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Page 1: Darden Emerging Markets Conference Programs 2002-2006 2002-2006.pdf · University of Baroda in Vadodara, ... responsible for collecting stock exchange surveys and delivering market

Darden Emerging Markets Conference

Programs

2002-2006

Page 2: Darden Emerging Markets Conference Programs 2002-2006 2002-2006.pdf · University of Baroda in Vadodara, ... responsible for collecting stock exchange surveys and delivering market

Emerging Markets Conference Programs

2002

Page 3: Darden Emerging Markets Conference Programs 2002-2006 2002-2006.pdf · University of Baroda in Vadodara, ... responsible for collecting stock exchange surveys and delivering market

7:00 a.m. BreakfastDarden Center

8:30 a.m. Session #1: Aims, Issues, OverviewClassroom 50

Robert F. Bruner, Distinguished Professor and Executive Director, The Batten Institute

Distinguished Professor of Business Administration Robert F. Bruner is a leading experton mergers and acquisitions, corporate finance, and corporate transformation. He is alsothe Executive Director of the Batten Institute, a foundation within The Darden Schoolthat supports research and programs dealing with creating, leading, and transformingbusiness enterprises.

Bruner is the author of more than 350 items of teaching materials, mainly Darden casestudies focusing on corporate finance and transformation. He has received numerousawards and recognitions for teaching and case writing, and is an acknowledgedauthority on the case method of instruction. Bruner has been a visiting professor atvarious schools in Europe and Latin America, and served as a consultant to dozens ofglobal organizations. Before joining the Darden faculty in 1982, he was a loan officerand investment analyst for First Chicago Corporation.

9:00 a.m. Session #2: Valuation in Emerging Markets: The Treatment ofClassroom 50 Global Companies

Mehran Nakhjavani, Executive Director and Co-Head of Emerging Markets, UBS

Global Asset Management

Mr. Nakhjavani is responsible for emerging markets strategic research, including themonitoring and forecasting of currency and interest rate trends. He is a member of theEmerging Markets Equity Strategy Committee. Prior to joining the firm in 1998, Mr.Nakhjavani launched an independent research service that provided strategic invest-ment forecasts covering equities, bonds and currencies in emerging capital markets.He also developed quantitatively-driven asset allocation models based on proprietaryindicators in both equity and fixed-income sectors. From 1980 to 1991, Mr.Nakhjavani tracked Middle Eastern banking and financial developments for variousresearch organizations from the U.K., Canada, Japan, Cyprus and the Persian Gulfstates. He has published research on the region’s oil producers, in particular theirpublic finance and political economy, as well as on Arab and Islamic banking prac-tices. From 1978 to 1980, Mr. Nakhjavani worked in the U.K. as a trade specialist onnewly-industrialized Asian economies and was involved in trade negotiations whichallowed consumer electronics exporters in these countries access to EU markets. Hisacademic thesis work was on Latin American development finance, primarily inMexico and Peru.

Conference ScheduleTHE BATTEN INSTITUTE Wednesday, May 29, 2002

Valuation in Emerging Markets — Wednesday, May 29, 2002

Mehran Nakhjavani

Robert F. Bruner

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Valuation in Emerging Markets — Wednesday, May 29, 2002

10:00 a.m. Morning Coffee BreakPepsiCo Forum

10:30 a.m. Session #3: Information Environment of Emerging Market FirmsClassroom 50 Moderator: Robert M. Conroy, Professor, The Darden School

Investor Protection and Earnings Management: An International ComparisonPeter Wysocki, Massachusetts Institute of Technology

Peter Wysocki is an Assistant Professor of Accounting at the MIT Sloan School ofManagement. Peter holds an MA in Economics from the University of British Colum-bia and MS and PhD degrees in Business Administration from the University ofRochester. Prior to joining the MIT Sloan School of Management, he served as anAssistant Professor at the University of Michigan Business School. ProfessorWysocki’s research focuses on the links between financial markets, corporate gover-nance, and accounting disclosures of U.S. and international firms. He specializes inempirical work addressing policy-related questions related to international account-ing standards and disclosure practices. His recent work questions the widely-heldbelief that harmonization of accounting standards has led to more comparablefinancial reports around the world. He has also investigated the role of laws andenforcement on accounting manipulations around the world.

AbstractThis paper examines the relation between outside investor protection and earningsmanagement. We argue that insiders, in an attempt to protect their private controlbenefits, use earnings management to mask firm performance from outsiders. Wehypothesize that earnings management decreases in legal protection because stronginvestor protection limits profit diversion by insiders, which reduces their incentive tomask these activities. Using accounting data from 31 countries between 1990 and1999, we present empirical evidence consistent with our hypothesis. The findingssuggest that weak legal protection perpetuates poor-quality financial reporting byinsiders, which further undermines financial market development.

Analysts’ Forecasts in Asian-Pacific Markets: The RelationshipBetweenAccounting Systems and AccuracyErvin L. Black, Brigham Young University

Ervin Black obtained both his BA and MBA from Brigham Young University. Afterworking seven years in private industry as a financial analyst for a start-up companyand as a stockbroker, he attended the University of Washington where he received hisPhD in 1995. He has served on the faculty at the Universities of Washington,Wyoming, Arkansas, and moved to Brigham Young University in 2000. ProfessorBlack’s research is primarily in the financial accounting and international accountingarea, with emphasis on examining firm financial characteristics in different settings.He has published articles in The Journal of the American Taxation Association, TheJournal of Business Finance and Accounting, Review of Quantitative Finance andAccounting, European Accounting Review, Asian-Pacific Journal of Accounting andEconomics, Corporate Reputation Review, Business Process Management Journal,and The Journal of Financial Statement Analysis. His article on the usefulness ofearnings and cash flows across life cycle stages in the Journal of AccountingAbstracts –Working Paper Series is in the all-time top-ten downloads list. He

Peter Wysocki

Ervin L. Black

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Valuation in Emerging Markets — Wednesday, May 29, 2002

currently teaches graduate courses in international accounting, accounting research,and financial statement analysis with an emphasis on emerging markets.

AbstractIn this study, we examine the determinants of accuracy of analysts’ forecasts in thelarger economies of the Asian-Pacific region. Examination of the accuracy of analysts’earnings forecasts allows us to judge how accounting systems and culturaldistinctions in this region affect earnings predictability. Since many investors rely onanalysts’ earnings forecasts instead of producing their own, the growth ofinternational investment means forecasts in non-U.S. markets will becomeincreasingly important to investors worldwide. Using a sample of firms with dataavailable on Global Vantage and I/B/E/S International, we find that the analysts onaverage have an optimistic bias. We examine whether macroeconomic factorsexplain part of the difference in the size of analyst forecast errors, employing theglobal competitiveness rankings of the World Economic Forum. We find that analystforecasts are more accurate in those nations with higher overall competitivenessrankings. We also find that four of the eight factors of competitiveness included inthe index are related to the size of forecast errors. In addition, we test for differencesin forecast errors across countries and across portfolios of countries based onRadebaugh and Gray (1997). We find evidence that British-influenced basedaccounting countries have smaller forecast errors. We also find evidence that firmswith a larger difference between market value of equity and book value of equityhave a larger optimistic bias in the analyst forecast.

ADRs, Analysts and Accuracy: Does Cross Listing in the US Improve aFirms Information Environment and Increase Market Value?Darius Miller, Indiana University

Darius Miller is an Assistant Professor at the Kelley School of Business at IndianaUniversity. He holds a BS in Electrical Engineering from Tulane University, an MBAfrom Loyola University, and a PhD in Finance from the University of California,Irvine. His research focuses on the effects of international security offerings oninvestors and corporations. Professor Miller’s research has been published in journalssuch as the Journal of Financial Economics and the Journal of Financial andQuantitative Analysis. He has taught courses in international finance, investments,and financial engineering at the undergraduate, MBA, executive MBA and PhDlevel. He also has developed finance courses for international professional programs.

AbstractThis paper investigates the relation between cross listing in the U.S., with its resultingcommitment to increased disclosure, and the information environment of non-U.S.firms. We find that firms that cross-list on U.S. exchanges have greater analystcoverage and increased forecast accuracy relative to firms that are not cross listed. Atime-series analysis shows that the change in analyst coverage and forecast accuracyoccurs around cross listing. We also document that firms that have more analystcoverage and higher forecast accuracy have higher valuations. Further, the change infirm value around cross listing is correlated with changes in analyst following andforecast accuracy suggesting that cross listing enhances firm value through its effecton the firm’s information environment. Our findings support the hypothesis thatcross-listed firms have better information environments, which are associated withhigher market valuations.

Darius Miller

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Measuring Transparency and Disclosure at Firm-level in Emerging MarketsSandeep A. Patel and Liliane K. Bwakira, Standard & Poor’s

Sandeep A. Patel is a Managing Director of Global Index Analysis at Standard &Poor’s, where he has a leading role in the overall management of Standard & Poor’sequity indexes covering securities outside the U.S. In this position, he is responsiblefor constructing and maintaining S&P’s international indices, providing analysis andanalytics around index products. Sandeep’s team is also responsible for the globalimplementation of Global Industry Classification Standard. Sandeep joined Standard& Poor’s in February 2000. Prior to joining Standard & Poor’s, he worked with TudorInvestment Management, and with J. P. Morgan Investment Management. Sandeephas over ten years’ experience in research and management of equity and fixedincome portfolios. He has published in the Journal of Finance, FinancialAnalysts Journal, Emerging Markets Quarterly and Journal of Investing. Sandeep isan Adjunct Associate Professor at the Stern School of Business, New York University.Sandeep holds a PhD in Finance from The Wharton School, an MBA from the IndianInstitute of Management in Ahmedabad, India, and a BA from the Maharaja SayajiraoUniversity of Baroda in Vadodara, India.

Liliane K. Bwakira is an Index Manager in Portfolio Services at Standard & Poor’s whereshe analyzes global index performance and specializes in corporate governance research.In this position, she is instrumental in implementing and providing analysis oftransparency & disclosure rankings initiated on S&P index constituents. She is activelyinvolved in quality control and project monitoring. She also writes emerging marketreviews and analyzes index performance published by Standard & Poor’s. Liliane isresponsible for collecting stock exchange surveys and delivering market data publishedin the Emerging Stock Markets Factbook. Liliane joined Standard & Poor’s in November2000. Prior to joining Standard & Poor’s, she pursued her graduate studies at ColumbiaUniversity. She previously worked at the United Nations Development Program asAssociate Economist and was a Teaching Assistant at Michigan Technological University.Liliane holds an MIA in International Finance and Business from Columbia University,an MS in Mineral Economics from Michigan Technological University, and a degreefrom the University of Burundi.

AbstractTransparency and disclosure are integral to corporate governance. In this paper, weuse a new dataset to analyze Transparency & Disclosure scores (T&D score) in 19emerging markets for 354 firms representing 70% of S&P/IFCI index marketcapitalization over the three years ending in 2000. We analyze differences acrosscountries, economic sectors and trend over the three years. We find that the Asianemerging markets and South Africa have significantly higher transparency anddisclosure compared to the Latin American, Eastern European, and Middle Easternemerging markets. The gap between the Asian emerging markets and South Africaover other emerging markets has increased over the last three years. We do not findany significant differences in T&D scores among economic sectors. Changes in theT&D scores over the last three years, however, differ by economic sectors for the sixmarkets with the largest investable market capitalization and/or number ofobservations, viz. Brazil, Poland, South Africa, India, Thailand, and Korea. We thenstudy the relationships between T&D scores and cross-holdings for the six emergingmarkets. For the six markets except Korea, correlation between cross-holdings andT&D scores is negative. For the six markets except South Africa, correlation betweenprice-to-book ratios and T&D scores is positive. We conclude with a discussion onfurther research.

Valuation in Emerging Markets — Wednesday, May 29, 2002

Sandeep Patel

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Noon LunchDarden Center

1:00 p.m. Session #4: Determining the International Cost of CapitalClassroom 50

Marc Zenner, PhD, CFA, Salomon Smith Barney/CitigroupMarc Zenner is a Director in the Investment Banking Division at Salomon Smith Barney/Citigroup where he is involved with valuation, credit rating, and capital structureissues related to M&A or financing transactions. He is primarily dedicated to thepower, energy and consumer sectors. From 1989 to 2000, Marc was a Professor ofFinance at The University of North Carolina at Chapel Hill. He was the Chairman ofthe Finance Area from 1998 to 2000. Marc is born in Brussels and earned a BScdegree in Commercial Engineering at the K.ULeuven in Belgium, an MBA at the CityUniversity in London, and a PhD in Finance at Purdue University. He taught corporatefinance, international finance, risk management and investments, is a CharteredFinancial Analyst, and won various MBA, PhD and University-wide Teaching Awards.Marc has published articles on corporate finance and M&A in The Journal of FinancialEconomics, The Journal of Finance, The Review of Financial Studies, The Journal ofFinancial and Quantitative Analysis, The Journal of Corporate Finance, FinancialManagement, The Columbia Journal of World Business, The Wake Forest Law Review,and Finanzmarkt und Portfolio Management. He also served as an Associate Editorfor Financial Management over 1997-1999.

2:00 p.m. Afternoon BreakClassroom 50

2:30 p.m. Session #5: Corruption and ControlClassroom 50 Moderator: Wei Li, Professor, The Darden School

Commentator: George Triantis, Professor, University of Virginia School of Law

Corporate Governance, Investor Protection and Performance in Emerging MarketsLeora Klapper and Inessa Love, The World BankLeora Klapper is an Economist in the Finance Team of the Development ResearchGroup at the World Bank. Her recent research has focused on corporate governance,financial distress, corporate risk management, and foreign bank entry. Prior to comingto the Bank in 1998, she worked at the Board of Governors of the Federal ReserveSystem, the Bank of Israel, and Salomon Smith Barney. She holds a PhD in FinancialEconomics from New York University Stern School of Business.

Inessa Love is an Economist in the Finance Team of the Development ResearchGroup at the World Bank, Washington, DC. She holds an MA in Financial Economicsfrom the American University and a PhD in Finance and Economics from the Colum-bia University Graduate School of Business. Her prior work experience includespositions at DRI/McGraw-Hill and the Urban Institute.

AbstractRecent research studying the link between law and finance has concentrated oncountry-level investor protection measures and focused on differences in legal

Valuation in Emerging Markets — Wednesday, May 29, 2002

Leora Klapper

Marc Zenner

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systems across countries and legal families. Our paper extends this literature andprovides a study of firm-level corporate governance practices across emerging marketsand a greater understanding of the environments under which corporate governancematters more. Our empirical tests show that better corporate governance is highlycorrelated with better operating performance and market valuation. More importantly,we provide evidence showing that firm-level corporate governance provisions mattermore in countries with weak legal environments. These results suggest that well-governed firms benefit more in bad corporate governance environments and that firmscan partially compensate for ineffective laws and enforcement by establishing goodcorporate governance and providing credible investor protection. Our tests also showthat firm-level governance and performance is lower in countries with weak legalenvironments, suggesting that improving the legal system should remain a priority forpolicymakers.

Private Benefits of Control: An International ComparisonAlexander Dyck, Harvard Business SchoolAlexander Dyck is an Associate Professor in the business, government andinternational economy area of the Harvard Business School. Dyck teaches a first-yearMBA course on Business, Government and the International Economy and a second-year MBA course on Managing Regulation, Deregulation and Privatization. Hisresearch focuses on the dynamics of the interaction between private enterprise andthe state. He approaches this issue by investigating how privatization affectsmanagement practices and economic systems. He has written academic articles andcase studies on privatization and economic reform in the United Kingdom, Russia,eastern Germany, the Philippines, and the United States. He is currently completing alarge empirical evaluation of the impact of privatization and economic liberalizationon control and incentive systems in the United Kingdom. Dyck earned his PhD inEconomics from Stanford University in 1993 where he was the recipient of aResearch Council of Canada scholarship and a Bradley fellowship. He received anhonors BA and the Gold Medal in economics and political science from theUniversity of Western Ontario, Canada in 1988. He also studied at St. AndrewsUniversity in Scotland from 1986-1987 where he was presented the Nisbet awardin Economics. Dyck’s research has been presented at a number of North Americanand European Universities including Stanford, Berkeley, MIT, UCLA and Harvard.Dyck worked as a research associate at the German Institute for Economic Research,Berlin (1992) and at the C.D. Howe Institute, Toronto (1989).

AbstractWe construct a measure of the private benefits of control in 39 countries based on412 control transactions between 1990 and 2000. We find that the value of controlranges between -4% and +65%, with an average of 14 percent. As predicted bytheory, in countries where private benefits of control are larger capital markets areless developed, ownership is more concentrated, and privatizations are less likely totake place as public offerings. We also analyze what institutions are most important incurbing these private benefits. A high degree of statutory protection of minorityshareholders and high degree of law enforcement are associated with lower levels ofprivate benefits of control, but so are a high level of diffusion of the press, a high rateof tax compliance, and a high degree of product market competition. A crude R-squared test suggests that the “non traditional” mechanisms have at least as muchexplanatory power as the legal ones commonly mentioned in the literature. In fact, ina multivariate analysis newspapers™ circulation and tax compliance seem to be thedominating factors. We advance an explanation why this might be the case.

Valuation in Emerging Markets — Wednesday, May 29, 2002

Inessa Love

Alexander Dyck

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Valuation in Emerging Markets — Wednesday, May 29, 2002

Corruption and International Valuation: Does Virtue Pay?David Ng, Cornell UniversityProfessor David Ng is an Assistant Professor of Finance in Cornell University’sDepartment of Applied Economics and Management. His research area is empiricalinternational finance. He studies how exchange rate risk and country risk affectasset returns. Recently he has focused on the impact of corruption on stockvaluations and bond spreads. He received his PhD, with distinction, fromColumbia University in 2000. While attending graduate school, he held visitingpositions at the International Monetary Fund, the Federal Reserve Board and theWorld Bank.

AbstractUsing firm-level data from 46 countries, we investigate the relation between corrup-tion – the misuse of public office for private gains – and international corporatevalues. Our analysis shows that firms from more (less) corrupt countries trade atsignificantly lower (higher) market multiples. This result is robust to the inclusion ofmany control variables suggested by valuation theory. On average, an increase in thecorruption level from that of Singapore to that of Mexico corresponds to a decrease of18.1 in the PE ratio, and a decrease of 1.17 in the PB ratio. We conclude thatcorruption has significant economic consequences for shareholder value.

4:00 p.m. Afternoon BreakClassroom 50

5:00 p.m. Session #6: The Challenges of Emerging Markets: Governance,Classroom 50 Transparency and the Rule of Law (pre-taped videoconference)

Mark Mobius, PhD, Managing Director, Templeton Asset ManagementMark Mobius joined the Templeton organization in 1987 as president of TempletonEmerging Markets Fund Inc. in Hong Kong. He currently directs the analysts based inTempleton’s eleven emerging markets offices and manages the emerging marketsportfolios. Dr. Mobius has spent over thirty years working in Asia and other parts ofthe emerging markets world. As a result of his experience, in 1999 Dr. Mobius wasappointed joint chairman of the World Bank and Organization for Economic Coopera-tion and Development (OECD) Global Corporate Governance Forum’s Investor Re-sponsibility Taskforce.

In 2001, Dr. Mobius was awarded “Emerging Markets Equity Manager of the Year2001” by International Money Marketing in the United Kingdom. In 1999, Dr.Mobius was named one of the “Ten Top Money Managers of the 20th Century” in asurvey by the Carson Group, a leading global capital markets intelligence consultingfirm. In the 1998 Reuters Survey, Dr. Mobius was named the number one globalemerging market fund manager. CNBC named him “1994 First in Business MoneyManager of the Year.”

Prior to joining Templeton, from 1983 to 1986 Dr. Mobius was President ofInternational Investment Trust Company Ltd.—Taiwan’s first and largest investmentmanagement firm. Prior to this position, he served as a director at Vickers da Costa,an international securities firm. Before joining Vickers, Dr. Mobius operated his ownconsulting firm in Hong Kong for ten years and was a research scientist for Monsanto

Mark Mobius

David Ng

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Valuation in Emerging Markets — Wednesday, May 29, 2002

Overseas Enterprises Company in Hong Kong and the American Institute for Researchin Korea and Thailand.

Dr. Mobius holds Bachelors and Masters degrees from Boston University, andearned a PhD in Economics and Political Science from the Massachusetts Institute ofTechnology. Dr. Mobius has studied at the University of Wisconsin, University of NewMexico, and Kyoto University in Japan.

Dr. Mobius is author of the books The Investor’s Guide to Emerging Markets, Mobiuson Emerging Markets, and Passport to Profits.

6:00 p.m. Cocktail ReceptionDarden Center

6:45 p.m. DinnerDarden Center

7:30 p.m. Session #7: Argentina’s Crisis: Causes, Cures and ConsequencesDarden CenterAuditorium Foyer

Kristin J. Forbes, Assistant Professor, Sloan School of Management, andFormer Deputy Assistant Secretary, U.S. Department of the TreasuryForbes was formerly the Deputy Assistant Secretary of Quantitative Policy Analysis,Latin America and the Caribbean at the U.S. Treasury Department. While with theU.S. Treasury, she was on leave from the Massachusetts Institute of Technology’sSloan School of Management, where she is the Mitsubishi Associate Professor ofInternational Management.

Forbes research focuses on empirical work addressing policy-related questions ininternational finance, trade, and development economics. Her recent work examineshow companies located around the globe have been affected by the financial crises ofthe 1990’s. Largely as a result of this research, she won the Milken Award forDistinguished Economic Research in 2000. Forbes has also written extensively onstock market contagion and recently co-edited the book International FinancialContagion. Forbes’ other line of research explores the relationship between incomeinequality and economic growth.

