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Article
Publication date: 1 July 1998

Alvin G. Wint

This study examines the recent efforts by the governments of two Caribbean countries to enhance the competitiveness of their economies in the context of the framework of…

Abstract

This study examines the recent efforts by the governments of two Caribbean countries to enhance the competitiveness of their economies in the context of the framework of the use of functional versus selective government interventions. In the course of the study, however, it was discovered that rather than focus exclusively on the distinction between functional and selective interventions as if they represent competing models for public policy intervention, it was useful to examine, pragmatically, the range of policy options open to these governments, and then consider the scope and merits of intervention in the context of these policy options. In so doing, it becomes apparent that functional and selective government interventions, to the extent that they are always distinguishable, become points along a continuum, rather than orthogonal lines incapable of being joined. The lesson of these Caribbean economies and, it is argued, of the East Asian experience, is that there is no simple choice between selective and functional interventions for the developing economy seeking to enhance its international competitiveness. Governments of these countries, and others seeking to enhance the international competitiveness of their economies, may well have to be capable of managing the process of selecting functional interventions, and of reducing the risks and improving the functioning of selective interventions.

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International Journal of Public Sector Management, vol. 11 no. 4
Type: Research Article
ISSN: 0951-3558

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Article
Publication date: 20 July 2021

Fouad Jamaani

This paper uniquely aims to triangulate the effects of the COVID-19 pandemic, government financial intervention (GFI) policies and power distance (PD) culture on returns…

Abstract

Purpose

This paper uniquely aims to triangulate the effects of the COVID-19 pandemic, government financial intervention (GFI) policies and power distance (PD) culture on returns of equity indices during the COVID-19 epidemic in the world's equity markets.

Design/methodology/approach

The research employs panel data regression analysis using 1,937 observations from 19 developed and 42 developing countries. The data employed contain daily registered COVID-19 cases, global equity market index prices, financial intervention policies introduced by governments and Hofstede's cultural dimension measure of PD.

Findings

The authors find that investors certainly react negatively to the number of confirmed COVID-19 cases reported, that GFI policies indeed reinforce investors' expectations of policymakers' dedication to stabilize the economy during the COVID-19 pandemic and that equity investors in high PD cultures overreact to GFI news, resulting in more positive stock returns. The authors discover a difference between developed and developing countries in terms of the effect of GFI policies and PD on equity returns.

Research limitations/implications

Results suggest that investors react negatively to the daily registered COVID-19 cases. The authors find that financial intervention policies introduced by governments reinforce investors' outlooks of policymakers' commitment to stabilize local stock markets during the coronavirus pandemic. The results confirm that equity market investors in PD cultures overreact to financial intervention news, thus resulting in more positive stock returns.

Practical implications

The paper provides three original contributions. First, it helps us to understand the single effect of the COVID-19 and financial intervention policies introduced by governments on returns of the global equity market. Second, it examines the possibility of a two-way joint effect between the COVID-19 and financial intervention policies introduced by governments and the COVID-19 and differences in countries characterized by a PD culture concerning stock market returns. Third, it investigates the possibility of a three-way interaction effect between the COVID-19 contagion, financial intervention policies introduced by governments and culture on returns of equity markets.

Originality/value

The authors' findings are valuable to researchers, investors and policymakers. Culture and finance scholars can now observe the role of Brown et al.'s (1988) uncertain-information hypothesis with reference to the effect of the COVID-19 and financial interventions policies introduced by governments on returns of equity markets. This is because the authors' findings underline that since investors' uncertainty declines with daily registered numbers of COVID-19 cases, the introduction of GFI policies function as a neutralizing device to re-establish investors' expectations to equilibrium. Consequently, stock market returns follow a random walk that is free from the negative effect of the COVID-19. The authors' work is likely to advise equity investors and portfolio managers about the extent to which major exogenous economic events such the outbreak of global diseases, financial interventions policies introduced by governments and differences in countries' PD culture can individually and jointly influence the return of the world's equity markets. Investors and portfolio managers can employ the authors' results as a guideline to adjust their investment strategy based on their investment decision strategy during global pandemics. Policymakers aiming to introduce financial intervention policies to stabilize their stock market returns during global pandemics can benefit from our results. They can observe the full effect of such policies during the current COVID-19, and subsequently be better prepared to choose the most effective form of financial intervention policies when the next pandemic strikes, hopefully never.

Details

Cross Cultural & Strategic Management, vol. 28 no. 4
Type: Research Article
ISSN: 2059-5794

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Book part
Publication date: 15 September 2017

Jingjing Yang and Hao-Chang Sung

We analyze the economic consequence of government intervention on the incidence of accounting fraud and audit fees of both Big 4 and local big auditors on Chinese audit…

Abstract

We analyze the economic consequence of government intervention on the incidence of accounting fraud and audit fees of both Big 4 and local big auditors on Chinese audit market in the period 2006–2013. In 2009, Chinese government issued favorable polices to local big auditors and required certain Chinese companies to give priority to these auditors. We find that market share of Big 4 auditors is quite stable before and after government intervention, but market share of local big auditors increases at the cost of local small auditors after intervention. Although audit fee premiums of both local big and Big 4 auditors have increased after intervention, the positive effect of local big auditors on audit fee premiums has significantly decreased. Further, both Big 4 and local big auditors are not likely to reduce the incidence of accounting fraud in pre- and post-intervention period. Our results suggest that Chinese government support to local auditors does not significantly enhance these auditors’ competitiveness in terms of audit fee and audit quality.

