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Vol. 8, Number 1, March 2011

French Banks amid the Global Financial Crisis
Yingbin Xiao
International Monetary Fund USA
Abstract Ɩ Full Text
This paper runs the gamut of qualitative and quantitative analyses to examine the performance of French banks during 2006-2008 and the financial support measures taken by the French government. French banks were not immune but proved relatively resilient to the global financial crisis reflecting their business and supervisory features. An event study of the impact of government measures on CDS, debt, and equity markets points to the reduction of credit risk and financing cost as well as the redistribution of resources. With the crisis still unfolding, uncertainties remain and challenges lie ahead, calling for continued vigilance and enhanced risk management.
Keywords: French banks, financial crisis, recapitalization, debt guarantee, government support, refinancing
JEL Classification: G01, G12, G15, G21, G28

Optimal Inflationary and Reserve Requirement Policies: A Study of an Economy with an Informal Sector
Hamid E. Ali
The American University in Cairo
Abstract Ɩ Full Text
Governments in developing economies often resort to taxing bank money balances through imposition of high reserve requirements and also by relying on seigniorage to finance their deficits. In the context of those practices, this research attempts to answer the following questions. First, why do developing economies with an informal sector resort to inflationary measures to finance their activities? Second, how does a government induce an agent to choose the formal economy? As to the first question on the trade-off between inflation and reserve requirements, it is shown that of maximum inflation and minimum reserve requirements will increase the steady-state utility of an optimizing agent. Regarding the second question, the agents prefer the informal economy if policy relies on a maximum reserve requirement.
Keywords: Informal market, financial development, financial repression, seigniorage
JEL Classification: J33, J61, H2

Cross-Border Mergers and Acquisitions between Industrialized and Developing Countries: US and Indian Merger Activity
Gordon V. Karels, Edward Lawrence and Jin Yu
University of Nebraska-Lincoln, Florida International University and St. Cloud State University, US
Abstract Ɩ Full Text
In this paper we study the cross border mergers and acquisition between the US and Indian firms. Our empirical work suggests that US firms realize significant losses on the announcement of acquisitions of Indian targets while Indian targets realize significant gains on the announcement mergers with US acquirers. Publicly-traded Indian firms realize significant returns on their announcement of acquisitions of publicly-traded US firms but realize significant positive returns on announcement of acquisitions of privately-held US firms and subsidiary firm targets. Publicly-traded US targets realize insignificant gains when US acquired by Indian firms.
Keywords: Cross border mergers and acquisitions, acquirer’s abnormal returns, target’s abnormal returns, publicly traded acquirers, privately held targets
JEL Classification: G34, G14

Market Reactions to Audit Committee Director’s Gender: Evidence from US-Traded Foreign Firms
Hua-Wei Huang
National Cheng Kung University, Taiwan, ROC
Yun-Chia Yan
University of New Orleans, USA
James M. Fornaro
State University of New York-College at Old Westbury, USA
Ahmed Elshahat
University of New Orleans, Bradley University, USA
Abstract Ɩ Full Text
This study investigates whether the appointment of a female to the audit committee of a foreign issuer in the US is positively associated with subsequent market price reaction. We hypothesize that female members on the audit committee can strengthen corporate governance by their conservative and ethical qualities. Accordingly, such appointments deliver a positive message to capital market participants. In order to observe the impact of audit committee gender diversity on foreign firms, we include all audit committee appointments of US-traded foreign firms from 2002 to 2009. We find that the appointment of female audit committee members has significant positive cumulative abnormal returns compared to the appointment of male audit committee members.
Keywords: Audit committee, female director, corporate governance, market price reaction, US-traded foreign firms
JEL Classification: G14, M42, O16

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