Forbes is currently a faculty research fellow at the National Bureau of EconomicResearch. She was awarded Sloan School of Management’s “Teacher of the Year”award in 2001. She has recently been a visiting scholar at the Federal ReserveBoard and Indian Council of Research on International Economic Relations (ICRIER).Prior to joining MIT, Forbes worked in the investment banking division at MorganStanley and in the policy research department at the World Bank.

Forbes received her PhD in Economics at MIT in 1998, where she won the SolowPrize for excellence in teaching and research. She obtained her BA, summa cumlaude with highest honors from Williams College in 1992.

8:30 p.m. Cash BarSponsors Pub

Kristin J. Forbes

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7:00 a.m. BreakfastDarden Center

8:30 a.m. Session #8: Comments on Emerging Markets ValuationClassroom 50

Michael A. Duffy, PhD, CFA, Managing Director, Emerging Markets ManagementMichael A. Duffy, PhD, CFA, is Secretary/Treasurer and a Managing Director of Emerg-ing Markets Management, LLC. He is responsible for the development of the Firm’sproprietary country allocation model and shares responsibility for country allocationwith Mr. van Agtmael. Mr. Duffy is also a Managing Director of the companies whichmake up Strategic Investment Group (SIG). Prior to the formation of SIG, Mr. Duffy wasa Senior Pension Investment Officer for the World Bank and, prior to that, an economistwith the Federal Reserve Board in Washington, D.C. Mr. Duffy holds a PhD and anMA in Economics from the University of Chicago, and a BA from the University ofMichigan. He is a Chartered Financial Analyst.

9:30 a.m. Morning Coffee BreakPepsiCo Forum

10:00 a.m. Session #9: Portfolio: Country Allocations within Emerging MarketsClassroom 50 Moderator: Mark Kritzman, Windham Capital Management Boston

The Asset Allocation of Emerging Market Mutual FundsR. Gaston Gelos, International Monetary Fund

Mr. Gelos is an economist with the Research Department of the International MonetaryFund, where he works mostly on capital flows to emerging markets as well as on finan-cial sector issues in developing countries. He received his Ph.D. in Economics from YaleUniversity in 1998 after completing his Master’s degree at the University of Bonn(Germany) in 1994 and spending a year as a graduate exchange student at the Univer-sity of California at Berkeley in 1991-92. Mr. Gelos has published in many profes-sional journals and contributed to the IMF’s International Capital Markets Report. Priorto his doctoral studies, he worked as an aide to the German Deputy Foreign Minister.Among other things, Mr. Gelos has also been a consultant for the World Bank and aVisiting Scholar at Banco de México.

AbstractBenchmark following and portfolio rebalancing effects have often been cited whentrying to explain international financial contagion phenomena. Using a dataset contain-ing the country allocation of individual dedicated emerging market equity funds, weassess the relevance of mean-variance optimization and benchmark following, findingstrong evidence for both. We also present a framework to systematically extract usefulinformation about market expectations from funds’ holdings.

Conference ScheduleTHE BATTEN INSTITUTE Thursday, May 30, 2002

Valuation in Emerging Markets — Thursday, May 30, 2002

R. Gaston Gelos

Michael A. Duffy

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Valuation in Emerging Markets — Thursday, May 30, 2002

Investors, Fund Managers, and Trend Following in Emerging MarketsJessica D. Tjornhom, State Street AssociatesJessica D. Tjornhom is a Senior Associate at State Street Associates LLC, a partnership of industry and academia dedicated to delivering preeminent investment management research to institutional investors worldwide. Dr. Tjornhom received herPhD in Economics from the University of Minnesota in 2001. She also holds anM.A. in Economics and a BA in International Relations from the University ofMinnesota as well as an MS in Agricultural Economics from Virginia Tech. Herprevious academic research is in the areas of international trade and economicgrowth. Her current research focuses on international portfolio flows and the behaviorof institutional investors.

AbstractIt is well known that flows into and out of country funds display trend-followingbehavior: inflows tend to be stronger subsequent to positive returns. These fund flowsmay be driven by reallocations by investment managers based on past returns.However, they may also be driven by investors who reallocate toward funds that haveperformed well and away from funds that haveperformed poorly. This paper attemptsto distinguish between these two explanations. Specifically, for a broad sample ofinternational and emerging market funds, we compare fund inflows with same-fundreallocations. We first measure investor flows into and out of funds and provideevidence of strong trend following. We then examine how fund managers alter theirportfolios in response to these aggregate fund flows. Do they tend to buy securitiesthat have risen in price and sell those that have fallen to the same degree as aggregatefund flows? Do they do the opposite, buying securities whose price has fallen andselling those that have risen? Our approach to detecting differences in the behavior ofinvestors versus fund managers is new. Previous literature has used only time seriesevidence in finding that investors buy from institutions subsequent to transitory priceincreases.

The Growth of Global Equity Markets: A Closer LookKai Li, University of British Columbia

Kai Li is Assistant Professor of Finance at the Faculty of Commerce, University ofBritish Columbia since 1996. She received her BS in International Business fromJiaotong University in China, MA in Economics from Concordia University, and PhDin Economics from the University of Toronto. Dr. Li’s research and teaching focuses oninternational financial markets, valuation, dual trading in futures markets, conditionalevent studies, Bayesian econometrics, and health economics. Her research hasappeared in Journal of Financial Economics, Journal of Empirical Finance, Journal ofEconometrics, Journal of Business and Economic Statistics, Journal of AppliedEconometrics, Current Issues in Economics and Finance, Economics Letters, andResearch in Official Statistics. At UBC, Dr. Li has taught business finance, financialmarkets and institutions, and empirical methods in finance at the undergraduatelevel, empirical methods in finance at the MBA level, and empirical corporate financeat the PhD level. Currently, Dr. Li holds a three-year grant from the Social Sciencesand Humanities Research Council of Canada to examine home biases in internationalinvesting and diversification benefits.

AbstractThis paper examines both the time series and cross-country patterns in thedevelopment of stock markets around the world. It adopts a flexible modeling

Jessica Tjornhom

Kai Li

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Valuation in Emerging Markets — Thursday, May 30, 2002

framework that allows for the breakdown of changes in equity market capitalizationinto changes in macroeconomic and financial fundamentals, shifts in valuationtechnology and market sentiment, and improvement in valuation eciency. Usingpanel data on 32 countries, I show that for developed countries, the size of theirequity markets is positively related to the correlation of these markets with the globalportfolio, and is negatively related to government consumption. For developingcountries, the level of financial intermediary development and openness to trade arefound to be conducive to the development of local equity markets. For given levels ofmarket fundamentals, developed countries with greater economic freedom andstronger shareholder protections are associated with more highly valued equitymarkets, while the French or German civil law countries and countries with insidertrading legislation tend to have relatively poorly valued equity markets. Fordeveloping countries, ceteris paribus, high quality of accounting standards is found tobe associated with higher valuation of their equity markets. I find that only equities inemerging markets become more highly valued, indicating an improvement invaluation eciency over time. Australia, Canada, the United States, Hong Kong, andSingapore have the most highly valued equity markets in the developed world, whileMalaysia has the mostly highly valued equity market in the developing world. Itappears that favorable shifts in valuation technology and market sentiment contributethe lion’s share of the growth of global equity markets.

11:30 a.m. Morning BreakClassroom 50

11:45 a.m. Session #10: Keynote AddressClassroom 50

Campbell R. Harvey, PhD, J. Paul Sticht Professor of International Business,Fuqua School of Business, Duke UniversityProfessor Harvey obtained his doctorate at the University of Chicago in BusinessFinance. His undergraduate studies in Economics were conducted at the Universityof Toronto. He has served on the faculties of the Stockholm School of Economics,the Helsinki School of Economics, and the Graduate School of Business at theUniversity of Chicago. He has also been a visiting scholar at the Board ofGovernors of the Federal System. He was recently awarded an honorary doctoratefrom Svenska Handelshögskolan in Helsinki.

Harvey is an internationally recognized expert in portfolio management and globalrisk management. His work in the implications of changing risk and the dynamics ofrisk premiums for tactical asset allocation has been published in top academic andpractitioner journals. He has published over 100 scholarly articles and books. Hiswork is frequently presented in international conferences and is often featured in thebusiness press.

In addition, Professor Harvey has wide-ranging practical experience. He serves as aconsultant to some of the world’s leading asset management and consulting firms.Harvey specializes in construction of global equity and fixed income allocation modelsas well as providing estimates of the international cost of capital.

Harvey is Editor of the Review of Financial Studies, one of the leading publications infinance. In addition, he is an associate editor of the Journal of Financial Economics,the Journal of Empirical Finance, the Journal of Fixed Income, the Pacific Basin

Campbell Harvey

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Finance Journal, the Journal of Banking and Finance, the Journal of InternationalFinancial Institutions, Markets and Money, European Financial Management, theInternational Review of Economics and Finance, and the European Journal of Finance. He is also Co-Editor of the Emerging Markets Review.

Harvey received the 1993-94 Batterymarch Fellowship. This annual award is givento the person that is most likely to establish a new area of research in finance. Harveyhas been awarded four Graham and Dodd Scrolls for excellence in financial writingfrom the Association for Investment Management and Research. The AmericanFinance Association awarded Harvey a Smith-Breeden prize for his publication “TheWorld Price of Covariance Risk” and he has received the American Association ofIndividual Investors’ Best Paper in Investments Award for “Predictable Risk andReturns in Emerging Markets.” His paper on the “Dynamics of Capital Flows”recently received the New York Stock Exchange’s Best Paper in Equities Award in2000. Harvey is past winner of the Outstanding Faculty Award at the Fuqua Schoolof Business, an annual award given by the students.

1:00 p.m. LunchDarden Center

2:00 p.m. Session #11: Cost of Capital I: Risk and ValuationClassroom 50 Moderator: Robert F. Bruner, Distinguished Professor and Executive

Director, The Batten InstituteCommentator: Benjamin Esty, Professor, Harvard Business School

Systematic Risk in Emerging Markets: The D-CAPMJavier Estrada, IESE Business SchoolJavier Estrada is an Associate Professor at the IESE Business School in Barcelona,Spain, and Editor-in-Chief of the Emerging Markets Review. He holds an MS degreein Finance and a PhD in Economics, both from the University of Illinois at Urbana-Champaign. His most recent publications are: “The Temporal Dimension of Risk,”Quarterly Review of Economics and Finance, 40 (Summer 2000), 189-204;“The Cost of Equity in Emerging Markets: A Downside Risk Approach,” EmergingMarkets Quarterly, Fall 2000, 19-30; “Empirical Distributions of Stock Returns:European Securities Markets, 1990-95,” European Journal of Finance, 7 (2001), 1-21 (with Felipe Aparicio); “The Cost of Equity in Emerging Markets: A DownsideRisk Approach (II),” Emerging Markets Quarterly, Spring 2001, 63-72; and“Empirical Evidence on the Impact of European Insider Trading Regulations,” Studiesin Economics and Finance, Spring 2002, 16-38 (with Ignacio Peña).

AbstractThere is by now a growing literature arguing against the use of the CAPM to estimaterequired returns on equity in emerging markets. One of the characteristics of thismodel is that it measures risk by beta, which follows from an equilibrium in whichinvestors display mean-variance behavior. In that framework, risk is assessed by thevariance of returns, a questionable and restrictive measure of risk. The semivarianceof returns is a more plausible measure of risk and can be used to generate analternative behavioral hypothesis (mean-semivariance behavior), an alternativemeasure of risk for diversified investors (the downside beta), and an alternativepricing model (the D-CAPM). The empirical evidence discussed below for the entireMSCI database of emerging markets clearly supports the downside beta and the D-

Valuation in Emerging Markets — Thursday, May 30, 2002

Javier Estrada

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CAPM over beta and the CAPM.

Cross-Border ValuationBernard Dumas, INSEAD and Gordon Bodnar, Johns Hopkins UniversityBernard Dumas is Rothschild Chaired Professor of Banking and Professor of Finance atINSEAD, which he joined in September 1999. Prior to joining INSEAD, he was aprofessor at HEC and The Wharton School of the University of Pennsylvania. ProfessorDumas specializes in International Finance and Finance Theory in Continuous Time.He is Associate Editor of various academic journals. He is a former co-editor of TheReview of Financial Studies. Professor Dumas’ research has been published inprestigious journals. Professor Dumas has been a Member of the Board of the AmericanFinance Association, is a Research Associate of NBER and a Research Fellow of CEPR.Professor Dumas received his Master of Science and PhD from Columbia University,New York in Economics.

Gordon Bodnar joined the International Economic Department at SAIS as a Professorin 1999. In 2001, he was named the Morris W. Offit Professor of InternationalFinance. Before joining SAIS, he held appointments at The Wharton School of theUniversity of Pennsylvania and the Simon Graduate School of Business at theUniversity of Rochester. He has also been a visiting professor at Frankfurt Universityin Germany. He received his PhD in Economics from Princeton University in 1991.His research focuses on the areas of international finance and corporate finance. Specific topics include corporate exchange rate exposure, foreign exchange riskmanagement, the valuation of multinational operations, and financial disclosures.Gordon’s research has been published in top academic journals in finance,economics and accounting as well as practitioner journals. Presently, he is aresearch associate of the Weiss Center for International Finance and the FinancialInstitutions Center at the Wharton School, and has held appointments as a researchfellow at the National Bureau of Economic Research and as a visiting scholar at theInternational Monetary Fund. He is currently an associate editor for EuropeanFinancial Management, the Journal of Asian Economics, the Journal of InternationalFinancial Markets and Accounting, and the Journal of International FinancialMarkets, Institutions & Money.

AbstractTraditionally, the valuation of corporations, for purposes of financial investment or forpurposes of acquisitions, and the valuation of physical investment projects entail twocomponents: the estimation of anticipated free cash flows and the discounting atsome appropriate discount rate. Most importantly, of course, the two componentsmust be associated in a such a away that the type of cash flow being considered andthe way in which they are discounted mesh with each other. In this context, thequestion will arise of estimating a firm’s or a project’s cost of equity financing on theinternational market. A similar estimation is needed for the purpose of incorporatingthe cost of equity in the accounting calculation of profits, as is done in the calculationof the Economic Value Added of a firm or project. Domestic Finance teaches us thatthe classic Capital Asset Pricing Model (CAPM) allows a systematic comparison ofthe costs of equity of various traded securities. The classic CAPM recognizes but onesource of risk and one risk premium to be charged on a share of stock; namely, thesystematic risk or risk of covariation of the stock with the market, captured by theequity’s â . 2 In the international setting, the matter is more complicated becausethere may be more dimensions of risk for which the financial market requires apremium. The focal point of the discussion is then the method by which the variousdimensions of risk are incorporated in the cost of equity that we seek.

Valuation in Emerging Markets — Thursday, May 30, 2002

Bernard Dumas

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A Long-Term Perspective on Short-Term Risk: Long-Term Discount Rates forEmerging MarketsKent Hargis, Goldman SachsKent Hargis, Vice President, joined Goldman Sachs in May 1998. He is the ChiefLatin America Strategist and Global Emerging Markets Strategist. Prior to joiningGoldman Sachs, Kent was professor of international finance at the Darla Moore Schoolof Business at the University of South Carolina where he taught PhD andinternational MBA classes on investment strategies in emerging markets. He alsopublished extensively in academic and practitioner journals on issues such as theliberalization of emerging stock markets, global investing and capital flows intoemerging markets. Kent received his PhD in Economics and International Financefrom the University of Illinois in 1995.

AbstractWe develop a model of discount rate determination and provide estimates for 23emerging markets over the last 25 years. Our model highlights the importance ofglobal monetary conditions, global risk aversion and commodity prices indetermining emerging market discount rates, complementing domestic cash flow,balance sheet and wealth indicators. Our analysis helps bridge the gap between theassessment of near-term market risk typically emphasized by portfolio managers andlonger-term risk trends more often looked at by direct investors in plant andequipment. By allowing the decomposition of discount rates into bond and stockmarket variables, and estimation of their fundamental determinants, our formulationpermits us to simulate emerging market risk sensitivity to changes in these underlyingdomestic and global fundamental variables. Our methodology permits the calculationof discount rates for any country, any time, with or without a local bond or stockmarket. The basic requirements are a limited set of domestic and global financial andeconomic indicators.

3:30 p.m. Afternoon BreakClassroom 50

4:00 p.m. Session #12: Cost of Capital II: Cross Section of ReturnsClassroom 50 Moderator: Robert F. Bruner, Distinguished Professor and Executive

Director, The Batten Institute

Best Company Valuation Practices in Argentina: What are the Issues forPractitioners?Luis Pereiro, Universidad Torcualo di TellaLuis Pereiro is Dean of the Business School and Director of the Center for Entrepreneurship and Business Venturing at Universidad Torcuato Di Tella in Buenos Aires,Argentina. He is the local liaison of the Entrepreneurship Division-The Academy ofManagement, and has been a visiting professor at HEC-School of Management inParis. He has pioneered entrepreneurship training in Argentina, and constructed abody of empirical research at the junction of entrepreneurship and finance in LatinAmerica: globalization of new ventures; the profile of Argentine entrepreneurs; astudy of private equity funds and angel investors in Argentina; and a fundamentals-based valuation model for pricing company acquisitions in emerging markets. Wiley& Sons will publish his book on valuing companies in emerging economies in 2002.

Valuation in Emerging Markets — Thursday, May 30, 2002

Luis Pereiro

Kent Hargis

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Valuation in Emerging Markets — Thursday, May 30, 2002

AbstractM&A activity has greatly increased in Latin America in the recent past. We know,however, very little about how do real managers and analysts appraise the economicvalue of acquisitions and investment projects in the region. In this paper, we reporton the best practices employed by finance managers, venture capitalists and financialadvisors in Argentina, the third largest economy in the region. We compare local bestpractices with those used in the U.S., and unveil the most controversial areas incompany valuation when dealing with emerging markets. The reported results maycontribute to enlarge our repository of data on corporate valuation and improve themanagement of knowledge in financial practice.

The Cross Sectional Determinants of Returns: Evidence from EmergingMarkets’ StocksAna Paula Serra, Faculdad de Economia do PortoAna Paula Serra is an Assistant Professor at the Faculdade de Economia daUniversidade do Porto where she teaches undergraduate and graduate courses incorporate finance, international finance and investments. She holds a PhD inFinance from London Business School. Her research concentrates on internationalasset pricing and capital markets, emerging markets and privatisation. Previously, sheworked for four years at the leading Portuguese investment bank, as a researchanalyst and asset manager.

AbstractThis paper looks at the cross-section of stock returns for the particular case ofemerging markets. For each of 21 emerging markets I investigate the role of a set of apriori specified factors in the cross-section of returns, and subsequently assesswhether the important factors are common. I use new data on emerging markets’individual stocks from the Emerging Markets Data Base. My results indicate that themost important pricing factors are common to the emerging markets in my sample,and that these important factors are similar to those identified for mature markets.Among the top six factors are technical factors and stock price level attributes. Thepayoffs to these factors are not correlated suggesting that even if investors acrossmarkets elect similar factors to price assets, those factors’ risk premia are local.

Emerging Market Bond Spreads and Sovereign Credit Ratings: ReconcilingMarket Views with Economic FundamentalsAmadou Sy, International Monetary FundAmadou Sy is an economist in the International Capital Markets Department at theIMF where he works mainly on emerging markets. He is a CFA charter holder andobtained his doctorate in finance at McGill University in Canada where he alsotaught finance as a faculty lecturer. His dissertation on debt covenants was selectedfor the 1996 FMA Doctoral Dissertation Consortium. Amadou has co-authored theIMF’s International Capital Markets Report since 1998 and has published in the RIE,the IMF WP series and the Blackwell Encyclopedic Dictionary of Finance. He is amember of AIMR, WSIA, FMA, and AFA.

AbstractThis paper uses a panel data estimation of a simple univariate model of sovereignspreads on ratings to analyze statistcally significant differences between actualspreads and ratings-based spreads. When such deviations are significant, we find

Ana Paula Serra

Amadou Sy

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that “excessively high” spreads are on average followed by episodes of spreadtightening one month later rather than credit downgrades. In contrast, observationswith “excessively low” spreads are on average followed by rating upgrades threemonths later rather than episodes of spread widening. The paper also illustrates howsignificant disagreements between market and rating agencies’ views can be used asa signal that further technical and sovereign analysis is warranted. For instance, wefind that spreads were “excessively low” for most emerging markets before the Asiancrisis. More recently, spreads were “excessively high” for a number of emergingmarkets.

6:00 p.m. Cocktail ReceptionDarden Center

6:30 p.m. DinnerDarden Center

7:30 p.m. Session #13: Issues in Emerging Markets BenchmarkDarden Center Construction: Theory and PracticeAuditorium Foyer

George R. Hoguet, CFA, Head, Active Emerging Markets, Global Active Equity,State Street Global AdvisorsGeorge is Head of the Active Emerging Markets Equity Team at State Street GlobalAdvisors. He has held positions in corporate finance at Bankers Trust Company, andin consulting at the Frank Russell Company. From 1981-1985 he served as U.S.Alternate Executive Director to the World Bank and, subsequently, as PrincipalDeputy Assistant Secretary of the Treasury for International Affairs.

He holds a BA from Harvard College and an MBA from Harvard Business School. Heis past President of the Boston Economic Club, and is a member of the Council onForeign Relations and the Visiting Committee of the Weatherhead Center forInternational Affairs at Harvard. He also sits on the Advisory Board of the Middle EastInstitute, Washington, DC.