Details

Advances in Pacific Basin Business Economics and Finance
Type: Book
ISBN: 978-1-78743-409-7

Keywords

Content available
Article
Publication date: 9 August 2018

Shoufu Xu, Xuehui He and Longbing Xu

The purpose of this paper is to empirically investigate the impact of equity market valuation and government intervention on the research and development (R&D) investments…

Abstract

Purpose

The purpose of this paper is to empirically investigate the impact of equity market valuation and government intervention on the research and development (R&D) investments of listed companies in China and their relationship.

Design/methodology/approach

Using a manually collected R&D database in the period 2007–2015, this paper constructs a sample of 6,595 firm–year observations and applies the methods of pooled OLS regressions to examine the effects of market valuation and government intervention on corporate R&D expenditures.

Findings

This paper finds that market valuation enhances corporate R&D investments, but there is no evidence that government intervention may significantly affect the R&D investments. Government intervention also decreases the sensitivity of corporate R&D investment to stock price, which implies that government intervention weakens the promotion of market mechanism to corporate R&D investment. Furthermore, these effects are stronger in the non-state-owned firms and the non-regulated industries.

Practical implications

This study suggests that the functional borders of markets and government should be reasonably defined and markets play a decisive role in resource allocation to improve corporate innovation and national innovation.

Originality/value

This paper provides a micro view of the relationship between market and government at the stage of transitional economy in China as well as directions for further research on the relationship between stock prices and corporate investments.

Details

China Finance Review International, vol. 9 no. 1
Type: Research Article
ISSN: 2044-1398

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Article
Publication date: 2 August 2011

Xiao Zuoping

The purpose of this paper is to empirically test how ultimate controlling shareholders' ownership‐control rights divergence and government intervention affect choice of…

Abstract

Purpose

The purpose of this paper is to empirically test how ultimate controlling shareholders' ownership‐control rights divergence and government intervention affect choice of capital structure (CS), and how the relationship between controlling shareholders' ownership‐control rights divergence and choice of CS is affected by government intervention.

Design/methodology/approach

Integrating the institutional background of China, the paper adopts balanced panel data containing related continuously obtainable information of 1,076 non‐financial companies listed in Shanghai and Shenzhen from 2004 to 2008 (a total of 5,380 observed values), and applies a series of generalised least squares to empirically test how ultimate controlling shareholders' ownership‐control rights divergence and government intervention affect choice of CS, and how the relationship between controlling shareholders' ownership‐control rights divergence and choice of CS is affected by government intervention.

Findings

The empirical evidence provided by this paper indicates that: controlling shareholders' ownership‐control rights divergence is negatively correlated with leverage; government intervention is positively correlated with leverage; and government intervention will weaken the negative relationship between controlling shareholders' ownership‐control rights divergence and leverage, and make debt capital suppliers (especially financial institutions like banks, etc.) provide loans, especially long‐term ones, to companies with high ownership‐control rights divergence.

Originality/value

So far, it is still little‐known how ownership‐control rights divergence affects choice of CS and how government intervention affects the relationship between ownership and control rights divergence and choices of CS. This paper is the first to test how ultimate controlling shareholders' ownership‐control rights divergence and government intervention affect choice of CS, and how the relationship between controlling shareholders' ownership‐control rights divergence and choice of CS is affected by government intervention based on the institutional background of China.

Details

Nankai Business Review International, vol. 2 no. 3
Type: Research Article
ISSN: 2040-8749

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Article
Publication date: 1 April 1997

Li‐Teh Sun

The success of several newly industrialized countries has created a renewed interest in the role of government in economic development. In contrast to the…

Abstract

The success of several newly industrialized countries has created a renewed interest in the role of government in economic development. In contrast to the industrialization of the West, the government was much more involved during the development process of these east Asian nations. Attempts to address this question of how much government intervention still remains. Uses the human development index to represent the level of economic or human development; and selects four indicators to depict the degree of government intervention. Both empirical evidence and intuitive reasoning seem to support the conclusion that moderate government intervention contributes most to human development.

Details

International Journal of Social Economics, vol. 24 no. 4
Type: Research Article
ISSN: 0306-8293

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Article
Publication date: 2 July 2021

Yang Zhao and Xiaohui Chen

Digital economic innovation is associated with risks. The lack of a platform's profitability weakens the operation's ability to sustain innovators and increases the…

Abstract

Purpose

Digital economic innovation is associated with risks. The lack of a platform's profitability weakens the operation's ability to sustain innovators and increases the possibility of the business' termination. Relevant data demonstrate a significant upward trend in the exit of Chinese innovators of the digital economy. The study aims to clarify the role of an effective government and effective market in the prevention and control of the withdrawal of innovators.

