumption than equal to, or smaller than that under the tariff. This conclusion holds for both price‐setting and quantity‐setting duopoly with heterogeneous goods as well as quantity‐setting duopoly with homogeneous goods.
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Chien‐Hsun Chen and Hui‐Tzu Shih
By the mid‐1990s, China had become the world's largest producer (and exporter) of textiles and garments. It is widely believed that China's textile industry will be one of the…
Abstract
By the mid‐1990s, China had become the world's largest producer (and exporter) of textiles and garments. It is widely believed that China's textile industry will be one of the biggest beneficiaries of World Trade Organization (WTO) accession, thereby enabling Chinese textile firms to use foreign‐invested enterprises to gain direct access to overseas purchasing networks, and helping to boost China's textile and clothing exports; however, most Chinese garment manufacturers have been in existence for only a relatively short period and are small in size. The Chinese garment industry is made up largely of small enterprises; run‐of‐the‐mill small garment manufacturers suffer because of the incomplete adoption of the market mechanism, restricted access to information and unfair competition. These smaller manufacturers remain dependent on traditional business models, and as a result, their operating costs have remained very high. Concludes that the vast majority of Chinese garment manufacturers are thus engaged in a constant struggle to stay in business.
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Examines the causal relationship between interest rates, savings and income in the Chinese economy over the period 1952 to 1999, using the cointegration test and Bayesian vector…
Abstract
Examines the causal relationship between interest rates, savings and income in the Chinese economy over the period 1952 to 1999, using the cointegration test and Bayesian vector autoregression (BVAR) for empirical testing. The empirical evidence from the cointegration test confirms that there is a stable long‐run relationship between interest rates, savings and income, whilst the BVAR causality test shows unidirectional causality running from savings to income. For China’s transitional economy, it is therefore important to establish well‐developed financial institutions – particularly the independence of the Central Bank – interest rate liberalization and sound financial intermediation, all of which are important for the efficient allocation of capital, which, in turn, can help to establish sustainable economic growth.
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Examines how the locational choice of foreign direct investment (FDI) is influenced by regional characteristics in mainland China, such as the potential for market share…
Abstract
Examines how the locational choice of foreign direct investment (FDI) is influenced by regional characteristics in mainland China, such as the potential for market share extension, labour cost differences, allocative efficiency, transportation infrastructure, and research and development capability. Empirical testing is conducted by the conditional logit model using pooled cross‐section and time‐series data. Empirical findings for the 1987‐1991 period indicate that the variable for market share extension potential only affects FDI in the middle region. Surprisingly, labour cost differences do not affect the location of FDI. Interregional railroad connections are found to be positively related to the choice of location of FDI, but FDI may not necessarily locate near innovative Chinese industries.