8:30 p.m. Cash BarSponsors Pub

George Hoguet

Valuation in Emerging Markets — Thursday, May 30, 2002

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7:00 a.m. BreakfastDarden Center

8:30 a.m. Session #14: Historical Perspectives of Manias and Panics inClassroom 50 Emerging Markets (live via satellite)

Marc Faber, PhD, Managing Director, Marc Faber Limited

Dr. Marc Faber was born in Zurich, Switzerland. He went to school in Geneva andZurich and finished high school with the Matura. He studied Economics at theUniversity of Zurich and, at the age of 24, obtained a PhD in Economics magna cumlaude.

Between 1970 and 1978, Dr. Faber worked for White Weld & Company Limited inNew York, Zurich and Hong Kong. Since 1973, he has lived in Hong Kong. From1978 to February 1990, he was the Managing Director of Drexel Burnham Lambert(HK) Ltd.

In June 1990, he set up his own business, Marc Faber Limited, which acts as aninvestment advisor, fund manager and broker/dealer. Dr Faber publishes a widely readmonthly investment newsletter The Gloom Boom & Doom report which highlightsunusual investment opportunities, and is the author of the book The Great Money Illusion- The Confusion of the Confusions which was on the best-seller list for several weeks in1988 and has been translated into Chinese and Japanese. A book on Dr. Faber, RidingThe Milennial Storm, by Nury Vittachi, was published in 1998. In addition, Dr. Faberis also a regular contributor to several leading financial publications around the world.

A regular speaker at various investment seminars, Dr. Faber is well known for his“contrarian” investment approach. He is also associated with a variety of funds includingthe Iconoclastic International Fund, The Baring Chrysalis Fund, The Overlook Partners’Fund, The Income Partners Global Strategy Fund, The India Capital Fund, The MatterhornIndia Fund, The Magna Europa Fund plc, The China Mantou Fund, Sofaer Capital Inc,Peach Office Products and Ivanhoe Mines Limited.

9:30 a.m. Morning Coffee BreakPepsiCo Forum

Conference ScheduleTHE BATTEN INSTITUTE Friday, May 31, 2002

Valuation in Emerging Markets — Friday, May 31, 2002

Marc Faber

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10:30 a.m. Session #15: Inflation and Devaluation Effects in EmergingClassroom 50 Markets

Moderator: Javier Estrada, Professor, IESE Business School

Devaluation and Emerging Stock ReturnsJack Glen, International Finance CorporationJack is Lead Economist in the Corporate Portfolio Management department at theInternational Finance Corporation. Prior to joining IFC, he was Assistant Professor ofFinance at the University of Pennsylvania. He has a PhD in Finance from Northwest-ern University and has been involved in research related to emerging financialmarkets and corporate finance topics for the last 11 years.

AbstractStock returns over the two years surrounding 24 currency devaluations are examined.Using bootstrapped distributions, returns preceding the devaluation are shown to besignificantly below normal, in both dollar and local currency terms. Most of thedownturn, however, occurs well before the month of the devaluation. Returns following a devaluation are more normal. While industry and company specific effectsappear to influence return behavior, only country effects and leverage levels arestatistically significant. At the country level, both aggregate economic activity (GDP)and the size of the devaluation are important in explaining return behavior. The stockof foreign debt has little impact on returns. Finally, even though returns appear toanticipate devaluations, they are not statistically significant at predicting the size ofthe devaluation.

Valuation in an Inflationary EnvironmentIgnacio Vélez-Pareja, Politécnico Grancolombiano andJoseph Tham, Independent ConsultantMr. Vélez-Pareja holds an M. Sc. in Industrial Engineering University of Missouri and inIndustrial Engineer from Universidad de los Andes in Bogotá, Colómbia. He is currentlyFinance Professor and Dean for the School of Industrial Engineering at PolitécnicoGrancolombiano. Vélez-Pareja is also a consultant who has written several publicationsincluding a two books titled Decisiones de inversión and Enfocado a la valoración deempresas. He is currently working with Joseph Tham to write a book on Cash FlowValuation. In addition to books, Vélez-Pareja has penned several articles including oneon Replacement models and another on Investment decision making practices inColombia” for Interfaces as well as an article on the Colombian Stock Market at LatinAmerican Business Review. He has written papers for the Social Science ResearchNetwork and a manuscript for a book on Decision investment under uncertainty.

Currently, Dr. Joseph Tham is a private international consultant specializing intraining and research in project appraisal. From 1996-2001, he was a lecturer at theFulbright Economics Teaching Program in Ho Chi Minh City, Vietnam, a trainingprogram managed by Harvard University. In this capacity, he served as a ProjectAssociate at Harvard’s John F. Kennedy School of Government (2000-2001) and aDistinguished Fulbright Scholar (1998-2000). Earlier, he spent a year in Jakarta,Indonesia, analyzing educational finance for the Asian Development Bank. Dr. Tham’sprimary areas of interest include financial analysis, cost of capital, risk modeling, andinvestment appraisal.

Valuation in Emerging Markets — Friday, May 31, 2002

Ignacio Vélez-Pareja

Joseph Tham

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Valuation in Emerging Markets — Friday, May 31, 2002

AbstractUsing illustrative examples, this paper shows that the Net Present Value for projectevaluation should be based on estimates of free cash flows at nominal prices. It is awidespread practice to evaluate projects at constant or real prices. These days, theuse of constant or real prices is an unnecessary oversimplification. In particular, wepresent an example where the results from the constant and real price methodologiesare biased upwards and there is a risk that in practice, bad projects will be acceptedas goodprojects.

Corporate Dollar Debt and Devaluations: Much Ado About Nothing?Hoyt Bleakley, MITHoyt Bleakley is a recent PhD from the Massachusetts Institute of Technology and avisiting scholar at the Federal Reserve Bank of Boston. In recent years he has studiedthe impact of partial dollarization on emerging markets and the macroeconomicaspects of labor-market search, among other topics. For the academic year 2002-3,he will be an investigator at the Population Research Center at the University ofChicago and a visiting assistant professor at the Universitat Pompeu Fabra.

AbstractMuch has been written recently about the problems for emerging markets that mightresult from a mismatch between foreign-currency denominated liabilities and assets(or income flows) denominated in local currency. In particualr, several models,developed in the aftermath of financial crises of the late 1990’s, suggest that theexpansion in the “peso” value of “dollar” liabilities resulting from a devaluationcould, via a net-worth effect, offset the expansionary competitiveness effect.Assessing which effect dominates, however, is ultimately an empirical matter. In thisvein, we construct a new database with accounting information (including thecurrency composition of liabilities) for over 500 non-financial firms in five LatinAmerican countries. We estimate, at the firm level, the reduced-form effect ofinvestment of holding foreign-currency-denominated debt during an exchange-raterealignment. We consistently find that this effect is positive, contrary to the predictedsign of the net-worth effect. Additionally, we show that the estimated coefficient canbe decomposed into competitiveness and net-worth effects, and we provide directevidence that the competitiveness effect dominates the net-worth effect. Finally, wediscuss aggregate implications of our empirical results. Within our sample of LatinAmerican corporations, the average effect of a devaluation was on net positive, andthe contribution of the net-worth effect was likely small.

11:30 a.m. Morning Coffee BreakPepsiCo Forum

Noon Session #16: Closing ReflectionsClassroom 50

Valuation in Emerging Markets: What We Know and Don’t KnowVihang Errunza, Bank of Motreal Chair in Finance and Banking, Faculty ofManagement, McGill UniversityVihang Errunza holds the Bank of Montreal Chair in Finance and Banking at McGillUniversity, Montreal, Canada. He earned his PhD in international finance from theUniversity of California at Berkeley in 1974. He taught at INCAE, a Harvard initiatedgraduate school of business in Central America from 1974 to 1976 and has been on

Hoyt Bleakley

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Valuation in Emerging Markets — Friday, May 31, 2002

the Faculty at McGill University since 1976. Dr. Errunza’s principal areas of academic and consulting activities include international asset pricing, emerging markets,portfolio management, international corporate finance and risk management. Heserves on numerous editorial boards of academic journals and has written extensivelyon international capital markets. He has served as an advisor to international institutions such as the World Bank and UNCTAD and major fund managers such as theTempleton Investment Counsel Inc., Rosenberg-Alpha Inc. and UBS Brinson PartnersInc.

Closing Remarks

Robert F. Bruner, Professor and Executive Director of the Batten Institute, TheDarden School

Robert M. Conroy, Professor, The Darden School

Javier Estrada, Professor, IESE Business School

Mark Kritzman, Windham Capital Management Boston and Research Foundation ofthe Association for Investment Management and Research

Wei Li, Professor, The Darden School

Katrina Sherrerd, Vice President, Research Foundation of the Association forInvestment Management and Research

1:00 p.m. Boxed LunchClassroom 50

2:00 p.m. Optional Conference Activities: Afternoon Golf or MonticelloClassroom 50

Vihang Errunza

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Emerging Markets Conference Programs

2003

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7:00 a.m. BreakfastAbbott Center

8:00 a.m. WelcomeClassroom 120 Robert S. Harris, Dean, Charles C. Abbott and C. Stewart Sheppard Profes-

sor of Business Administration, The Darden School, University of Virginia

Robert S. Harris is Dean at The Darden School. He teaches in the Finance area.Harris’ research has concentrated on corporate finance, financial markets andmergers and acquisitions. He has authored financial textbooks, journal articles,computer tutorials and dozens of business cases and teaching notes. Harris hasalso served as a consultant to corporations and government agencies.

Before being named Dean in 2001, Harris held a dual appointment as C. StewartSheppard Professor of Business Administration at Darden and Vice President andChief Learning Officer of United Technologies Corporation. Prior to joining theDarden faculty in 1988, Harris was on the faculties of the University of NorthCarolina’s Kenan-Flagler School and the University of Pennsylvania’s WhartonSchool, and was visting faculty at London Business School. He received teachinghonors at UNC and the Wachovia Award for Research Excellence at Darden.Harris earned his B.A. (summa cum laude) from Davidson College and his Ph.D.in Economics from Princeton University.

Conference IntroductionRobert F. Bruner, Executive Director, The Batten Institute and DistinguishedProfessor of Business Administration, The Darden School, University ofVirginia

Distinguished Professor of Business Administration Robert F. Bruner is a specialiston emerging markets investing, mergers and acquisitions, and corporate finance.He is also the Executive Director of the Batten Institute, a foundation within TheDarden School that invests in applied research and knowledge transfer programs inthe areas of innovation, entrepreneurship, and corporate transformation.

Bruner is the author of twelve books and more than 400 items of teaching materialfocusing on corporate finance. He has received numerous awards and recognitionsfor teaching and case writing. Investing in Emerging Markets, a monograph byBruner, Conroy, Li, O’Halloran, and Palacios, will be published soon. Bruner hasbeen a visiting professor at various schools in Europe and Latin America, andserved as a consultant to global organizations.

Before joining the Darden faculty in 1982, he was a loan officer and investmentanalyst for First Chicago Corporation.

Conference ScheduleThursday, May 29, 2003

Robert S. Harris

Robert F. Bruner

Investing in Emerging Markets — Thursday, May 29, 2003

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Investing in Emerging Markets — Thursday, May 29, 2003

8:15 a.m. Session #1: Agency Cost of Overvalued EquityClassroom 120 Michael C. Jensen, Jesse Isidor Straus Professor of Business, Emeritus,

Harvard Business School; Managing Director of the Organizational StrategyPractice, Monitor Group; and Batten Fellow

Michael Jensen, Jesse Isidor Straus Professor of Business Administration,Emeritus, at the Harvard Business School, joined the faculty there in 1985. In1999 he became Managing Director of Monitor Company’s organizationalstrategy practice. He was LaClare Professor of Finance and BusinessAdministration at the William E. Simon Graduate School of BusinessAdministration, University of Rochester, from 1984 to 1988.

Jensen is the author of numerous scientific papers, articles, and editorials on awide range of economic, finance, and business topics. He is the author ofFoundations of Organizational Strategy (Harvard University Press, 1998) andTheory of the Firm: Governance, Residual Claims, and Organizational Forms(Harvard University Press, 2000). In 1973 he founded the Journal of FinancialEconomics and served as managing editor from 1987 to 1997. In 1993 hecofounded the Social Science Research Network (SSRN) and currently servesas chairman.

In 1996 Jensen was elected to the American Academy of Arts and Sciences, andhe has received many awards throughout his career. In 1990, he was namedScholar of the Year by the Eastern Finance Association and one of the Year’s 25Most Fascinating Business People by Fortune magazine. He received the 1989McKinsey Award from the Harvard Business Review for his article “Eclipse of thePublic Corporation.”

Jensen earned an A.B. from Macalester College. His M.B.A. in Finance and hisPh.D. in Economics, Finance, and Accounting are from the University ofChicago. He has been awarded honorary degrees by Universite Catholique deLouvain in Belgium, the University of Bern in Switzerland, and the University ofRochester’s William E. Simon Graduate School of Business Administration.

9:45 a.m. Refreshment Break

10:00 a.m. Session #2: Protection of ShareholdersClassroom 120 Moderator: Robert M. Conroy, Professor of Business Administration,

The Darden School, University of Virginia

When Do Foreign Banks Finance Domestic Investment? NewEvidence on the Importance of Legal and Financial SystemsBenjamin Esty, Associate Professor, Harvard Business School

Benjamin Esty is an associate professor at Harvard Business School where heteaches courses on corporate and project finance. He has written more than 65case studies, technical notes, and teaching notes on project finance, emergingmarket investments, and valuation techniques. The cases on project finance arecontained in a book entitled: Modern Project Finance: A Casebook (Wiley,forthcoming 2003). In addition, he has publish numerous articles in both finance

Michael C. Jensen

Benjamin Esty

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Investing in Emerging Markets — Thursday, May 29, 2003

and practitioner journals, and has served as a consultant to investment banks,consulting firms, government agencies, and Fortune 500 firm on a broad range ofinvestment, financing, and valuation issues.

Do Analysts Matter Most When Investors are Protected Least?International EvidenceKarl Lins, Assistant Professor of Finance, David Eccles School ofBusiness, University of Utah

Karl Lins’ research agenda focuses on international corporate finance, capitalmarkets, and corporate governance. Lins has published papers in the Journalof Finance, Journal of Financial and Quantitative Analysis, Journal of AccountingResearch, and Financial Management. He has presented research papers atAFA, WFA, EFA, and NBER conferences as well as specialized InternationalFinance conferences. Lins holds a B.S. in Petroleum Engineering from TexasA&M University, an M.B.A. from the Anderson School at UCLA, and a Ph.D. inFinance from the University of North Carolina at Chapel Hill. His work experienceincludes an engineering position with Conoco Inc. and corporate finance,financial analyst, and international sales positions with Boise Cascade Corp.Lins’ teaching interests are in the area of corporate finance and internationalfinance.

Protection of Minority Shareholder Interests, Cross-Listings in theUnited States, and Subsequent Equity OfferingsMichael S. Weisbach, Golder Chair in Finance, University of Illinois

Michael S. Weisbach is a distinguished scholar in corporate finance. His earlywork focused on corporate governance and control. His “Outside Directors andCEO Turnover” is one of the most cited papers of its era, with over 300 citationsin academic journals. More recently, Weisbach’s research has addressedissues concerning corporate financial policy: his work applying quantitativemethods to capital structure choices won the prestigious Jensen Prize, and hisresearch on the motivations for stock repurchase programs led him to advise theSEC concerning the these programs’ regulations. Weisbach’s research hasbeen funded by the NSF, and has been cited numerous times in the businesspress, including by The New York Times, The Economist, The Wall StreetJournal, Forbes, and Barrons.

Weisbach has been a member of the Finance faculty since 1999. He received aB.S. in Mathematics from the University of Michigan and a Ph.D. in Economicsfrom MIT. Active in the academic Finance profession, Weisbach is on theeditorial boards of Journal of Financial Economics, Financial Management, andJournal of Corporate Finance, and is a Research Associate of the NationalBureau of Economic Research.

Noon LunchAbbott Center

Karl Lins

Michael S. Weisbach

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Investing in Emerging Markets — Thursday, May 29, 2003

1:15 p.m. Session #3: CalPERS Emerging Market ProcessClassroom 120 Mark J.P. Anson, Chief Investment Officer, California Public Employees’

Retirement System (CalPERS)

Mark Anson is the Chief Investment Officer for the California Public Employees’Retirement System (CalPERS) which has over $140 billion in assets. He hasresponsibility for all asset classes in which CalPERS invests, including domesticand international equity and fixed income, real estate, corporate governance,currency overlay, private equity, and hedge funds.

Anson earned his law degree from the Northwestern University School of Law inChicago where he was the Production Editor of the Law Review, and his Ph.D.and Masters in Finance from the Columbia University Graduate School ofBusiness in New York where he graduated Beta Gamma Sigma.

Anson is a member of the New York and Illinois State Bar Associations. He hasalso earned the Chartered Financial Analyst, Certified Public Accountant,Certified Management Accountant and Certified Internal Auditor degrees. Inaddition, Anson has received the Series 3, 4, 7, 8, 24, and 63 NASD securitiesindustry licenses. He is the author of three books on the financial markets andhas published over 50 articles on the topics of hedge funds, private equity, riskmanagement, derivatives, and portfolio management.

2:00 p.m. Refreshment Break

2:15 p.m. Session #4: Corporate Control and OrganizationClassroom 120 Moderator: Kenneth M. Eades, Professor of Business Administration,

The Darden School, University of Virginia

Market Discipline and Corporate GovernanceAmit Bhartia, Portfolio Manager, Emerging Equity, Grantham, Mayo, VanOtterloo & Co. LLC.

Amit Bhartia is engaged in portfolio management for the GMO Emerging MarketsFund. Prior to joining GMO in 1995, he worked as an investment advisor in India.Bhartia earned a Bachelor of Engineering at the University of Bombay and anM.B.A. at the Institute for Technology and Management in Bombay. He is aChartered Financial Analyst.

Emerging Giants: Building World-Class Companies from EmergingMarketsTarun Khanna, Professor, Harvard Business School

Tarun Khanna is Professor and Novartis Fellow at the Harvard BusinessSchool, where he has been a member of the Strategy group since 1993. Heholds a Bachelor of Science in Engineering degree, summa cum laude, Phi BetaKappa, from Princeton University, and a Ph.D. in Business Economics fromHarvard University. He has served as course head for the required Strategycourse in the MBA program, and teaches in HBS executive education programsworldwide.

Amit Bhartia

Tarun Khanna

Mark J.P. Anson

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Investing in Emerging Markets — Thursday, May 29, 2003

Sonia Wong

Khanna’s current research focuses on understanding how company strategyshould be tailored to suit country context. He is particularly interested instudying the drivers of entrepreneurship in emerging markets. This research hasbeen conducted in several emerging economies in South and East Asia and LatinAmerica, including Argentina, Chile, Hong Kong, India, Indonesia, Malaysia,Mexico, South Africa, and South Korea. His other main interest is work on theappropriate structuring and use of alliances, joint ventures, and networkedorganizational forms. His work has been published extensively in academicjournals, including the Journal of Finance, Academy of Management Journal,Harvard Business Review, and Sloan Management Review.

Khanna is a co-editor of the Journal of Economics and Management Strategy,and the Journal of International Business Studies. His first book, Foundationsof Neural Networks (Addison-Wesley Press, 1989), has been translated intoItalian and Japanese, and is widely used as a reference text in engineering andapplied science departments.

Shareholding Structure, De-Politicization, and EnterprisePerformance: Lessons from China’s Listed CompaniesSonia Wong, Research Assistant Professor, School of Business, Universityof Hong Kong

Wong earned her Ph.D. from the University of Hong Kong in 1999. She thenserved as a research assistant professor at the University’s business school.Her research area is on the reforms in China’s financial sector. During the pasttwo years, she has devoted herself to the investigation of the relationshipbetween political control of firm’s decision marking and firm performance inChina. She has published papers on China’s foreign exchange and bankingreforms

4:15 p.m. Refreshment Break

4:30 p.m. Session #5: Global Corporate Governance Reform:Classroom 120 Challenges and Opportunities

Peter C. Clapman, Senior Vice President and Chief Counsel, CorporateGovernance, TIAA-CREF

Peter C. Clapman is Senior Vice President and Chief Counsel, Corporate Gover-nance. He formerly was Chief Counsel for TIAA-CREF Investments for 28 yearswhere he managed the legal services in support of TIAA-CREF domestic andinternational investments. Clapman manages the domestic and global corporategovernance program; in this capacity, he has developed TIAA-CREF governancepolicies and strategies on such issues as board and committee composition andeffectiveness, anti-takeover measures, executive compensation, and globalinitiatives. Clapman also serves as a spokesman in many domestic and interna-tional forums regarding the role and responsibility of institutional investors.

A graduate of Princeton University, Clapman earned his J.D. degree fromHarvard Law School. He is a member of the Association of the Bar of the City ofNew York, where he serves on the Committee on Mergers, Acquisitions andCorporate Control Contests and the Committee on Securities Regulation; the

Peter C. Clapman

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Investing in Emerging Markets — Thursday, May 29, 2003

American Bar Association. He was elected a member of the American LawInstitute (ALI) in 1993.