Design/methodology/approach

Based on balanced panel data of 31 provinces and cities from 2010 to 2018, this study uses the individual fixed effect model to study the impact of the marketization level, the market's scale and government interventions on the withdrawal of innovators. Simultaneously, based on the spatial econometric model, this study examines the spatial spillover effect of the withdrawal of innovators.

Findings

Results indicate that government interventions have an inhibiting effect on the withdrawal of innovators. Moreover, there was a positive “U”-shaped nonlinear relationship between the marketization level and the withdrawal of innovators, and an inverse “U”-shaped nonlinear relationship between the market size and the withdrawal of innovators.

Originality/value

The paper first studies the relationship between the exit of innovators and government intervention, marketization level and field scale; takes the lead in the research on the role of the government and effective market in the prevention and control of the exit of innovators from the perspective of the exit of innovators and puts forward policy suggestions to promote the sustainable and healthy development of fintech innovation in China from the market scale and other aspects.

Details

Journal of Enterprise Information Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1741-0398

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Article
Publication date: 17 October 2019

Yue Song, Naiding Yang, Yanlu Zhang and Jingbei Wang

This paper aims to explore what factors influence the possibility of internal and external risk propagation in R&D networks and investigate how government intervention

Abstract

Purpose

This paper aims to explore what factors influence the possibility of internal and external risk propagation in R&D networks and investigate how government intervention moderates the associations between the influencing factors and risk propagation.

Design/methodology/approach

The authors divided government intervention into directive and facilitative intervention and adopted an empirical research approach in this study. They collected 228 questionnaires from managers and R&D personnel participating in R&D projects in Shanghai and Jiangsu province through e-mail and in person. The data were used to carry out multiple regression analysis to test hypotheses.

Findings

The results show that the probability and consequence of risks positively affect the possibility of internal and external risk propagation; risk perception and transformation ability negatively influence the possibility of internal and external risk propagation; both directive and facilitative intervention weaken the relationship between the probability of risks and internal risk propagation when they are high than low the association between transformation ability and internal risk propagation is weaker when directive intervention is high than low, whereas facilitative intervention presents the insignificant moderation effect on the relationships between risk perception ability and internal and external risk propagation.

Originality/value

This study provides a distinctive theoretical perspective for risk conduction theory, government intervention theory and risk management. It also offered managers and the government a clear understanding of how to reduce or avoid risk propagation by leveraging directive and facilitative government intervention.

Details

Chinese Management Studies, vol. 13 no. 4
Type: Research Article
ISSN: 1750-614X

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Book part
Publication date: 3 August 2015

Christopher J. Coyne and Abigail R. Hall

This paper analyzes how the use of unmanned aerial vehicles (UAVs) or “drones” in foreign interventions abroad have changed the dynamics of government activities…

Abstract

This paper analyzes how the use of unmanned aerial vehicles (UAVs) or “drones” in foreign interventions abroad have changed the dynamics of government activities domestically. Facing limited or absent constraints abroad, foreign interventions served as a testing ground for the domestically constrained U.S. government to experiment with drone technologies and other methods of social control over foreign populations. Utilizing the “boomerang effect” framework developed by Coyne and Hall (2014), this paper examines the use of drones abroad and the mechanisms through which the technology has been imported back to the United States. The use of these technologies domestically has substantial implications for the freedom and liberties of U.S. citizens as it lowers the cost of government expanding the scope of its activities.

Details

New Thinking in Austrian Political Economy
Type: Book
ISBN: 978-1-78560-137-8

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Book part
Publication date: 1 January 2004

Rolf Höijer

In The Road to Serfdom, Hayek argued against planned economies that “the close interdependence of all economic phenomena makes it difficult to stop planning just where we…

Abstract

In The Road to Serfdom, Hayek argued against planned economies that “the close interdependence of all economic phenomena makes it difficult to stop planning just where we wish…once the free working of the market is impeded beyond a certain degree, the planner will be forced to extend his controls till they become all-comprehensive” (Hayek, 1944, p. 79). According to Hayek, and especially Mises, there exists no stable condition in-between laissez faire capitalism and the planned economy. Once politicians engaged in acts of interventionism further interventions would successively lead them towards a condition where the state fully planned and controlled the economy and civil society. According to Austrians, ‘interventionism’ thus represented an unstable and self-reinforcing condition (Burton, 1984, p. 110). In John Gray's words “whenever an interventionist policy…fails to achieve the desires result, the practical and theoretical response of the interventionist ideologue is to demand an extension of the policy to new fields…interventionist policies will always interpret the failure of any such policy, not as a reason in favour of its abandonment, but rather as one supporting its wider application”(Gray, 1984, p. 32).

Details

The Dynamics of Intervention: Regulation and Redistribution in the Mixed Economy
Type: Book
ISBN: 978-0-76231-053-1

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