Clapman is active in many organizations specializing in corporate governance inU.S. and globally. He is the immediate past Chairman of the InternationalCorporate Governance Network (ICGN) for the years 1999-2002. Clapmanserved as the ICGN representative on the Task Force of the Office of EconomicCooperation and Development (OECD) that drafted global principles of corporategovernance. He also co-chairs the Investor Responsibility Task Force,established by the World Bank Global Corporate Governance Forum. Clapmanis a Board Member of the Investor Responsibility Research Center (IRRC). He isa member of the Advisory Board of the Global Corporate Governance ResearchCenter of the Conference Board.

Clapman is a frequent panelist on programs involving corporate governanceissues and international and domestic investment activities. He serves on thefaculty of the Stanford Law School “Directors’ College.” He authored the article,“The SEC Market 2000 Report: A Sensible Approach to Future MarketRegulation,” University of Iowa Journal of Corporation Law (Spring 1994), co-authored “The Role of Independent Directors in Corporate Governance,”published in the Notre Dame Lawyer, and authored “Fiduciary Responsibilities ofInvestment Managers on Proxy Issues.” He is on the Editorial Board of theCorporate Governance Advisor and has written articles appearing inDirectorship, Directors Monthly, Top Pay Monitor, and other publications.

5:45 p.m. Cocktail ReceptionAbbott Center

6:45 p.m. DinnerAbbott Center

9:00 p.m. Cash BarSponsors Pub

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Conference ScheduleFriday, May 30, 2003

Investing in Emerging Markets — Friday, May 30, 2003

7:00 a.m. BreakfastAbbott Center

8:15 a.m. Session #6: Opportunities and Risks of Investing in RussiaClassroom 120 Sergei Ambartsumov, Portfolio Manager / Head Trader, Hermitage Capital

Management

Ambartsumov is Portfolio Manager/Head Trader at Hermitage Capital Management.He is responsible for trading, investment, and portfolio analysis. Prior to joiningHermitage, he was a senior equity research analyst with Alfa-Bank in 1998-1999,one of the leading investment banks in Russia, and managed a proprietary tradingdesk (both equities and fixed income) at Bank of Investments from 1994-1997.Ambartsumov received his M.B.A. from INSEAD and M.Sc. in Accounting andFinance from the London School of Economics.

9:00 a.m. Refreshment Break

9:15 a.m. Session #7: Capital Market Efficiency, Hedging, andClassroom 120 Portfolio Management

Moderator: Javier Estrada, Professor, IESE Business School

Corporate Governance and the Hedging Premium around the WorldYiorgos (George) Allayannis, Associate Professor of BusinessAdministration, Darden Graduate School of Business Administration,University of Virginia

Allayannis teaches in the Finance area at Darden. His research focuses oninvestment, financing constraints, and the use of derivatives. He has examined theimpact of exchange-rate movements on firms’ values and the effect of currencyderivatives in potentially mitigating a firm’s exchange rate risk and in increasingvalue. Before joining the Darden faculty in 1996, Allayannis taught at New YorkUniversity’s Stern School of Business, where he received both research andteaching awards.

Portfolio Preferences of Foreign Institutional InvestorsLeora Klapper, Senior Financial Economist, The World Bank

Leora Klapper is a Senior Economist in the Finance Team of the DevelopmentResearch Group at the World Bank. Since joining the Bank in 1998 as a YoungEconomist, her research and operational work has focused on SMEs, corporatefinance, and risk management. Prior to coming to the Bank she worked at theBoard of Governors of the Federal Reserve System, the Bank of Israel, and SalomonSmith Barney. Klapper holds a Ph.D. in Financial Economics from New YorkUniversity Stern School of Business.

Yiorgos Allayannis

Leora Klapper

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Investing in Emerging Markets — Friday, May 30, 2003

Randall Morck

Market Efficiency and Asset Pricing Theory: What Moves Prices inEmerging MarketsRandall Morck, Jarislowsky Distinguished Chair in Finance, University ofAlberta School of Business

Randall Morck holds the Stephen Jarislowsky Distinguished Chair in Finance atthe University of Alberta, and is a Research Associate with the National Bureau ofEconomic Research in Cambridge, MA. A summa cum laude Yale graduate witha Harvard Ph.D., he has published over 70 articles on corporate governance andcorporate finance in journals such as the American Economic Review, Journal ofFinance, and Journal of Financial Economics. He has also advised the Canadianand U.S. governments. His work is cited over a thousand times by otherresearchers. Morck has presented guest lectures at Harvard, MIT, New YorkUniversity, University of Western Ontario, Wharton, and Yale. He is a frequentspeaker to academic, business, and government audiences in North America andabroad.

11:15 a.m. Refreshment Break

11:30 a.m. Session #8: Ownership, Theft, and Appropriation ofClassroom 120 Capital Assets

Larry Harris, Chief Economist and Director of the Office of EconomicAnalysis, Securities and Exchange Commission

Larry Harris holds the Fred V. Keenan Chair in Finance at the Marshall School ofBusiness at the University of Southern California. He is currently on assignmentto the U.S. Securities and Exchange Commission where he serves as its ChiefEconomist and Director of the Office of Economic Analysis. He received hisPh.D. in Economics from the University of Chicago in 1982 where he examinedprice-volume relations in futures and securities markets.

Harris is an expert in market microstructure, investment management, andthe uses of transactions data in financial research. He has written extensivelyabout exchange trading rules, volatility, stock index markets, and marketregulation; and he consults to traders, exchanges, investment banks, andregulators. His work is frequently cited and widely appreciated for his clarity ofpresentation. He is the author of TRADING AND EXCHANGES: MarketMicrostructure for Practitioners (Oxford University Press: 2003), a comprehensivelay-level introduction to the economics of market microstructure.

12:15 p.m. Closing RemarksClassroom 120

12:30 p.m. Boxed LunchClassroom 120

Larry Harris

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Emerging Markets Conference Programs

2004

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Emerging Markets: Innovations in Portfolio Management

March 10—12, 2004 Wednesday, March 10, 2004 12:30 p.m. Lunch (optional) Abbott Center Dining Room 1:30 p.m. Welcome Classroom 50 Conference Program Committee 2:00 p.m. Portfolio Stratification in Emerging Markets Classroom 50 Moderator: Jeremy Armitage, Managing Director, State Street Corporation Country Versus Region Effects in International Stock Returns Robin Brooks, Economist, Financial Studies Division, International

Monetary Fund Robin Brooks is an economist in the financial studies division of the research department at the International Monetary Fund (IMF) in Washington, DC, where his research focuses on the growing importance of financial linkages ac ross countries and their implications for risk reduction strategies in portfolio management. Before joining the IMF, he was a research fellow in the Economic Studies Program at the Brookings Institution, where he studied the effects of population aging on financial markets. He received at Ph.D. in economics from Yale University in 1998 and a B.Sc. in monetary economics from the London School of Economics in 1993.

Marco Del Negro, Research, Federal Reserve Bank – Atlanta Marco Del Negro is an economist with the macro group of the research department of the Federal Reserve Bank of Atlanta. Del Negro's research ranges from international macroeconomics and finance, to the use of general equilibrium models in forecasting and policy analysis. He has published his work in the Journal of International Economics, the JMCB, and has articles forthcoming in the International Economic Review and the Journal of Empirical Finance. His research has been quoted and discussed in major magazines and newspapers including The Economist and The Financial Times. Del Negro received his B.A. from Bocconi University in Italy in 1992, and earned his Ph.D. in economics from Yale University in 1998. He was an assistant professor at ITAM, México City, from August 1998 to July 2000.

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The Relative Importance of Country and Industry Factors in Emerging Markets

Robert F. Bruner, Executive Director, Batten Institute, and Distinguished Professor of Business Administration, The Darden School Robert F. Bruner is a leading expert on mergers and acquisitions, corporate finance, and corporate transformation. He is also executive director of the Batten Institute, a foundation within The Darden School that supports research and programs dealing with creating, leading, and transforming business enterprises. Bruner is the author of more than 350 items of teaching materials, mainly Darden case studies focusing on corporate finance and transformation. He has received numerous awards and recognitions for teaching and case writing, and is an acknowledged authority on the case method of instruction. Bruner has been a visiting professor at various schools in Europe and Latin America, and served as a consultant to dozens of global organizations. Before joining the Darden faculty in 1982, he was a loan officer and investment analyst for First Chicago Corporation. His B.A. is from Yale University and his M.B.A. and D.B.A. are from Harvard University

Wei Li, Associate Professor of Business Administration, The Darden School Wei Li teaches business and the political economy in Darden’s M .B.A. program. His research and publications focus on public finance, industrial organization, and international economics; the Chinese economy and economic reform in China; and emerging markets finance. Before coming to Darden in 2000, Li was a research associate at the University of Michigan’s Institute for Social Research and taught at Duke University’s Fuqua School of Business.

Countries Versus Industries in Emerging Markets: A Normative

Portfolio Approach

Sébastien Page, Vice President, State Street Corporation Sébastien Page is vice president at State Street Associates. He joined the company as a research analyst for the development of portfolio tools and investment strategies. Previously, he completed two research internships at the Caisse de Depot et Placement du Quebec on asset allocation. He won the first prize in the Montreal Society of Financial Analyst contest for his research on Value At Risk. He also won honorable mention in the Young Professional of the Year category at the 2002 Quebec Financial Industry Gala. Page is a frequent presenter at various academic and practitioner conferences. He has co-authored the articles Asset Allocation versus Security Selection: Evidence from Global Markets published in the Journal of Asset Management and The Hierarchy of Investment Choice: A Normative Interpretation, published in the Journal of Portfolio Management and winner of the Bernstein Fabozzi/Jacobs Levy Award. He holds an M.Sc. in Finance from Sherbrooke University in Canada and is a C.F.A. charterholder.

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Mark Kritzman, Managing Partner, Windham Capital Management Boston Mark Kritzman is managing partner of Windham Capital Management Boston, a senior partner of State Street Associates, research director of the AIMR Research Foundation, and an adjunct professor at MIT’s Sloan School. He also serves on the boards of the Institute for Quantitative Research in Finance and the International Securities Exchange, and on the editorial boards of Emerging Markets Review, the Financial Analysts Journal, the Journal of Alternative Investments, the Journal of Asset Management, the Journal of Derivatives, and the Journal of Investment Management. Kritzman has written numerous articles for academic and professional journals and is the author of six books including Puzzles of Finance and The Portable Financial Analyst.

Javier Estrada, Associate Professor of Financial Management, IESE Business School Javier Estrada holds a B.A. in economics from the National University of La Plata, and both an M.S. in finance and a Ph.D. in economics from the University of Illinois at Urbana-Champaign. His areas of specialization lie in securities markets, corporate finance, emerging markets, law and economics, and econometrics. Estrada has held positions in both the economics and business departments of the Carlos III University in Madrid. He is also a regular visiting professor at the Torcuato Di Tella University in Buenos Aires and has visited both the Copenhagen Business School and the Swedish School of Economics and Business Administration. His articles have appeared in the Quarterly Review of Economics and Finance, the European Journal of Finance, Economics Letters, the Swiss Review of Business Law, and the Wall Street Journal Europe. He is also the editor-in-chief of the Emerging Markets Review.

The Dynamics of Geographic Versus Sectoral Diversification: A

Causal Explanation

Vihang Errunza, Bank of Montreal Chair in Finance and Banking, McGill University Vihang Errunza holds the Bank of Montreal Chair in Finance and Banking at McGill University in Montreal. He earned his Ph.D. in international finance from the University of California at Berkeley in 1974. He taught at INCAE, a Harvard initiated graduate school of business in Central America from 1974 to 1976 and has been on the faculty at McGill University since 1976. Errunza’s principal areas of academic and consulting activities include international asset pricing, emerging markets, portfolio management, international corporate finance, and risk management. He serves on numerous editorial boards of academic journals and has written extensively on international capital markets. He has served as an advisor to international institutions such as the World Bank and UNCTAD and major fund managers such as the Templeton Investment Counsel Inc., Rosenberg-Alpha Inc. and UBS Brinson Partners Inc.

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5:30 p.m. Reception & Dinner Abbott Center Dining Room 9:00 p.m. Cash Bar Sponsors Pub

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Emerging Markets: Innovations in Portfolio Management

March 10—12, 2004 Thursday, March 11, 2004 7:00 a.m. Breakfast Abbott Center Dining Room 8:00 a.m. Keynote: The Emerging Market Horizon Classroom 50

William N. Goetzmann, Edwin J. Beinecke Professor of Finance and Management Studies, and Director, International Center for Finance, Yale School of Management Emerging market investing is best understood in historical context. Emerging market investing has been the defining feature of the world economy for the past 120 years. Capital flows from the first world to the third world created an unprecedented period of economic development around the globe, but also led to a destructive nationalist and anti-capitalist backlash. The new financial architecture for emerging market investing has the potential for successful development and thus can continue the great economic benefits for finance for developing countries. However, its failure may have great costs. Will Goetzmann has taught Finance at the Yale School of Management since 1994, and has served as the director of Yale’s International Center for Finance since 1999. Goetzmann received both his Bachelor’s degree and Doctorate of Philosophy from Yale University. He has served on the board of directors of The American Finance Association, The European Finance Association, and The American Real Estate and Urban Economics Association. He is past editor of the Real Estate Economics and past associate editor of the Journal of Finance and the Journal of Financial and Quantitative Analysis. He has published more than 40 articles in academic journals over the past 15 years. His work has been featured in leading business periodicals such as the Wall Street Journal, The New York Times, BusinessWeek, The Economist, Forbes, Hedge Fund News and Art and Auction. Goetzmann has served as an expert witness in finance-related litigation ranging from the U.S. states’ tobacco settlement to the matter of the estate of Andy Warhol. He has past experience and current interest in the arts and in arts management. Goetzmann’s current research falls broadly into four categories: equity markets, financial intermediaries, real estate, and the arts.

9:00 a.m. Refreshment Break

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9:30 a.m. Portfolio Choice: Beyond Risk and Return I Classroom 50 Moderator: Yiorgos Allayannis, Associate Professor, The Darden School Location Effects and Portfolio Tilting

Mark Seasholes, Assistant Professor, Haas School of Business, University of California—Berkeley Mark Seasholes is an assistant professor of finance at the Haas School. His research focuses on empirical studies of international asset pricing. His first paper, co-authored with Ken Froot and Paul O'Connell, was about cross-border portfolio flows and is published in the Journal of Financial Economics. A second paper on correlated trading (herding) has been accepted for the Journal of Finance. Seasholes’ current research interests continue to involve international, financial markets. Besides studying equity markets, he has recently completed an empirical study of portfolio tilting (bias). Seasholes studied physics at Wesleyan University. After college, he worked on Wall Street and in the emerging markets of Eastern and Central Europe. He has completed a valuation project in Honduras, helped with the Lloyds of London restructuring, and given a series of lectures in the People's Republic of China.

Investor Protection and Equity Holdings: An Explanation of Two

Puzzles

Mariassunta Giannetti, Assistant Professor of Finance, Stockholm School of Economics Mariassunta Giannetti is an associate professor at the Stockholm School of Economics, and a CEPR research affiliate. She received a Ph.D. from the University of California—Los Angeles in 1999 and completed her undergraduate studies at Bocconi University in Italy. Her research interests include corporate finance and international finance. Currently, her main area of research is on the effects of different institutional arrangements on agency problems, investment, financial stability, firm level, aggregate growth, and portfolio decisions. She has also served as a consultant for the European Commission on issues related to financial integration, corporate financing, and growth. Her articles have been published in the Journal of Financial and Quantitative Analysis, Journal of Money, Credit and Banking, and Journal of Development Economics.

Yrjö Koskinen, Assistant Professor of Finance, Stockholm School of Economics Yrjö Koskinen is an assistant professor of finance at the Stockholm School of Economics in Sweden, where he teaches corporate finance and venture capital financing. He is also a research affiliate with the Centre for Economics Policy Research in London. He holds a Ph.D. in Management (finance) from INSEAD in Fontainebleau, France. His areas of research are financial contracting, corporate governance, venture capital, and international finance. He has published articles in the Journal of Financial Economics and in the Journal of Business. Prior to his academic career, Koskinen worked as a financial journalist in Helsinki and as an economist and a section head at the Bank of Finland.

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11:30 a.m. Lunch Abbott Center Dining Room 1:00 p.m. Classroom 50

Housekeeping and Plumbing: The Investability of Emerging Markets

Sara Zervos, Senior Financial Economist, The World Bank The paper presented in this session looks at the investment allocation process employed by portfolio investors in emerging markets. In particular, this paper examines the first of a two-staged decision process: first, investors create a sub-set of investable countries to be analyzed later in further detail; second, they weigh expected returns versus risk and subsequently allocate their funds. This study hypothesizes that the determination of whether a country is investable or not is influenced by a number of factors especially related to size, quality of "housekeeping" (macro policies, political economy, local financial markets, corporate governance, etc.) and efficiency of the "plumbing" (legal and regulatory framework, custody, clearing and settlement, taxes, etc.). By interviewing many types of these investors in both the USA and London, we delve into the their decision making processes as well as attempt to uncover the factors they indicate matter most in defining the investable universe. We determine the relative importance of such housekeeping and plumbing factors, while highlighting the role of external issues such as index benchmarking and U.S. foreign policy. We recognize from the outset that the most profound effects on investment flows, or the required minimum expected returns, arise from improvements or deteriorations in macro policies. However, at the margin, improvements can be made in country policies which will, for a given macro situation, improve the ability of a country to attract international investment flows. Sara Zervos joined the World Bank as a senior financial economist in June 2002. Her main responsibilities include assisting governments with development of fixed income securities markets, formal assessments of capital markets, and policy issues across all areas of financial development. Formerly, Zervos was head of Emerging Market Strategy (fixed income) at Westdeutsche Landesbank in both New York and London, and earlier was the emerging market strategist for Barclays Capital in London. She was a lecturer (assistant professor) at Brunel University in London, and has written various papers linking financial development to the economy. Zervos holds a Ph.D. and M.A. in economics from the University of Rochester.

1:45 p.m. Refreshment Break

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2:00 p.m. Portfolio Choice: Beyond Risk and Return II Classroom 50 Moderator: Mark Kritzman, Managing Partner, Windham Capital

Management Boston Global Price of Foreign Exchange Risk

Francesca Carrieri, Assistant Professor, Faculty of Management, McGill University Francesca Carrieri holds a Ph.D. in economics from the University of Southern California and a degree in law from the University of Bari in Italy. Carrieri’s research interests include asset pricing, international finance, and financial eonometrics. Her current research focus is on issues such as the role of industries for international diversification in developed markets, financial integration, and currency risk for emerging markets.

Dynamic Investment Strategies With and Without Emerging Equity Markets

Bengt Pramborg, Assistant Professor, Stockholm University School of Business Bengt Pramborg is an assistant professor at Stockholm University School of Business. His previous experience includes positions as financial controller in the oil industry, financial consultant in banking, and senior analyst at the Swedish National Debt Office. He has a Ph.D. in finance and an M.Sc. in mathematical statistics from Stockholm University, as well as an M.B.A. from Yonsei University in Seoul. His area of interest involves issues concerning dynamic portfolio allocations, corporate risk management, and capital budgeting methods.

Does Investor Sophistication Influence Investing Behavior and

Trading Performance? Evidence from China

Kenneth Kim, Assistant Professor of Finance, State University of New York (SUNY) at Buffalo Kenneth A. Kim is a finance professor at the State University of New York (SUNY) at Buffalo. His research interests include behavioral finance and corporate finance, with specific emphasis on emerging markets. His academic papers on emerging markets have appeared in many of the leading finance journals. During 1998 and 1999, Kim worked as a financial economist at the U.S. Securities and Exchange Commission in Washington, DC. Kim regularly serves as a consultant to the Kuala Lumpur Stock Exchange, and he has held a variety of academic posts at institutions from around the world, including Ecuador, Hong Kong, Japan, Korea, and Thailand.

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John Nofsinger, Assistant Professor of Finance, Department of Finance, Insurance, and Real Estate, College of Business and Economics, Washington State University John Nofsinger, finance professor at Washington State University, is author of Investment Madness, The Psychology of Investing, Investment Blunders, and co-author of Corporate Governance, and Infectious Greed. He is frequently quoted in the financial media including the Wall Street Journal, Fortune, BusinessWeek, SmartMoney, Bloomberg, and CNBC, and other media from the Washington Post to Wired.com . Nofsinger has published over 20 articles in scholarly and professional journals in behavioral finance, investments, international finance, and corporate finance topics. This research has won awards at national and international conferences. He is a frequent speaker to academic, corporate, and association audiences worldwide.

4:30 p.m. Refreshment Break 4:45 p.m. Event Risk in Emerging Markets Classroom 50

Hayes Miller, Senior Vice President - Global Equities, Baring Asset Management, Inc. Emerging markets, much more than developed equity or bond markets, are susceptible to event risk, which is notoriously difficult to forecast. The relative importance of events to the markets is determined by the size of the country involved, the nature of the event, and the degree of contagion one might expect from the shock. This presentation focuses on the relative importance of event risk to the historical return profile of emerging equities, and then humbly submits the top ten potential events to watch out for over the next year. Hayes Miller is a member of both the Global Equity Group and the Strategic Policy Group at Baring Asset Management, and is the portfolio manager responsible for North American clients. He has developed quantitative models for Global and EAFE equity products and has been instrumental in creating a successful Active/Passive EAFE Equity product. MIller joined Baring Asset Management in 1994 as a portfolio manager with responsibility for global equities. In 2000 he became a member of the Strategic Policy Group, a five-member team which forms country, sector, asset, and currency strategy for Baring’s global client base. Miller has a B.A. in economics and political science from Vanderbilt University, and received his C.F.A. designation in 1989. He has spoken at numerous conferences, and has written numerous research pieces, including co-authoring a manuscript on the relative importance of country, sector, and company factors for the AIMR Research Foundation.

6:00 p.m. Reception & Dinner Abbott Center Dining Room 9:00 p.m. Cash Bar Sponsors Pub

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Emerging Markets: Innovations in Portfolio Management

March 10—12, 2004 Friday, March 12, 2004 Emerging Markets: Innovations in Portfolio Management 7:00 a.m. Breakfast Abbott Center Dining Room 8:00 a.m. Sources of Return in Global Investing: A Comparative Analysis Classroom 50

Andrew Rudd, Chairman and Co-Founder, Barra We address the perennial question of international investment: what matters the most, country or industry selection? Using superior asset coverage and granularity of Barra Integrated Model we are able to decipher contributions from global factors, such as country and global industry returns, as well as country-specific trends. In particular, we find that the significant and sharp increase in the relative importance of industry selection observed in the end of 90's was closely related to the TMT bubble. While we do observe a much slower drift of relative importance from country to industry they remain compatible in the developed markets. In contrast, in the emerging markets the choice of country is clearly dominant. We also address importance of utilizing country-specific trends that contribute a significant fraction of the total cross-sectional variance of asset returns. Andrew Rudd is chairman of the Board of Directors of Barra, Inc. He has been associated with Barra and its predecessors since its inception in 1975 and became president and chief exec utive officer of Barra in 1984. Between 1977 and 1982, Rudd was a professor of finance and operations research at Cornell University. Rudd gained recognition as the co-author of Modern Portfolio Theory: The Principles of Investment Management (1982) and of Option Pricing (1983). He has written numerous journal articles, monographs, and research papers on a wide range of domestic and international investment practices and theories. Rudd received his B.S. with honors in mathematics and physics from Sussex University in England. He holds an M.Sc. in operations research, an M.B.A. in finance and international business, and a Ph.D. in finance and operations research from the University of California—Berkeley.

8:45 a.m. Refreshment Break

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9:00 a.m. Bond Markets Classroom 50 Moderator: Robert F. Bruner, Executive Director, Batten Institute, and

Distinguished Professor of Business Administration, The Darden School Diversification, Original Sin, and International Bond Portfolios

John Burger, Sellinger School of Business and Management, Loyola College in Maryland John Burger is an assistant professor of economics in Loyola College’s Sellinger School of Business and Management. He earned a B.S. from Wake Forest University (1994) and Ph.D. in economics from the University of North Carolina at Chapel Hill (2000). His research interests include monetary policy, international finance, development economics, and combining two passions in sports economics. Serving as team moderator, Burger is very proud of Loyola’s recent Fed Challenge championship. Outside of academe he has taken his love of teaching to the athletic arena as a little league baseball coach.

Frank Warnock, Economist, Division of International Finance, Board of Governors of the Federal Reserve System and Adjunct Assistant Professor, Walsh School of Foreign Service, Georgetown University Frank Warnock is an economist in the International Finance Division of the Federal Reserve Board and an adjunct assistant professor at Georgetown University's Walsh School of Foreign Service. He received his B.A. from Johns Hopkins University (1989) and his Ph.D. in economics from the University of North Carolina at Chapel Hill (1999). Prior to graduate school, Warnock worked in Malawi, teaching secondary school mathematics and computer programming as a Peace Corps Volunteer, and on Wall Street, where he traded commodity futures. His research is in international finance, primarily the analysis of capital flows, portfolio allocation, and financial liberalization.

Predictability in Emerging Sovereign Debt Markets

Gergana Jostova, Assistant Professor, Department of Finance, George Washington University Gergana Jostova has been an assistant professor at the George Washington University since 2002. She obtained her Ph.D. in finance from Boston College in 2002. She is also a C.F.A. charterholder and has experience working for JPMorgan and DeutscheBank. Her research focuses on asset pricing, studying predictability, and determinants of credit risk changes. The paper she is presenting is forthcoming in the Journal of Business.

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Evaluating Government Bond Fund Performance Using Stochastic Discount Factors

Wayne Ferson, Professor, Boston College Wayne Ferson received his B.S. and M.B.A. degrees from Southern Methodist University and his A.M. and Ph.D from Stanford University. He holds the John L. Collins Chair in Finance at the Carroll School of Management at Boston College. From 1992-2001 he held the Pigott-PACCAR Professorship in Finance at the University of Washington. He has taught at the University of Chicago, the Wharton School at the University of Pennsylvania, and has been a visiting faculty member at the Graduate School of Business at Stanford University, the Institute for Advanced Studies in Vienna, and also at the Universities of Miami, South Carolina and Arizona State. Ferson's research has focused on the empirical analysis of asset pricing models, the predictability of security returns, the relation of security prices to economic variables, estimating the cost of capital, and the evaluation of investment performance. He has published his research in the Journal of Finance, the Journal of Financial Economics, the Journal of Political Economy, the Review of Financial Studies, and others.

11:30 a.m. Refreshment Break 11:45 a.m. Interest Rate Parody in Emerging Markets Classroom 50

Lee Thomas, Managing Director, PIMCO Emerging markets often offer higher short term interest rates than emerged market currencies. This is often attributed to expectations that emerging economies will suffer from higher inflation, and as a consequence emerging market currencies are expected to depreciate secularly. We examine uncovered interest rate parity -- the hypothesis that international interest rate differentials equal expec ted exchange rate changes -- for a sample of emerging market currencies, using monthly data from the 1990's. In general, the results are inconsistent with uncovered parity. These results appear to be economically significant, as well as statistically significant. Lee Thomas is a managing director and senior member of PIMCO’s portfolio management and investment strategy groups. He joined the firm in 1995, previously having been associated with Investcorp, an international investment bank, as a member of the management committee. Prior to that, Thomas was associated with Goldman Sachs, where he was an executive director in the fixed income division of their London office. He has published extensively in the field of international fixed income and foreign exchange management. He has 24 years of investment experience and holds a bachelor’s degree and a Ph.D. in economics from Tulane University.

12:30 p.m. Closing Remarks Classroom 50 1:00 p.m. Boxed Lunch

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Emerging Markets Conference Programs

2005

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Emerging Markets Finance March 9–11, 2005

Thursday, March 10, 2005 7:00 a.m. Breakfast Abbott Center Dining Room 8:00 a.m. Welcome Classroom 50 Robert S. Harris, Dean, The Darden School Are Emerging Markets Cheap?

C. Hayes Miller, Senior Vice President—Global Equities, Baring Asset Management, Inc. Hayes Miller is a member of both the Global Equity Group and the Strategic Policy Group at Baring Asset Management, and is the portfolio manager responsible for North American clients. He has developed quantitative models for Global and EAFE equity products and has been instrumental in creating a successful Active/Passive EAFE Equity product. Miller joined Baring Asset Management in 1994 as a portfolio manager with responsibility for global equities. In 2000 he became a member of the Strategic Policy Group, a five-member team which forms country, sector, asset, and currency strategy for Baring’s global client base. Miller has a B.A. in economics and political science from Vanderbilt University, and received his C.F.A. designation in 1989. He has spoken at numerous conferences, and has written numerous research pieces, including co-authoring a manuscript on the relative importance of country, sector, and company factors for the CFA Institute Research Foundation.

8:45 a.m. Refreshment Break 9:15 a.m. Market Synchronicity Classroom 50

Moderator: Campbell Harvey, Fuqua School of Business, Duke University Campbell Harvey is the J. Paul Sticht Professor of International Business at the Fuqua School of Business, Duke University. He is also a research associate of the National Bureau of Economic Research in Cambridge, Massachusetts. Harvey obtained his doctorate at the University of Chicago in business finance. His undergraduate studies in economics were conducted at the University of Toronto. He has served on the faculties of the Stockholm School of Economics, the Helsinki School of Economics, and the Graduate School of Business at the University of Chicago. He has also been a visiting scholar at the Board of Governors of the Federal Reserve System. He was recently awarded an honorary doctorate from Svenska Handelshögskolan in Helsinki. Harvey is an internationally recognized expert in portfolio management and global risk management.

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Stock Price Synchronicity and Analyst Coverage in Emerging

Markets

Allaudeen Hameed, National University of Singapore Allaudeen Hameed is an associate professor of finance at the Business School of the National University of Singapore (NUS). He is currently the head of department of finance and accounting. Hameed received his Ph.D. in finance from the University of North Carolina at Chapel Hill (UNC). He has taught in the undergraduate and graduate programs at NUS and UNC as well as in executive education programs. His research interests include return-based trading strategies, role of financial analysts, and emerging stock markets. He has published papers in leading finance journals such as The Journal of Finance, The Journal of Financial and Quantitative Analysis, and The Journal of Business. He is an editorial board member of the Pacific-Basin Finance Journal and serves on the executive board of the Asian Finance Association. Abstract: This paper examines the relationship between the stock price synchronicity and analyst activity in emerging markets. Contrary to the conventional wisdom that security analysts specialize in the production of firm-specific information, we find that securities which are covered by more analysts incorporate greater (lesser) market-wide (firm-specific) information. Using the R-square statistics of the market model as a measure of the synchronicity of stock price movements, we find that more analyst coverage leads to an increase in stock price synchronicity. Furthermore, after controlling for the influence of firm size on the lead-lag relation, we find that the returns on a high analyst-following portfolio lead returns on a low analyst-following portfolio more than vice versa. We also find that the aggregate changes in the earnings forecast of the high analyst-following portfolio affect the aggregate returns of the portfolio itself as well as those of the low analyst-following portfolio, whereas the aggregate changes in the earnings forecasts of the low analyst-following portfolio have no predictive ability. Finally, when the forecast dispersion is high, the effect of analyst coverage on stock price synchronicity is reduced.

R-Squared around the World: New Theory and New Tests

Li Jin, Harvard Business School Li Jin is an assistant professor in the finance area at the Harvard Business School. He currently teaches the required finance course in the first year M.B.A. program. His primary research interest is in empirical and theoretical corporate finance and asset pricing. His research studies the efficiency of stock markets in aggregating firm information, the compensation policy of chief executive officers, the trading behavior of institutional investors and their price impacts, and the impact of taxation on investor trading behaviors, asset pricing, and corporate finance. Jin received his Ph.D. in finance from the MIT Sloan School of Management in 2001, and a bachelor's degree in economics from Fudan University in 1992. He has been a full time faculty member at Fudan University, and has worked as a part time consultant in the Investment Banking Division of Shanghai International Securities Co. Ltd.

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Li Jin (continued) Abstract: Morck, Yeung, and Yu (2000) show that R2 and other measures of stock market synchronicity are higher in countries with less developed financial systems and poorer corporate governance. We develop a model that explains these results and generates additional testable hypotheses. The model shows how control rights and information affect the division of risk bearing between inside managers and outside investors. Insiders capture part of the firm’s operating cash flows. The limits to capture are based on outside investors’ perception of the value of the firm. The firm is not completely transparent, however. Lack of transparency shifts firm-specific risk to insiders and reduces the amount of firm-specific risk absorbed by outside investors. Our model also predicts that “opaque” stocks are more likely to crash, that is, to deliver large negative returns. Crashes occur when insiders have to absorb too much firm-specific bad news and decide to give up. We test these predictions using stock returns from 40 stock markets from 1990 to 2001. We find strong positive relations between R2 and several measures of opaqueness. These measures also explain the frequency and magnitude of large negative returns.

11:00 a.m. Market Efficiency Classroom 50

Moderator: Darius Miller, Kelley School of Business, Indiana University Darius Miller is an assistant professor of finance and Daimler-Chrysler Faculty Fellow at the Kelley School of Business, Indiana University. He holds a B.S. in electrical engineering from Tulane University, an M.B.A. from Loyola University, and a Ph.D. in finance from the University of California, Irvine. His research focuses on the effects of international security offerings on investors and corporations. Miller's research has been published in journals such as the Journal of Financial Economics, Journal of Accounting Research, and the Journal of Financial and Quantitative Analysis. He has taught courses in international finance, investments, and financial engineering at the undergraduate, M.B.A., executive M.B.A., and Ph.D. level, and has received the Kelly School M.B.A. teaching excellence award. He also has developed finance courses for international professional programs.

Liquidity and Expected Returns: Lessons from Emerging

Markets

Christian Lundblad, Indiana University Christian Lundblad is an assistant professor of finance at Indiana University's Kelley School of Business. He joined Indiana University in 2001 after serving as a financial economist at the Federal Reserve Board in Washington, D.C., where he advised the Board of Governors on international financial market developments. Lundblad completed his Ph.D. at Duke University. His research focuses on empirical asset pricing issues, with particular attention to the determination of fundamental values, asset volatility and correlation, and cross-sectional variation in risk premia. Recent research in international finance has investigated the relationships between equity market liberalization and economic growth. Abstract: Given the cross-sectional and temporal variation in their liquidity, emerging equity markets provide an ideal setting to examine the

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Christian Lundblad (continued)

impact of liquidity on expected returns. Our measure of liquidity is the proportion of zero daily firm returns, averaged over the month. We find that this liquidity measure significantly predicts future returns, whereas alternative measures such as turnover do not. Consistent with liquidity being a priced factor, unexpected liquidity shocks are positively correlated with return shocks and negatively correlated with shocks to the dividend yield. Equity market liberalization significantly improves the level of liquidity, but has no significant effect on the relationship between liquidity and future returns. We consider a simple asset pricing model with liquidity and the market portfolio as risk factors, differentiating between integrated and segmented countries and periods. Models with local liquidity risks outperform all others models.

Uninformed Trading and Asset Prices

Mark Seasholes, Haas School of Business, University of California—Berkeley Mark Seasholes is an assistant professor of finance at the Haas School. His research focuses on empirical studies of international asset pricing. Seasholes’ current research interests continue to involve international, financial markets. Besides studying equity markets, he has recently completed an empirical study of portfolio tilting (bias). Seasholes studied physics at Wesleyan University. After college, he worked on Wall Street and in the emerging markets of Eastern and Central Europe. He has completed a valuation project in Honduras, helped with the Lloyds of London restructuring, and given a series of lectures in the People's Republic of China. Abstract: This paper examines the relationship between uninformed trading and asset prices. We outline a simple market clearing model in which some traders have demands shocks that are uncorrelated with asset fundamentals. We verify the predictions of the model empirically using an untapped dataset that allows ex ante identification of uninformed demand shocks. Our results show pervasive price pressure at a daily, weekly and monthly frequency. A zero-cost portfolio based on past uninformed trades earns up to 171 bp (before transaction costs) over the subsequent three week period. Returns of this zero-cost portfolio cannot be explained by known sources of systematic risk. Within the same modeling framework, we show that uninformed trading is also related to permanent price differences across stocks. Stocks that are subject to more volatile uninformed trading earn higher average returns. Our results provide insights into the limits of arbitrage and a market’s ability to absorb aggregate demand shocks.

12:30 p.m. Lunch Abbott Center Dining Room

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1:30 p.m. Classroom 50

What Will Make Emerging Markets of the Future so Different from Emerging Markets in the Past

Antoine W. van Agtmael, President and Chief Investment Officer, Emerging Markets Management L.L.C. Antoine van Agtmael is president and chief investment officer of Emerging Markets Management, L.L.C. and Emerging Markets Investors Corporation, and chairman of its Investment Committee. He is also a director of strategic investment partners, Inc., one of the investment advisory firms that forms part of the Strategic Investment GroupSM. Prior to his current position, van Agtmael was deputy director of the Capital Markets department of the International Finance Corporation (IFC), the private sector oriented affiliate of the World Bank. Previously, he was a division chief in the World Bank's treasury operations, managing director of Thai Investment and Securities Ltd. (TISCO), one of Thailand's leading merchant banks, and vice president and international lending officer at Bankers Trust Company. Antoine van Agtmael's involvement with investing in emerging markets started in 1976 when he oversaw TISCO's trading, brokerage, investment management and underwriting activities in Thailand. He is the author of Emerging Securities Markets (Euromoney, 1984), one of the first publications on emerging markets, and co-editor of The World's Emerging Stock Markets (Probus Publishing, 1992). While at IFC, he founded the IFC emerging markets database and was active in the promotion and structuring of a number of emerging market funds. He has an M.B.A. from New York University, an M.A. from Yale University and a B.A. from the Netherlands School of Economics, Erasmus University. He was an adjunct professor at Georgetown University Law Center and taught at Harvard University’s Institute of Politics and Thammasat University, Bangkok. He has been a frequent guest lecturer at a number of universities. Antoine van Agtmael is a director of the Emerging Markets Strategic Fund, the Africa Emerging Markets Fund, and the Emerging Markets New Economy Fund, PLC. He is a member of the Yale University Council, the Yale President’s Council on International Activities, and Johns Hopkins University’s Paul H. Nitze School of Advanced International Studies (SAIS) Advisory Council. He is also a member of the Board of Trustees of the Washington National Opera, where he also co-chairs the Education Committee. He is treasurer and board member of Global Rights and a member of the Board of Trustees of The National Public Radio (NPR) Foundation. He is a board member and the treasurer of the Institute for War and Peace Reporting. Van Agtmael was also recently appointed as a member of the Board of Trustees of The Brookings Institution and is also chair of their International Advisory Council.

2:15 p.m. Refreshment Break

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2:30 p.m. Market Transparency Classroom 50

Moderator: Marc Lang, Kenan-Flagler Business School, University of North Carolina Mark Lang is Thomas W. Hudson, Jr./Deloitte and Touche L.L.P. Distinguished Professor of Accounting. He teaches and conducts research in financial accounting. Lang's research interests include stock market valuation of accounting information; international accounting and analysis; employee stock option valuation, taxation and exercise behavior; causes and effects of voluntary disclosure; and multinational tax strategy. He serves on the International Accounting Standards Board's Share-Based Payment Advisory Group and the American Institute of CPAs Blockage Factor Task Force. He received his Ph.D. and M.B.A. from the University of Chicago and his B.S. from Sioux Falls College.

Disclosure Standards and Market Efficiency: Evidence from

Analysts' Forecasts

Hui Tong, International Finance Division, Bank of England Hui Tong has been in the International finance division of the Bank of England since 2004, after he received his Ph.D. degree in economics from the University of California–Berkeley. His research interests include international finance, trade and market transparency. He has been invited to present at conferences organized by American Finance Association, Econometrics Society, and Royal Economic Society. Abstract: Since the Mexican and Asian crises, there has been a proliferation of international initiatives, including an ambitious standard-setting agenda, to encourage banks, firms and governments to disclose more information about their financial affairs. This paper studies whether and how such transparency standards affect information accuracy and dispersion. I show that the impact of transparency initiatives may be more limited than often thought to the extent that public disclosure crowds out private investments in information. I first develop a theoretical model of the incentive to invest in information and the impact of public disclosure. I then analyze a panel data set of stock market analysts’ forecasts for sixty countries for the period 1990-2002. I find that disclosure standards enhance forecast accuracy directly but at the same time reduce the number of analysts per stock (the variable that serves as my proxy for private investments in information). The net effect of disclosure standards on forecast accuracy and dispersion thus ranges from weak to nonexistent. The implication is that studies that fail to analyze this crowding out effect may exaggerate the impact of disclosure standards on market outcomes.

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Sovereign Credit Ratings, Transparency, and International Portfolio Flows

Amar Gande, Owen Graduate School of Management, Vanderbilt University Amar Gande's research focuses on investment banking, commercial banking, and international finance. His research has been published in top-tier finance journals, such as the Review of Financial Studies, and the Journal of Financial Economics. His paper "Bank Entry, Competition, and the Market for Corporate Securities Underwriting," (co-authored with Manju Puri and Anthony Saunders) won the 1999 Fama-DFA first prize for best paper published in the Journal of Financial Economics in the capital markets and asset-pricing category. More recently, his paper "News Spillovers in the Sovereign Debt Market," (co-authored with David Parsley) published in the 2005 Journal of Financial Economics took the top prize in the FMA competitive best paper award in the fixed income category. Gande is also considered an outstanding teacher, having been honored twice with the James A. Webb Jr. Award for teaching excellence by the graduating M.B.A. classes at Vanderbilt in 2001 and 2003. Abstract: We examine the response of equity mutual fund flows to sovereign rating changes in 85 countries from 1996-2002. We find that the response is asymmetric: Sovereign downgrades are strongly associated with outflows of capital from the downgraded country while improvements in a country’s sovereign rating are not associated with discernable changes in equity flows. Greater transparency moderates the response, i.e., highly transparent countries experience smaller outflows around downgrades. Moreover, flows around downgrades are consistent with a flight to quality phenomenon. That is, highly transparent non-event countries are net recipients of capital inflows, and these inflows increase with the severity of the cumulative downgrade abroad. The results remain after controlling for country size, legal traditions, market liquidity, crisis versus non-crisis periods, and are invariant to different assumptions regarding the within month distribution of equity flows, monthly predicted benchmark flows, and persistence of equity flows. Taken together, the results suggest that improving transparency could mitigate some of the perceived negative effects associated with global capital flows.

Sovereign Credit Rating Changes and the Stock Market

Rodolfo Martell, Purdue University Martell's research and teaching interests are in international finance and risk management. His research focuses on the international aspects of equity and debt origination, corporate finance, investments and derivatives. Martell's research has been published in the American Economic Review. He has also served as ad-hoc referee to the Journal of Empirical Finance, the Journal of Business, and the Pacific Basic Finance Journal. In addition to his doctorate in finance (expected), he holds an undergraduate and a masters degrees in economics. He received the Pacesetter Award for Outstanding Achievement from the Fisher College of Business in 2004. Before Purdue, Martell worked with Petroleos Mexicanos and Bancrecer.

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Rodolfo Martell (continued) Abstract: This paper studies the effect of sovereign credit rating changes issued by Standard and Poor’s and Moody’s on the cross section of domestically traded stocks. We first establish, consistent with earlier literature that analyzed similar phenomena in the U.S. (e.g. Holthausen and Leftwich, 1986; Goh and Ederington, 1993), that local stock markets react only to news of sovereign credit rating downgrades. Cumulative abnormal returns of stock indices also show that investors react only to rating announcements made by Standard & Poor’s. We then study the cross sectional variation of the abnormal returns of individual firms associated with sovereign credit rating changes. We find that larger firms experience larger stock price drops after a sovereign credit downgrade. Also, firms located in more developed emerging countries experience smaller stock price reductions following sovereign credit downgrades. Finally, we document that firms that had access to international capital markets experience larger abnormal returns than firms that do not have access to international financial markets.

4:30 p.m. Refreshment Break 4:45 p.m. Classroom 50

Keynote Address Capital Controls in Emerging Markets: No Free Lunch

Kristin J. Forbes, Member, White House's Council of Economic Advisers and Associate Professor, Sloan School of Management, MIT Kristin Forbes was confirmed by the U.S. Senate on October 17, 2003 as a member of the White House’s Council of Economic Advisers. She is the youngest person to ever hold this position. Forbes is on leave from the MIT’s Sloan School of Management, where she is the Mitsubishi Career Development Chair and Associate Professor of International Management. During 2001-2002, Forbes worked in the U.S. Treasury Department as the deputy assistant secretary of quantitative policy analysis, Latin American and Caribbean nations. In January of 2005 she was honored as a “Young Global Leader” as part of the World Economic Forum at Davos. Forbes’ research addresses policy-related questions in international finance and development economics. Her recent work uses firm-level data to analyze questions such as the impact of capital controls, currency depreciations and financial crises on company behavior and performance. Forbes has also written extensively on stock market contagion and on the relationship between income inequality and economic growth. She was awarded the Milken Award for Distinguished Economic Research in 2000. Forbes is currently a faculty research fellow at the National Bureau of Economic Research and a term member on the Council on Foreign Relations. She was honored as Sloan School of Management's "Teacher of the Year" in 2001. Prior to joining MIT, Forbes worked in the investment banking division at Morgan Stanley and in the policy research department at the World Bank. Forbes received her Ph.D. in Economics at MIT in 1998, where she won the Solow Prize for excellence in teaching and research. She obtained her BA, summa cum laude with highest honors from Williams College in 1992.

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6:15 p.m. Bus Departs from Sponsors Executive Residence Gatehouse 6:30 p.m. Colonnade Club

Reception & Dinner on the University of Virginia’s Historic Central Grounds

9:00 p.m. Pub Open Sponsors Pub

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Emerging Markets Finance March 9–11, 2005

Friday, March 11, 2005 7:00 a.m. Breakfast Abbott Center Dining Room 8:00 a.m. When Should an Emerging Markets Manager Close:

A Framework for Analysis Classroom 50

George Hoguet, Emerging Market Strategist, State Street Global Advisors George Hoguet is a principal and the emerging market investment strategist for SSgA. He has been involved with the firm’s active emerging markets strategy over the past six years. Prior to joining the firm in 1998, Hoguet worked in London and Boston with the chief investment officer of Baring Asset Management. He has also worked at the Frank Russell Company, Tacoma, WA, where he consulted to large institutional investors on a wide range of investment topics. Hoguet spent the first part of his career in emerging market and domestic corporate finance at Bankers Trust Company. From 1981-1985 he served at the U.S. Treasury Department, first as U.S. alternate executive director to the World Bank and, subsequently, as principal deputy assistant secretary of the treasury for international affairs. At the treasury department, he worked on a broad range of international monetary issues. He is a graduate of Harvard College and Harvard Business School. He earned the Chartered Financial Analyst designation and is a qualified Financial Risk Manager, as certified by the Global Association of Risk Professionals. His affiliations/directorships include: former president – Boston Economic Club, executive committee of the Boston Committee on Foreign Relations, visiting committee – Weatherhead Center for International Affairs at Harvard, Council on Foreign Relations, New York, New York and the executive advisory board of the Middle East Institute in Washington. His commentaries have appeared in various media, and he has published in various industry journals.

8:45 a.m. Refreshment Break

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9:00 a.m. Exogenous Shocks Classroom 50

Moderator: Bill Megginson, Michael F. Price College of Business, The University of Oklahoma Bill Megginson is professor and Rainbolt Chair in Finance at the University of Oklahoma. He is also a voting member of the Italian Ministry of Economics and Finance’s Global Advisory Committee on Privatization. He has published refereed articles in several top academic journals, including the Journal of Economic Literature, the Journal of Finance, the Journal of Financial Economics, the Journal of Financial and Quantitative Analysis, and Foreign Policy. Megginson has a Ph.D. in finance from Florida State University. He has visited 57 countries and has served as a privatization consultant for the New York Stock Exchange, the OECD, the IMF, the World Federation of Exchanges and the World Bank.

Migration, Spillovers, and Trade Diversion: The Impact of

Internationalization on Domestic Stock Market Activity

Sergio Schmukler, The World Bank Sergio Schmukler is a senior economist in development research group of the World Bank. During 2004-2005, he is visiting the IMF research department. He obtained his Ph.D. from the University of California at Berkeley in 1997, when he joined the World Bank research department. Besides his work for the Bank, he has been treasurer of LACEA (Latin America and Caribbean Economic Association) since 2004, was associate editor of the Journal of Development Economics from 2001 to 2004, and visited and taught at the University of Maryland department of economics from 1999 to 2003. Before joining the World Bank, he worked at the Federal Reserve Board, the Inter-American Development Bank, and the Argentine Central Bank. His research area is international finance and international financial markets. He has published various articles in academic journals and edited volumes on emerging markets finance, exchange rate regimes, financial globalization, financial crises and contagion, and financial development. Abstract: What is the impact of firms that cross-list, issue depositary receipts, or raise capital in international stock markets on the trading activity and liquidity of remaining firms in domestic markets? Using a panel of 3,000 firms from 55 emerging economies during 1989-2000, we find that internationalization reduces the trading activity and liquidity of domestic firms through two channels. First, the trading of international firms migrates from domestic to international markets and this migration along with the reduction in domestic trading of international firms has negative spillover effects on domestic firm trading activity and liquidity. Second, there is trade diversion within domestic markets as trading activity shifts out of domestic firms and into international firms.

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The Politics of Bank Failures: Evidence from Emerging Markets

Craig Brown, University of Michigan Business School Craig Brown is a doctoral student at the University of Michigan Business School. His research fields are corporate finance, financial intermediation, political economy, and econometrics. His current research interests are financial intermediation in developing countries and conflict of interest in securities issuance. He has received numerous awards for outstanding academic achievement including the 2002 Citigroup Foundation Scholarship. Abstract: This paper studies large private banks in 21 major emerging markets in the 1990s. It first demonstrates that bank failures are very common in these countries: About 25% of these banks failed during the seven-year sample period. The paper also shows that political concerns play a significant role in delaying government interventions to failing banks. Failing banks are much less likely to be taken over by the government or to lose their licenses before elections than after. This result is robust to controlling for macroeconomic and bank-specific factors, a new party in power, outstanding loans from IMF, as well as country-specific, time-independent factors. This finding implies that much of the within-country clustering in emerging market bank failures is directly due to political concerns.

10:30 a.m. Refreshment Break 10:45 a.m. Corporate Control Classroom 50

Moderator: Leora Klapper, Senior Economist, The World Bank Leora Klapper is a senior economist in the finance team of the development research group at the World Bank. Since joining the Bank in 1998 as a Young Economist, her research and operational work has focused on SMEs, corporate finance, bankruptcy and risk management. Prior to coming to the Bank she worked at the Board of Governors of the Federal Reserve System, the Bank of Israel, and Salomon Smith Barney. She holds a Ph.D. in financial economics from New York University Stern School of Business.

The Stock Market Valuation of Corporate Control: Evidence from

Cross Border Mergers and Acquisitions in Emerging Markets Photo not available

Anusha Chari, University of Michigan Business School Anusha Chari’s research focuses on international finance with an emphasis on the study of emerging financial markets. Her recent work on stock market liberalization uncovers new stylized facts about the interaction of real and financial markets using firm-level data. These facts complement a growing body of literature that documents the importance of financial

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Anusha Chari (continued) development for economic growth. Her current research includes a study of cross border mergers and acquisitions in Latin America and East Asia. Previously she examined the effects of central bank interventions using tick-by-tick data in the foreign exchange market. She holds a Bachelor’s degree from the Oxford University and a Ph.D. in business economics from the University of California, Los Angeles. She is currently an assistant professor of finance at the University of Michigan and a visiting assistant professor of finance at the Haas School of Business at the University of California, Berkeley. Previously, she was a visiting assistant professor of economics at the Graduate School of Business at the University of Chicago. Abstract: When firms from developed markets acquire firms in emerging markets, market capitalization-weighted monthly joint returns show a statistically significant increase of 1.8%. Panel data estimations suggest that the value gains from cross-border M&A transactions stem from the transfer of majority control from emerging-market targets to developed market acquirers—joint returns range from 5.8% to 7.8% when majority control is acquired. Announcement returns for acquirer and target firms estimate the distribution of gains and, on average, show a statistically significant increase of 2.4% and 6.9%, respectively. The evidence suggests that the stock market anticipates significant value creation from cross-border transactions that involve emerging market targets leading to substantial gains for shareholders of both acquirer and target firms.

Czech Mate: Expropriation and Investor Protection in a Converging

World

Mihir Desai, Harvard Business School Mihir A. Desai is the Rock Center Associate Professor in the Finance and Entrepreneurial Management areas of Harvard Business School. Desai's research focuses on international corporate and public finance. Within international corporate finance, he has investigated the determinants of ownership shares and capital structure choice for multinational affiliates, the advantages afforded by the internal capital markets of multinationals, the determinants of dividend remittance policy for multinationals, and the interaction between domestic and international investment decisions by firms. Within public finance, his research has emphasized the effects of taxation on the export, financing, organizational form, and investment decisions of firms facing multiple tax regimes. Additionally, his work has also addressed the dynamics of international tax competition, the divergence between book income and tax income, the tax avoidance decisions of firms, and the policy choices available to developing countries facing the loss of talent. His academic publications have appeared in several journals including the Journal of Finance, Journal of Financial Economics, Journal of Public Economics, and the National Tax Journal. He is a faculty research fellow in the National Bureau of Economic Research's Public Economics and Corporate Finance Programs, and his research has been cited in The Economist, BusinessWeek, the New York Times, and several other publications.

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Mihir Desai (continued) Abstract: This paper examines the expropriation of a foreign investor by a local partner and the subsequent resolution of that case through international arbitration. Ronald Lauder, a U.S. investor, created a media holding company for investments in Eastern Europe that included a once-successful joint venture with Vladimir Zelezny in the Czech Republic. Despite Lauder’s 99% interest in the underlying Czech entity, Zelezny managed to divert the value of the underlying entity for his personal benefit. Subsequent to the expropriation, Lauder employed international agreements and tribunals to recoup 354.9 million USD from the Czech Republic. This clinical examination of an expropriation and its aftermath illustrates how ownership shares can be of secondary importance in determining control, how corporate control is shaped by geography, and how differential access to investor protections in global capital markets can contribute to the persistence of differences, rather than convergence, in investor protections.

12:30 p.m. Risk or Opportunity in China’s Capital Markets? Classroom 50

James R. Hille, CFA, Chief Investment Officer, Teacher Retirement System of Texas Jim Hille was appointed chief investment officer of the Teacher Retirement System of Texas in March 2003. Formerly the director of international equities, he has been with TRS since 1995. From 1992 to 1995 he managed portfolios for the Employees Retirement System of Texas. While earning an MBA from TCU in Fort Worth, from 1990-92 he worked as an assistant international portfolio manager at a major family owned asset management firm. With a B.S. in engineering from the U.S. Naval Academy, class of ’83, he served for six years as a Marine Corps officer. He has served as president of the Austin Society of Financial Analysts, and an adjunct finance professor for the University of Texas’ McCombs School of Business. The Teacher Retirement System of Texas serves active and retired public and higher education employees of the state of Texas. The $91 billion trust fund, presently the fifth largest US state public pension plan, is broadly diversified in domestic and foreign securities and alternative assets. The TRS portfolio has over $13 billion invested internationally including more than $1.8 billion in emerging markets. The fund is internally managed with a staff of 55 investment professionals.

1:15 p.m. Closing Remarks Classroom 50 1:30 p.m. Boxed Lunch Classroom 50

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Darden Emerging Markets Conference

Programs

2006

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The Financing of Corporation in Emerging Countries

Conference Agenda March 28-29, 2006

All conference sessions will be held in the 13th floor conference room.

Tuesday, March 28, 2006 9:00 – 9:45 am Breakfast and Registration, 13th Floor 9:45 – 10:00 am

Welcome Remarks Robert F. Bruner, Dean, Darden Graduate School of Business

Biography: Robert F. Bruner is Dean and Distinguished Professor of Business Administration at the Darden Graduate School of Business Administration, University of Virginia. His areas of teaching, research, and writing are corporate finance, mergers and acquisitions, investing in emerging markets, innovation, and technology transfer. His latest book, Applied Mergers and Acquisitions, was published in 2004 by John Wiley and Sons. He teaches the course, “Mergers and Acquisitions” in Darden’s MBA program, and is the faculty director of Darden’s executive education program, “Mergers and Acquisitions.” He has been recognized in the United States and Europe for his teaching and casewriting. BusinessWeek magazine cited him as one of the “masters of the MBA classroom.” He is the author or co-author of over 400 case studies and notes, and of Case Studies in Finance: Managing for Corporate Value Creation now in its fourth edition. His research has been published in journals such as Financial Management, Journal of Accounting and Economics, Journal of Applied Corporate Finance, Journal of Financial Economics, Journal of Financial and Quantitative Analysis, and Journal of Money, Credit, and Banking. Industrial corporations, financial institutions, and government agencies have retained him for counsel and training. He has been on the faculty of the Darden School since 1982, and has been a visiting professor at various schools in Europe and Latin America, including INSEAD, and IESE. Formerly he was a loan officer and investment analyst for First Chicago Corporation. He holds the B.A. degree from Yale University and the M.B.A. and D.B.A. degrees from Harvard University. He has served The Darden School, professional groups, and community organizations in various positions of leadership.

Cesare Calari, World Bank, Vice President Financial Sector Biography: Cesare Calari, an Italian national, assumed his current position in July 2001. He is responsible for the Bank's policy, advisory, and lending work in respect of financial sector development and stability. After experiences in law practice and with the Bank of Italy, he joined the International Finance Corporation (IFC) in 1982 and has held a number of appointments including Director of the IFC Africa Region and Director of the IFC Global Financial Markets Group, the position he held until his recent appointment as Vice President of the Financial Sector of the World Bank in July 2001. Mr. Calari is a member of the Financial Stability Forum and serves on the Board of Directors of Moneda Asset Management (Santiago, Chile). He has also been a director of Zivnostenska Banka (Prague), Nomura Hungary (Budapest), and International Bank in Poland (Warsaw). Cesare Calari holds degrees in law and international economics from the University of Bologna (Italy) and Johns Hopkins University (US).

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10:00 – 12:00 pm Session 1: Institutions and Governance

Chair: Bernard Black, University of Texas Law School

Biography: Bernard S. Black is Hayden W. Head Regents Chair for Faculty Excellence and Professor of Law at University of Texas Law School, Professor of Finance at UT's McCombs School of Business, and managing director of the Legal Scholarship Network. Professor Black received his B.A. from Princeton University, M.A. in physics from University of California at Berkeley and J.D. from Stanford Law School. After graduation, he clerked for Judge Patricia M. Wald on the United States Court of Appeals for the District of Columbia Circuit, practiced corporate and securities law at Skadden, Arps, Slate, Meagher & Flom in New York City, and served as Counsel to Commissioner Joseph Grundfest of the U.S. Securities and Exchange Commission. Before coming to Texas, he was Professor of Law at Stanford Law School (1998-2004) and Columbia Law School (1988-1998). He has been an advisor on company law, securities law, and corporate governance in Armenia, Brazil Indonesia, Korea, Mongolia, Russia, Ukraine, and Vietnam. He has published numerous articles in major law, finance and economics journals, principally in the areas of corporate and securities law, international corporate governance, corporate acquisitions, and corporate finance. His recent articles and working papers are available at http://ssrn.com/author=16042. His books include The Law and Finance of Corporate Acquisitions (2nd ed., with Ronald Gilson, 1995 and supplement 2003) and Guide to the Russian Law on Joint Stock Companies (with Reinier Kraakman and Anna Tarassova (1998).

The Law & Economics of Self-Dealing Presented by Rafael La Porta, Dartmouth College

Collaborating Authors: Simeon Djankov, World Bank Florencio Lopez-de-Silanes, University of Amsterdam Andrei Shleifer, Harvard University

Presenter Biography: Rafael La Porta is professor of finance at the Tuck School. He received his PhD in economics from Harvard in 1994 and was on the Harvard faculty from that time until he joined Tuck in 2003. Professor La Porta's research has focused on issues of investor protection and corporate governance across the world, an area known as "law and finance." He is an expert on cross-country differences in laws and practice pertaining to investor protection and how those differences cause economies, stock markets, and firms' financing practices to vary. Professor La Porta teaches the core Corporate Finance course at Tuck and will begin offering an international finance course in the future.

Abstract: We present a new measure of legal protection of minority shareholders against expropriation by corporate insiders: the anti-self-dealing index. Assembled with the help of Lex Mundi law firms, the index is calculated for 72 countries based on legal rules prevailing in 2003, and focuses on private enforcement mechanisms, such as disclosure, approval, and litigation, governing a specific self-dealing transaction. This theoretically-grounded index predicts a variety of stock market outcomes, and generally works better than the commonly used index of anti-director rights.

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Legality and Venture Governance around the World Presented by Douglas Cumming, Rensselaer Polytechnic Institute

Collaborating Authors: Daniel Schmidt, J.W. Goethe-Universitat Frankfurt/Main Uwe Walz, J.W. Goethe-Universitat Frankfurt/Main

Presenter Biography: Douglas Cumming, J.D., Ph.D., CFA, is an Associate Professor of Finance and Director of the Severino Center for Technological Entrepreneurship at the Lally School of Management and Technology at Rensselaer Polytechnic Institute in Troy, New York. He has previously taught at the University of Alberta School of Business and the University of New South Wales School of Banking and Finance, and has previously been a Visiting Professor at the University of Amsterdam Graduate School of Business, Center for Financial Studies, University of Frankfurt, and the University of Cambridge ESRC Centre for Business Research Judge Institute of Management. He is also a Fellow of Clare Hall, University of Cambridge. His research is primarily concentrated on law and finance, venture capital, private equity and IPOs, with a focus on international differences across Europe, North America and the Asia-Pacific. His work has been presented at the American Finance Association, the European Finance Association, the American Law and Economics Association, and other international conferences, and has been published in leading finance, economics and law journals. He was the recipient of the 2004 Ido Sarnat Award for the best paper published in the Journal of Banking and Finance for a paper on full and partial venture capital exits in Canada and the United States. He is a research associate with AEI-Brookings Joint Center for Regulatory Studies and the Groupe d'Economie Mondiale at Sciences Po (Paris), Capital Markets CRC (Sydney), Venture Capital Experts (New York), Cambridge University ESRC Center for Business Research, Center for Financial Studies (Frankfurt), Amsterdam Center for Research in International Finance, and the University of Calgary Van Horne Institute. He has also consulted for a variety of governmental and private organizations in Australasia, Europe and North America.

Abstract: We analyze governance with a new dataset on investments of venture capitalists in 3848 portfolio firms in 39 countries from North and South America, Europe and Asia spanning 1971-2003. We first provide evidence that cross-country differences in Legality (a weighted average of the La Porta et al., 1998, legal indices) have a significant impact on the governance structure of investments in the VC industry: better laws facilitate faster deal screening and deal origination, a higher probability of syndication and a lower probability of potentially harmful co-investment, and facilitate investor board representation of the investor and the use of securities that do not require periodic cash flows prior to exit. We point out that the Legality index and GNP per capita are very highly correlated in our sample (the correlation is 0.91), and we cannot exclude a strong role for economic development alongside Legality in explaining the observed international differences. We also show country-specific differences exist apart from legal and economic development, and offer explanations for the observed differences based on the vast array of data introduced herein.

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Mixing Family with Business Presented by Simon Johnson, Massachusetts Institute of Technology

Collaborating Authors: Marianne Bertrand, University of Chicago

Antoinette Schoar, Massachusetts Institute of Technology Krislert Samphantharak, University of California at San Diego

Presenter Biography: Simon Johnson is the Ronald A. Kurtz Associate Professor at the Sloan School of Management, MIT. He is a Faculty Research Fellow in theNBER research groups on corporate finance and international macroeconomics, amember of the International Advisory Board of CASE in Warsaw, and a non-resident scholar at the Asian Institute for Corporate Governance of KoreaUniversity. He is also on the Global Advisory Board of Endeavor, an organizationthat promotes entrepreneurship in emerging markets. In 2000-2001 Professor Johnson was a member of the US Securities and Exchange Commission’s Advisory Committee on Market Information. His assessment of the need for continuingstrong market regulation is published as part of the final report of that committee. Professor Johnson's research focuses on the institutions that support or prevent growth. Most of his work deals with emerging markets, and draws on extensivefieldwork in Eastern Europe, the former Soviet Union, Africa, East Asia, and LatinAmerica. Recent papers have appeared in the American Economic Review, the Quarterly Journal of Economics, the Journal of Financial Economics, and the Journal of Law, Economics and Organization. He regularly uses these research findings, in association with the Brattle Group, to provide advice on emergingmarkets.

Abstract: A large fraction of business groups around the world are run by families. In this paper, we analyze how the structure of the families behind these business groups affects the groups' organization, governance and performance. To address this question, we constructed a unique data set of family trees and business groups for nearly 100 of the largest business families in Thailand. We find a strong positive association between family size and family involvement in the ownership and control of the family business. The sons of the founders play a central role in both ownership and board membership, especially when the founder of the group is gone. The availability of more sons is also associated with lower firm-level performance, especially in private firms and when the founder is gone. We identify a possible governance channel for this performance effect. Excess control by sons, but not other family members, is associated with lower firm performance. In addition, excess control by sons increases with the number of sons and with the death of the founder. Relatedly, at the group-level, we find that larger families are associated with larger (more firms) and more pyramidal groups, again especially when the founder is gone. One hypothesis that emerges from our analysis is that part of the decay of family-run groups over time may be due to a dilution of the ownership stakes across a set of equally powerful descendants of the founder, with each possibly trying to tunnel resources out before others do. Some preliminary analysis also suggests that such wider involvement of family members in the family business may also have led to less efficient restructuring after the East Asian financial crisis, again especially when the founder is no longer involved in the family business.

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Discussant: Alexander Dyck, University of Toronto

Biography: I. J. Alexander Dyck has published widely in top finance and economics journals and lectures regularly on corporate governance. While at Harvard Business School he taught in the MBA, doctoral and executive education programs. He has consulted to the World Bank on corporate governance and is a member of the Corporate Governance Task Force of the Initiative for Policy Dialogue at Columbia University. Prof. Dyck received an honors B.A. and the Gold Medal in economics and political science from the University of Western Ontario, Canada in 1988. He worked at the C.D. Howe Institute; as a research associate at the German Institute for Economic Research; and in 1993 earned his Ph.D. in Economics from Stanford University, where he was the recipient of a Research Council of Canada scholarship and a Bradley fellowship.

Discussant: Thorsten Beck, World Bank

Biography: Thorsten Beck is a Senior Financial Economist in the Finance Team of the Development Research Group of the World Bank. He has published articles about the impact of financial development and structure on economic growth, the determinants of financial development, and the link between international trade and financial development. His recent research has focused on the effects of bank concentration and competitiveness, access to financial services, and the impediments to growth that SMEs face. His country experience, both in operational and research work, includes Bangladesh, Bolivia, Brazil, Cameroon, Guinea, Kenya, Madagascar, Mozambique, Russia, Rwanda and Uganda. He holds a Ph.D. in economics from the University of Virginia and a M.A. degree from the University of Tubingen in Germany. He also studied at the University of Kansas and the Universidad de Costa Rica.

12:00 – 1:30 pm Lunch, World Bank East Dining Room, Main Complex Lower-Level 

1:30 - 3:30 pm Session 2: Political Economy/Internationalization Chair: Asli Demirguc-Kunt, World Bank

Biography: Asli Demirguc-Kunt holds the joint appointment of Senior Research Manager in Finance, in the World Bank's Development Economics Research Group, and Senior Adviser, Operations and Policy Department in the Bank's Financial Sector Vice Presidency. After joining the Bank in 1989 as a Young Economist, she has been in different parts of the Bank, working on external finance and domestic financial sector issues. Her research interests include how financial development contributes to economic growth and poverty reduction; and how best to improve the stability, efficiency and reach of the financial systems around the world. She has published widely in academic journals. Prior to coming to the Bank, she was an Economist at the Federal Reserve Bank of Cleveland. She holds a Ph.D. and M.A. in economics from the Ohio State University.

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Does Campaign Finance Imply Political Favors? The Case of the 1998 Brazilian Elections. Presented by Stijn Claessens, World Bank

Collaborating Authors: Erik Feijen, University of Amsterdam Luc Laeven, World Bank

Biography: Stijn Claessens is since 2004 Senior Adviser in the Financial Sector Vice-Presidency of the World Bank. He is also a Professor of International Finance Policy at the University of Amsterdam where he taught for three years (2001-2004). Mr. Claessens, a Dutch national, holds a Ph.D. in business economics from the Wharton School of the University of Pennsylvania (1986) and M.A. from Erasmus University, Rotterdam (1984). He started his career teaching at New York University business school (1987) and then worked for fourteen years at the World Bank in various positions (1987-2001). His policy and research interests are firm finance and access to financial services; corporate governance; internationalization of financial services; and risk management. Over his career, Mr. Claessens has provided policy advice to emerging markets in Latin America and Asia and to transition economies. His research has been published in the Journal of Financial Economics, Journal of Finance and Quarterly Journal of Economics. He had edited several books, including International Financial Contagion (Kluwer 2001) and Resolution of Financial Distress (World Bank Institute 2001). He is an associate editor of the Journal of Financial Services Research and a fellow of the London-based Centre for Economic Policy Research, CEPR.

Abstract: We provide empirical evidence that campaign contributions are strongly associated with market expectations of future firm-specific political favors, including preferential access to external finance. Using a novel dataset, we find that Brazilian firms providing more contributions in the 1998 campaign to (elected) federal deputies experienced higher stock returns following the election, even after controlling for industry-specific effects and firm-specific characteristics. This suggests that federal deputies were expected to shape policy to benefit these firms. Consistent with such political favors, we find that these firms substantially increased their financial leverage relative to a control group in the four years following election, especially from banks, suggesting that contributions gained firms preferential access to finance.

The Influence of Domestic Firms on Foreign Direct Investment Liberalization Presented by Anusha Chari, University of Michigan

Collaborating Author: Nandini Gupta, Indiana University

Presenter Biography: Anusha Chari is an assistant professor of finance at the University of Michigan. Her research focuses on international finance with an emphasis on the study of emerging financial markets. Her earlier work on stock market liberalization uncovers new stylized facts about the interaction of real and financial markets using firm-level data. These facts complement a growing body of literature that documents the importance of financial development for economic growth. She has also researched mergers and acquisitions in emerging markets. She received an undergraduate degree in Philosophy, Politics and Economics from the University of Oxford and a PhD in Business Economics from UCLA. She has held positions at the Graduate School of Business at the University of Chicago and the Haas School of Business at the University of California, Berkeley.

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Anusha Chari (continued) Abstract: This paper investigates the influence of incumbent firms on the decision to allow foreign direct investment into an industry. Based on data from India’s economic reforms, the results suggest that firms in concentrated industries are more successful at preventing foreign entry, that state-owned firms are more successful at stopping foreign entry than similarly placed private firms, and that profitable state-owned firms are more successful at stopping foreign entry than unprofitable state-owned firms. These results continue to hold when we control for industry characteristics such as the presence of natural monopolies and the size of the workforce. When foreign entry is allowed in an industry, incumbent firms experience a significant decline in market share and profits. The pattern of foreign entry liberalization supports the private interest view of policy implementation.

Coping with Disaster: The Impact of Hurricanes on International Financial Flows Presented by Dean Yang, University of Michigan Presenter Biography: Dean Yang is Assistant Professor of Public Policy and Economics at the Gerald R. Ford School of Public Policy and Department of Economics, University of Michigan. His research deals with the economic problems of developing countries. Current areas of interest include international migration, human capital, disasters, international trade, and crime and corruption. At the Ford School, Professor Yang teaches courses in development economics and in microeconomics. He has worked as a consultant on development issues for the World Bank and the International Monetary Fund. He received his undergraduate and Ph.D. degrees in economics from Harvard University. Abstract: How well do countries cope with the aftermath of natural disasters? In particular, do international financial flows help buffer countries in the wake of disasters? This paper focuses on hurricanes (one of the most common and destructive types of disasters), and examines the impact of hurricane exposure on resource flows to developing countries. Using meteorological data on storm paths, I construct a time-varying storm index that takes into account the fraction of a country’s population exposed to storms of varying intensities. Across developing countries, greater hurricane exposure leads to large increases in foreign aid. For other types of international financial flows, the impact of hurricanes varies according to income level. In the poorer half of the sample, hurricane exposure leads to substantial increases in migrants’ remittances, so that total inflows from all sources in the three years following hurricane exposure amount to roughly three-fourths of estimated damages. In the richer half of the sample, by contrast, hurricane exposure stimulates inflows of new lending from multilateral institutions, but offsetting declines in private financial flows are so large that the null hypothesis of zero damage replacement cannot be rejected.

Discussant: Simon Johnson, Massachusetts Institute of Technology

Biography: Simon Johnson is the Ronald A. Kurtz Professor of Entrepreneurship at the Sloan School of Management, MIT, having recently finished two years as an Assistant Director in the IMF's Research Department. He is a Research Associate at the NBER, and a co-organizer of the NBER’s first meeting on Africa in April 2006. He is also a CEPR Research Fellow, a BREAD affiliate, a member of the International Advisory Board of CASE in Warsaw, and a non-resident scholar at the Asian Institute for Corporate Governance of Korea University. He is also on the Global Advisory Board of Endeavor, an organization that promotes entrepreneurship in emerging markets.

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Simon Johnson (continued) In 2000-2001 Professor Johnson was a member of the US Securities and Exchange Commissions Advisory Committee on Market Information. His assessment of the need for continuing strong market regulation is published as part of the final report of that committee. Professor Johnson's research focuses on the institutions that affect growth and crises. Most of his work deals with economic and financial development, and draws on extensive fieldwork in Eastern Europe, the former Soviet Union, Africa, East Asia, and Latin America. Recent papers have appeared in the American Economic Review, the Journal of Political Economy, the Quarterly Journal of Economics, the Journal of Financial Economics, and the Journal of Law, Economics and Organization. He regularly uses these research findings, in association with the Brattle Group, to provide advice on emerging markets.

Discussant: Ray Fisman, Columbia University

Biography: Professor Fisman’s research focuses on the measurement of corruption. In prior work he has provided a market valuation for political connections in Indonesia and the extent of smuggling and tariff evasion between Hong Kong and mainland China. His research has been published in the American Economic Review, Quarterly Journal of Economics, and Journal of Political Economy. His teaching includes the core course in Managerial Economics and a course on the role of private enterprise in economic development. During 1998 he worked in the Africa division of the World Bank; he is currently on leave in the economics department at Harvard University.

3:30 - 4:00 pm Refreshment Break 4:00 - 5:30 pm Session 3: Cross-Listing

Chair: Andrew Karolyi, Ohio State

Biography: Professor Karolyi is an internationally-known scholar in the area of investment management with a specialization in the study of international financial markets. He has published extensively in top-tier journals in financial economics, including the Journal of Finance, Journal of Financial Economics and Review of Financial Studies, and has published several books and monographs. He serves as an associate editor for a variety of journals, including the Journal of Finance, Journal of Empirical Finance, Journal of Banking and Finance and the Pacific Basin Finance Journal, which he edited between 1999 and 2003. He is a recipient of the Fama/DFA Prize for Capital Markets and Asset Pricing (2005), the William F. Sharpe Award for Scholarship in Finance (2001) and of the Fisher College of Business’ Pace Setter Awards for Excellence in Research and Graduate Teaching.

Professor Karolyi holds the Charles R. Webb Designated Professorship in Finance which is dedicated to the advancement of research in investment management. He directs Ohio State University’s Student Investment Management program in which undergraduate and graduate students manage $20 million of the university’s endowment fund. His teaching interests focus on securities markets and investments at the MBA and undergraduate levels and on financial econometrics at the PhD level. He teaches regularly in executive education programs in Europe, Asia, Canada and the U.S. and consults for various major financial institutions, banks and stock exchanges.

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Internationalization and the Evolution of Corporate Valuation Presented by Ross Levine, Brown University

Collaborating Authors: Juan Carlos Gozzi, World Bank Sergio Schmukler, World Bank

Presenter Biography: Ross Levine is the Harrison S. Kravis University Professor and Professor of Economics at Brown University. He is also the Paul Dupee Faculty Fellow at the Watson Institute for International Studies and a Research Associate at the National Bureau of Economic Research. He received his Ph.D. in economics from UCLA in 1987. After working at the Board of Governors of the Federal Reserve System for three years, Dr. Levine moved to the World Bank in 1990. There he participated and managed a number of research and operational programs. In 1997, Dr. Levine joined the University of Virginia, before moving to University of Minnesota in 1999, where he became the Curtis L. Carlson Professor of Finance. Professor Levine’s work focuses on the linkages between financial sector policies, the operation of financial systems, economic growth, and poverty alleviation. His new book with James Barth and Gerard Caprio, “Rethinking Bank Regulation: Till Angels Govern,” challenges current approaches to the regulation of banks. Abstract: By documenting the evolution of Tobin’s q before, during, and after firms internationalize, this paper provides evidence on the bonding, segmentation, and market timing theories of internationalization. Using new data on 9,096 firms across 74 countries over the period 1989-2000, we find that Tobin’s q does not rise after internationalization, even relative to firms that do not internationalize. Instead, q rises significantly before internationalization and during the internationalization year. But, then q falls sharply in the year after internationalization, quickly relinquishing the increases of the previous years. To account for these dynamics, we show that market capitalization rises before internationalization and remains high, while corporate assets increase during internationalization. The evidence supports models stressing that internationalization facilitates corporate expansion, but challenges models stressing that internationalization produces an enduring effect on q by bonding firms to a better corporate governance system.

The Colors of Investors’ Money: Which Firms Attract Institutional Investors From Around the World? Presented by Pedro Matos, University of Southern California

Collaborating Author: Miguel Ferreira, ISCTE Business School – Lisbon CEMAF

Presenter Biography: Pedro Matos is an Assistant Professor of Finance at the USC Marshall School of Business. His research focuses on the behavior of institutional investors, in particular mutual funds, and their impact on corporate financial policies. His work has been published in the Journal of Finance and the Journal of Financial Economics and has been featured in the press, including in the New York Times. He holds a PhD from INSEAD in France. Prior to his PhD studies, Pedro worked in public debt management with the Portuguese Ministry of Finance where he also consulted for The World Bank. Abstract: We study institutional investors’ stock holdings around the world using a comprehensive data set from 27 countries. Three groups of institutions based on their geographic origin (U.S., non-U.S. foreign, and domestic managers) have equal importance in the shareholder base of non-U.S. corporations. Thus, we offer a global (non-U.S. centric) view on what firm- and country-level characteristics attract investment by institutional investors. We find that all institutions reveal a strong preference for large and liquid stocks

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Pedro Matos (continued) with good governance practices. There is, however, a substantial diversity between domestic and foreign institutions with respect to other firm characteristics. Foreign investors overweight stocks that are cross-listed in the U.S., members of the MSCI indexes, and globally visible through high foreign sales or analyst coverage. Domestic institutions, in contrast, seem to underweight these same stocks. The crosslisting effect is not concentrated in the holdings of ADRs as a significant increase in the holdings of local shares by foreigners is found, which sheds some light on “multi-market trading” and the “flow-back” phenomena. Our results show an important characteristic of modern international capital markets as firm and investor actions take place in inter-connected markets. Finally, we find that foreign institutional ownership has real effects as it is positively associated with higher firm valuation.

Discussant: Michael Schill, Darden Graduate School of Business

Biography: Michael J. Schill, Assistant Professor of Business Administration, teaches in the Finance area. His research focuses on the impact of market friction on capital market price formation. Recent projects examine market behavior for such issues as price momentum, post equity offering performance, overseas listing decisions, higher-order market factors, and Internet stock valuations. Schill joined the Darden faculty in 2001. He previously taught at the University of California-Riverside and the University of Washington and worked as a management consultant with Marakon Associates.

Discussant: Paul Bennett, NYSE

Biography: Paul B. Bennett is senior vice president and chief economist of the NYSE. As chief economist and head of the Research department at the New York Stock Exchange, Paul Bennett is responsible for analytic support for the Exchange's various business and public-policy activities, and for support of academic and other professional research into equities market issues. Before joining the NYSE in 2001, Mr. Bennett was a senior officer and economist of the Federal Reserve Bank of New York, where he had worked since 1978. At the Fed, Mr. Bennett headed the Capital Markets Research division, was editor of the Bank’s research journal and, prior to that, vice president for Fedwire Funds and Securities Transfers, among other responsibilities. Mr. Bennett has published numerous papers on finance, economics, and securities markets in both academic and practitioner journals. Mr. Bennett holds a Ph.D. in economics from Princeton University and a B.A. in economics from the University of Chicago.

6:00 – 8:30 pm Dinner, Watergate Hotel, Chesapeake Room

2650 Virginia Avenue, NW

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The Financing of Corporation in Emerging Countries

Conference Agenda March 28-29, 2006

All conference sessions will be held in the 13th floor conference room.

Wednesday, March 29, 2006 7:00 – 8:00 am Continental Breakfast (Outside Conference Room) 8:00 – 10:00 am Session 4: Capital Structure

Chair: Cam Harvey, Duke

Biography: Campbell Harvey is the J. Paul Sticht Professor of International Business at the Fuqua School of Business, Duke University. He is also a research associate of the National Bureau of Economic Research in Cambridge, Massachusetts. Harvey obtained his doctorate at the University of Chicago in business finance. His undergraduate studies in economics were conducted at the University of Toronto. He has served on the faculties of the Stockholm School of Economics, the Helsinki School of Economics, and the Graduate School of Business at the University of Chicago. He has also been a visiting scholar at the Board of Governors of the Federal Reserve System. He was recently awarded an honorary doctorate from Svenska Handelshögskolan in Helsinki. Harvey is an internationally recognized expert in portfolio management and global risk management.

Firm Risk and Capital Structure Choice Presented by Mihir Desai, Harvard University

Collaborating Authors: C. Fritz Foley, Harvard University James R. Hines, University of Michigan

Presenter Biography: Mihir A. Desai is the Rock Center Associate Professor in the Finance and Entrepreneurial Management areas of Harvard Business School. Desai's research focuses on international corporate and public finance. Within international corporate finance, he has investigated the determinants of ownership shares and capital structure choice for multinational affiliates, the advantages afforded by the internal capital markets of multinationals, the determinants of dividend remittance policy for multinationals, and the interaction between domestic and international investment decisions by firms. Within public finance, his research has emphasized the effects of taxation on the export, financing, organizational form, and investment decisions of firms facing multiple tax regimes. Additionally, his work has also addressed the dynamics of international tax competition, the divergence between book income and tax income, the tax avoidance decisions of firms, and the policy choices available to developing countries facing the loss of talent. His academic publications have appeared in several journals including the Journal of Finance, Journal of Financial Economics, Journal of Public Economics, and the National Tax Journal. He is a faculty research fellow in the National Bureau of Economic Research's Public Economics and Corporate Finance Programs, and his research has been cited in The Economist, BusinessWeek, the New York Times, and several other publications.

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Mihir Desai (continued) Abstract: American multinational firms respond to politically risky environments by adjusting their capital structures abroad and at home. Foreign affiliates located in politically risky countries are significantly more levered than other foreign affiliates of the same parent companies. American firms also limit their exposures in politically risky countries by sharing ownership with local partners and serving foreign markets with exports rather than local production. The residual political risk borne by parent companies leads them to use less domestic leverage, resulting in lower firm-wide leverage. Multinational firms with above-average exposures to politically risky countries have 7.6 percent less domestic leverage than do other firms. These results illustrate the impact of risk exposures on capital structure.

Financing Firms in India Presented by Franklin Allen, University of Pennsylvania

Collaborating Authors: Rajesh Chakrabarti, Georgia Institute of Technology Sankar De, Indian School of Business Jun “QJ” Qian, Boston College Meijun Qian, Boston College

Presenter Biography: Franklin Allen is the Nippon Life Professor of Finance and Professor of Economics at the Wharton School of the University of Pennsylvania. He has been on the faculty since 1980. He is currently Co-Director of the Wharton Financial Institutions Center. He was formerly Vice Dean and Director of Wharton Doctoral Programs and Executive Editor of the Review of Financial Studies, one of the leading academic finance journals. He is a past President of the American Finance Association, the Western Finance Association, the Society for Financial Studies, and the Financial Intermediation Research Society. He received his doctorate from Oxford University. Dr. Allen's main areas of interest are corporate finance, asset pricing, financial innovation and comparative financial systems. He is a co-author with Richard Brealey and Stewart Myers of the eighth edition of the textbook Principles of Corporate Finance. Abstract: We examine financing channels and governance mechanisms among various types of firms in India, and compare them to those from other countries studied in existing literature. Despite its English common-law origin, strong legal protection provided by the law and a democratic government, corruption within India’s legal system and government significantly weakens investor protection in practice. External financing of firms has been dominated by non-market sources of financing, while the characteristics of listed firms are similar to those from countries with weak investor protection. Our evidence, including results based on a survey of private firms in the Small Scale Industries (SSI) sector, shows that alternative financing channels provides the most important source of funds. We also find that informal governance mechanisms, such as those based on reputation, trust and relationships, are more important than formal mechanisms (e.g., courts) in resolving disputes, overcoming corruption and supporting growth.

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Why Have Debt Ratios Increased for Firms in Emerging Markets? Presented by Todd Mitton, Brigham Young University Presenter Biography: Todd Mitton is Assistant Professor of Business Management and Ford Faculty Fellow at the Marriott School of Management at Brigham Young University in Provo, Utah. He received a Ph.D. in financial economics from the Sloan School of Management at MIT in 2000. He previously received a B.A. in economics and an M.B.A. from Brigham Young University. Abstract: I study trends in capital structure between 1980 and 2004 in a sample of over 11,000 firms from 34 emerging markets. The average firm's book-value debt ratio rose by 10 percentage points over this quarter century; market-value debt ratios rose by 15 percentage points. I study how this rise in leverage was influenced by the firm-level demand for and the country-level supply of debt financing. The central finding is that the increase in debt ratios can largely be attributed to changes in the characteristics of emerging market firms over this period. For the average firm, the most prominent determinants of capital structure -- size, profitability, asset tangibility, and growth opportunities -- all shifted in the direction implying a higher optimal level of debt. Changes in the supply of financing at the country level also appear to have played a role in the increase in debt, though financial development within the country is less important than the opening of the country to foreign markets.

Discussant: Rohan Williamson, Georgetown University

Biography: Rohan Williamson is an Associate Professor of Finance, Area Coordinator, and the Holowesko Faculty Research Fellow at the McDonough School of Business at Georgetown University. He received his PhD from Ohio State University. Professor Williamson specializes in international finance, corporate finance and risk management/hedging. He is currently conducting research in the areas of corporate investment decisions, foreign exchange rate exposure, corporate liquidity and governance. Professor Williamson teaches international finance to undergraduates and MBAs, advanced corporate finance to MBA’s and has taught several courses to corporate executives. Professor Williamson’s research has appeared in many finance journals including the Journal of Finance, the Journal of Financial Economics and the Review of Financial Studies. He has also written several book chapters and presented his work at many conferences and seminars and his works have appeared in other non-academic publications such as the Journal of Applied Corporate Finance and the National Bureau of Economic Research Working Paper Series. Professor Williamson was a co-recipient of the 1999 Michael Jensen Prize for the best paper published in the Journal of Financial Economics in the areas of Corporate Finance and Organizations and the 2003 William Sharpe Best Paper Award in the Journal of Financial and Quantitative Analysis. He received the Georgetown University Junior Faculty Research Fellowship in 1999, the McDonough School of Business Research Award in 2003, and the Dean’s Research Fellowship from 2003 to 2005. He has received the Ohio Sate University Pace Setters Award and is a member of Beta Gamma Sigma Business Honor Society. He was formerly a financial analyst for the Chrysler Corporation and an Aircraft Research Engineer for Lockheed Corporation.

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Discussant: Marc Zenner, Citigroup Biography: Marc is the Global Head of the Financial Strategy Group. He currently focuses on the consumer, retail, energy, and chemical sectors and advises leading companies globally across these industries on topics such as the relation between capital structure and distribution policy, acquisition financing, dividend initiations, capital allocation strategies, use of excess liquidity, valuation, and other shareholder enhancement strategies. Marc joined Citigroup’s Financial Strategy Group in 2000, and became the head of ABN AMRO’s US Financial Markets Advisory group in 2003. He rejoined Citigroup in 2004 as North America Head of The Financial Strategy Group before being named Global Head in 2005. Prior to his career in banking, Marc was the Chairman of the Finance Area and a Professor of Finance at the Business School of The University of North Carolina — Chapel Hill (UNC), from 1989–2000. He also taught at Purdue University and Indiana University, and consulted for some large global corporations. Marc taught corporate finance, investments, banking, risk management and international finance and was given the MBA, Ph.D., and University-wide teaching awards at UNC. He published widely in the main academic finance journals such as the Journal of Finance, The Journal of Financial Economics, The Review of Financial Studies, Financial Management, and The Journal of Quantitative and Financial Analysis, on corporate finance topics. Marc earned a Commercial Engineering degree at Katholieke Universiteit Leuven (Belgium), an MBA at the City University in London, and a Ph.D. in finance at Purdue University. He is a Chartered Financial Analyst (CFA). Marc is married and has three boys. He is originally from Belgium, he speaks English, Dutch, and French fluently, and is conversant in Spanish and German.

10:00 – 10:30 am Refreshment Break 10:30 –12:00 pm Session 5: Institutional Investment

Chair: Jeremy Armitage, State Street Global Markets

Biography: Mr. Armitage is responsible for the Research department of State Street Global Markets and is based in London, England. This global team is renowned for their research in the fields of investor behavior and portfolio & risk management. Our theoretical work is regularly published in prestigious academic and practitioner journals, such as the Journal of Financial Economics, the Journal of Portfolio Management and the Financial Analysts Journal. For our clients we provide an analytical framework and a full spectrum of indicators, tools, and strategies spanning the global markets that enable them to reexamine their investment opportunities from new, illuminating perspectives. This award-winning analysis is regularly cited in the financial press and is available to clients through Global Markets’ research portal, www.globallink.com.

Mr. Armitage has been at the forefront of establishing our research agenda, having been appointed Managing Director and Head of State Street Associates in August 2000. This unique partnership was formed by State Street in conjunction with academic and practitioner thought leaders in the Finance profession. Prior to this role Mr. Armitage worked for State Street in

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Jeremy Armitage (continued)

their London branch for eight years in a number of management positions within the Global Markets business and has assisted clients across the globe in providing solutions to complex investment problems. He has presented at conferences Worldwide has had numerous articles published in the financial press. He has a BS in Computing Science, Imperial College , London , holds the CFA designation and is member of the UK Society of Investment Professionals.

Do local analysts know more? A cross-country study of the performance of local analysts and foreign analysts. Presented by Rene Stulz, Ohio State University

Collaborating Authors: Kee-Hong Bae, Queen’s University Hongping Tan, Queen’s University

Presenter Biography: René M. Stulz is the Everett D. Reese Chair of Banking and Monetary Economics and the Director of the Dice Center for Research in Financial Economics at the Ohio State University. He has also taught at the Massachusetts Institute of Technology, the University of Chicago, and the University of Rochester. He received his Ph.D. from the Massachusetts Institute of Technology. He was awarded a Marvin Bower Fellowship from the Harvard Business School, a Doctorat Honoris Causa from the University of Neuchâtel, and the 1999 Eastern Finance Association Distinguished Scholar Award. In 2004, the magazine Treasury and Risk Management named him one of the 100 most influential people in finance. He is a past president of the American Finance Association and of the Western Finance Association, and a fellow of the American Finance Association, of the Financial Management Association, and of the European Corporate Governance Institute. René M. Stulz was the editor of the Journal of Finance, the leading academic publication in the field of finance, for twelve years. He is on the editorial board of more than ten academic and practitioner journals. Further, he is a member of the Asset Pricing and Corporate Finance Programs and the director of the Risk of Financial Institutions Group of the National Bureau of Economic Research. He has published more than sixty papers in finance and economics journals, including the Journal of Political Economy, the Journal of Financial Economics, the Journal of Finance, and the Review of Financial Studies. His published research deals with topics such as the valuation discount of conglomerates, the gains from acquisitions, the benefits and costs of leverage, spinoffs and asset sales, the determinants of liquid asset holdings of firms, secured debt, bank loans, the pricing of exotic options, credit risks, the cost of capital, managerial ownership, the market for corporate control, corporate governance, the performance of firms issuing debt and equity, the determinants of firm capital structures and liquid asset holdings, the use of derivatives in risk management, capital flows, and financial globalization. He is the author of a textbook titled Risk Management and Derivatives and has edited several books. René M. Stulz has taught in executive development programs in the U.S., Europe, and Asia. He has consulted for major corporations, law firms, the New York Stock Exchange, and the World Bank. He is a director of several companies, the president of the Gamma Foundation, and a trustee of the Global Association of Risk Professionals.

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Rene Stulz (continued) Abstract: This paper examines whether analysts resident in a country make more precise earnings forecasts for firms in that country than analysts who are not resident in that country. Using a sample of 32 countries, we find that there is an economically and statistically significant analyst local advantage even after controlling for firm and analyst characteristics. The importance of the local advantage is inversely related to the quality of the information provided by firms. In particular, the local advantage is high in countries where earnings are smoothed more, less information is disclosed by firms, and firm idiosyncratic information explains a smaller fraction of stock returns. The local advantage is also negatively related to market participation by foreign investors and by institutions and positively related to holdings by insiders. U.S. investors underweight a country’s stocks more in their portfolios if that country has a higher analyst local advantage.

Do Foreigners Invest Less in Poorly Governed Firms? Presented by Karl Lins, University of Utah

Collaborating Authors: Christian Leuz, University of Pennsylvania Francis Warnock, Darden Graduate School of Business

Presenter Biography: Dr. Karl V. Lins is the Thayne Robson Faculty Fellow and Associate Professor of Finance at the David Eccles School of Business at the University of Utah. Karl has an extensive research record primarily in the areas of international corporate governance and capital markets. His research has been presented at academic and practitioner conferences and at universities in 13 countries and in 24 states within the U.S. Karl has published his papers in the Journal of Finance, the Journal of Financial Economics, the Journal of Accounting Research, the Journal of Financial and Quantitative Analysis, and Financial Management. His teaching interests are corporate finance and international finance and he has won a University-wide teaching award. Karl earned a B.S. in Petroleum Engineering from Texas A&M University in 1985, an MBA from the Anderson School at UCLA in 1989, and a Ph.D. in Finance from the University of North Carolina at Chapel Hill in 2000 where he was named the school’s Outstanding Doctoral Student. Prior to starting his academic career, Karl worked for two years as an engineer for Conoco Inc. and, after his MBA, for six years in corporate finance, financial analyst, and international sales positions for Boise Cascade Corporation. Karl’s international corporate experience includes international bond offerings while in the treasury department and opening up distribution in Mexico for large quantities of business and printing paper during the early 1990s and continuing through the Mexican peso crisis of 1994. He has done executive teaching for the University of North Carolina at Chapel Hill, for the OneMBA global program at EGADE in Monterrey, Mexico, for AvalonBay Real Estate Investment Trust in Washington D.C., and for IBM Business Services in Mexico City. Abstract: As domestic sources of outside finance are limited in many countries around the world, it is important to understand the factors that influence whether foreign outside investors provide capital to a country’s firms. This study examines whether and why investor concern about corporate governance results in fewer foreign holdings. We use a comprehensive set of foreign holdings by U.S. investors as a proxy for foreign investment and analyze a sample of 4,411 firms from 29 emerging market and developed economies. We find that foreigners invest significantly less in firms that are poorly governed, i.e., firms that have ownership structures that are more conducive to outside investor expropriation.

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Karl Lins (continued) Interestingly, this finding is not simply a matter of a country’s economic development but appears to be directly related to a country’s legal institutions and information rules. We therefore argue that information problems faced by foreign investors play an important role in this result. Supporting this explanation, we show that foreign investment is lower in firms that appear to engage in more earnings management.

Discussant: Darius Miller, SMU-Cox

Biography: Darius Miller is an Associate Professor at Southern Methodist University, where he joined the faculty in 2005. Professor Miller previously held appointments at Indiana University and Texas A&M University. Professor Miller holds a B.S. in Electrical Engineering from Tulane University, a MBA from Loyola University, and a Ph.D. in Finance from the University of California, Irvine. Dr. Miller has teaching and research interests in international financial markets, corporate governance, financial disclosure, and securities offerings. He has published numerous academic papers in premier journals, including the Journal of Financial Economics, Journal of Accounting Research, and the Journal of Financial and Quantitative Analysis. His work has been featured in business publications, such as the CFA Digest and the Bownes Review for CFOs & Investment Bankers, and has influenced important policy debates, including the mandatory auditor rotation provision of the 2002 Sarbanes-Oxley Act. Professor Miller has presented his work to numerous conferences, universities, and industry groups. He has received awards for both teaching and research, most recently from the Kelley School of Business at Indiana University where he received both the college research and MBA teaching awards. Dr. Miller is active in executive education, delivering numerous programs here and abroad, most recently to executives from Wuhan and Beijing in the PRC.

Discussant: Leora Klapper, World Bank

Biography: Leora Klapper is a Senior Economist in the Finance Team of the Development Research Group at the World Bank. Since joining the Bank in 1998 as a Young Economist, her research and operational work has focused on SME and corporate access to financing, corporate governance, and bankruptcy and risk management. She has also participated in Financial Sector Assessment Programs (FSAPs) in many regions. Prior to coming to the Bank she worked at the Board of Governors of the Federal Reserve System, the Bank of Israel, and Salomon Smith Barney. She holds a Ph.D. in financial economics from New York University Stern School of Business.

12:00 – 2:00 pm

Formal Lunch, 12th Floor Dining Room, Main Complex, Gallery Lunch Keynote speech: Nobel Laureate Joseph Stiglitz Biography: Joseph E. Stiglitz is University Professor in Economics at Columbia University in New York and Executive Director of the Initiative for Policy Dialogue (IPD). In 2001, Professor Stiglitz was awarded the Nobel Prize in economics for his revolutionary work in the economics of imperfect and asymmetric information. Earlier (1978) he was awarded the John Bates Clark award given every other year to the American economist under 40 who has made the most significant contributions to the field. He served as a member (1993-1995) and then chairman of President Clinton’s Council of Economic Advisers and as a member of his cabinet. He was Chief Economist and Senior Vice-President of the World Bank (1997 to 2000). His prior academic appointments include professorships at Yale, Princeton, Stanford and Oxford universities. Stiglitz’s voluminous publications include his recent

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Joseph Stiglitz (continued)

books: The Roaring Nineties (2003) and Globalization and Its Discontents (2002) -- both published by W.W. Norton, and with Bruce Greenwald, Towards a New Paradigm in Monetary Economics (Cambridge University Press, 2003). Detailed information about his publications and activities can be consulted at www.josephstiglitz.com.

2:00 – 4:30 pm Policy/Practitioner Panel Increasing Access to Financing in Emerging Markets Chair: Silvina Vatnick, World Bank

Biography: Silvina Vatnick is a Lead Financial Economist at the World Bank working in both PREM (Poverty Reduction & Economic Management) and PSD (Private Sector Development. She has experience in South America, Western Africa, North America, Argentina, Brazil, Mexico, Nigeria, United States, Central America, Central Asia, East Asia, Europe. Prior to working at the World Bank, Ms. Vatnick worked at the International Monetary Fund as an economist and has been an Instructor at the University of Buenos Aires, and at Columbia University in the Department of Economics and the Business School. She was graduated with a Bachelor of Science in Economics from the University of Buenos, a Masters Degree in Macro Economics & International Relations from Columbia University and a Degree in Finance from the Stern School of Business at New York University.

Panelists:

• Reena Aggarwal, MIT/Georgetown

Biography: Visiting Professor of Finance, MIT- Sloan School of Management Stallkamp Faculty Fellow and Professor of Finance, Georgetown University. Professor Aggarwal specializes in international stock markets, microstructure of stock exchanges and initial public offerings. Her current research focuses on mutual fund investments in international markets, corporate governance, and public offerings. Her current research focuses on the capital raising process both in domestic and international financial markets. She is examining the relationship between corporate governance, access to capital markets, and valuation. She teaches financial management and a course on Investment Banking and Going Public. She has been named among "Outstanding Faculty" in the Business Week Guide to the Best Business Schools. Her papers have been published in the Journal of Finance, Journal of Financial Economics and Journal of Financial and Quantitative Analysis among others. She was awarded the Faculty Research Award in 2000 and in 1999. In 2003 she received the Allan N. Nash Distinguished Doctoral Graduate Award, University of Maryland. She has held various positions including Interim Dean of the McDonough School of Business (2004-2005); Visiting Professor of Finance at MIT's Sloan School of Management (2005-2006); Visiting Research Scholar at the International Monetary Fund (2004, 2003); Academic Fellow at the U.S. Securities and Exchange Commission (1997-1999). As a Fulbright Scholar in Brazil and Chile Dr. Aggarwal examined stock markets and privatization programs. She has worked on major consulting projects sponsored by Credit Suisse, Wilmer Cutler Pickering Hale and Dorr, NERA Economic Research, the World Bank, IMF, IFC, IDB, The Nasdaq Stock Market, United Nations, U.S. Small Business Administration, and U.S. AID among others.

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• Richard Frank, Darby Overseas

Biography: Mr. Frank is Darby's Chief Executive Officer, responsible for management of firm-wide activities and Chairman on the firm's Private Equity, Mezzanine Finance and Venture Capital Investment Committees. Mr. Frank joined Darby in July 1997 after a long and distinguished career at the World Bank and International Finance Corporation (IFC) in Washington, D.C. In his last assignment he chaired the Private Sector Group, coordinating the private sector activities of the World Bank, IFC, and the Multilateral Investment Guarantee Agency (MIGA). During his career at the World Bank Group as Managing Director, Mr. Frank oversaw the South Asia and Latin America operations and chaired the Banks Finance Committee. At the IFC, Mr. Frank served as CFO leading the Corporation to become an AAA borrower and securing two capital increases. Earlier in his Bank Group career, he was active in project and investment work throughout Latin America, Asia, the Middle East and Eastern Europe. Mr. Frank is a Director of Templeton International Funds and on the Boards of several Latin American companies and banks. He is the Chairman of the Latin American Venture Capital Association. Mr. Frank serves on the Board of Georgetown University; the International Strategic Board of Banco Finantia, S.A. (Portugal); Inter-American Dialogue; Institute of International Finance and Bretton Woods Committee. He earned a Bronze Star for his service as Captain in Vietnam. Mr. Frank holds a BS in Mechanical Engineering from the S D School of Mines and Technology and an MS from the Sloan School of Management at the Massachusetts Institute of Technology.

• Ali Kucukcolak, Istanbul Stock Exchange

Biography: Director, Research Department, Istanbul Stock Exchange. Graduated from the Law Faculty of the University of Istanbul and obtained an MA in “Economics Capital Market & Stock Exchange” from the same University. He also holds an MA in “Finance Law” and Ph.D. in “Policy of Economics” from the University of Marmara/Istanbul. He is a member of the Union of the Certified Public Accountants of Turkey having a “Certified Public Accountant License” and has a “Attorneyship License” from the Istanbul Bar. Prior to joining the Istanbul Stock Exchange (ISE) as an inspector in November 1990, had an experience as a lawyer. Established a “databank and financial analyses center” for the ISE where he held the position of Assistant Director of the Listing Department mainly responsible from the evaluation of the listing applications of the publicly held companies. Mr. Kucukcolak, who was promoted to his current post as Director of Research Department in 2002, is mainly responsible for preparing development and feasibility reports to the management in developing new products and markets; research report on the sector as well as the ISE Quarterly Review. His recent research interests are on SMEs and corporate governance. He also participated in the project with OECD on the SME development model for Turkey. He had a published book titled “Finance Solutions in Capital Market for Small and Medium Sized Enterprises (SMEs)” and over 30 articles and reports on various capital market issues published or presented in the international business environment.

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• Rumi Masih, Goldman Sachs

Biography: Rumi is a Vice President in the Global Investment Strategies group, where he serves as an Econometrician and Research Strategist. In this role, he is responsible for servicing key central bank clients and aiding product side developments for our internal management process. Rumi joined Goldman Sachs Asset Management in 2005 after spending eight years on the broker/dealer side of Goldman Sachs & Co. Previously, Rumi was the Global Econometrician for both the Global Economics Research and Quantitative Equity Strategy groups. He was responsible for developing various quantitative models, supporting GS trading and strategy research. Along with his collaborators, Rumi was part of a team that ranked first in emerging markets currency strategy by the Institutional Investor for three consecutive years (1998-2000). Rumi completed a PhD in econometrics from the University of Cambridge.

• Michael O’Sullivan, State Street Global Markets

Biography: Michael was educated at University College Cork, Ireland and Balliol College, Oxford from where he obtained his masters and D.Phil degrees as a Rhodes Scholar. He has lectured economics and finance at Oxford and Princeton universities. Michael previously worked as a strategist for Goldman Sachs International, UBS Warburg and Commerzbank Securities before joining State Street Global Markets in 2003. He is author of 'Ireland and the Global Question' (forthcoming in June 2006 from Cork University Press and Syracuse University Press in the US).

• Anthony Thompson, World Bank

• Paulo Vieira da Cunha, ILAS, Columbia University Paulo Vieira da Cunha is a Visiting Scholar at the Institute for Latin American Studies at Columbia University and a consultant to the World Bank. For nearly a decade he produced and managed research on Latin America for the global securities industry first at Lehman Brothers and later at HSBC where he managed research teams in Buenos Aires, Mexico City, New York and São Paulo. Mr Vieira da Cunha is a frequent speaker at professional, academic and legislative seminars and appears regularly in Bloomberg-TV, CNN-Latin America, Globo News (Cable) and Brazilian newspapers. He is a Director of the Brazilian American Chamber of Commerce and of the Brazil Program at the Woodrow Wilson Institute in Washington DC. He is also associated with the joint Columbia University – Council of the Americas Brazil Study Group. Mr Vieira da Cunha had a distinguished career at the World Bank where he worked in close association with Chief Economist Michael Bruno. Earlier in his career he held senior positions in the government of the State of São Paulo. He participated in the preparation of the Cruzado Plan and was a researcher at major Brazilian research institutions, including IPEA in Rio de Janeiro and CEBRAP in São Paulo, in addition to holding the post of Associate Professor of Economics at the Federal University of Rio de Janeiro. For several years he was editor in chief of Pesquisa e Planejamento Economico, the leading Brazilian academic publication in economics. In addition to his writings for the market he has over 50 publications in areas of labor economics, the economics of inflation and macroeconomics generally, and a Ph.D. degree from the University of California at Berkeley.

4:30 pm

Closing Remarks