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The article presents commentary from Ananth Madhavan about a paper written by Kumar Venkataraman entitled "Automated Versus Floor Trading: An Analysis of Execution Costs on the Paris and New York Exchanges," which appeared in the August, 2001 issue of the "Journal of Finance." In that paper Venkataraman concluded that automated stock exchanges could not yet match the benefits afforded by floor traders on traditional exchanges. The author of the current paper raises questions about some of Venkataraman's interpretations.

A global trend towards automated trading systems raises the important question of whether execution costs are, in fact, lower than on trading floors. This paper compares the trade execution costs of similar stocks in an automated trading structure (Paris Bourse) and a floor-based trading structure (NYSE). Results indicate that execution costs are higher in Paris than in New York after controlling for differences in adverse selection, relative tick size, and economic attributes across samples. These results suggest that the present form of the automated trading system may not be able to fully replicate the benefits of human intermediation on a trading floor. [ABSTRACT FROM AUTHOR]

Using a sample of small firms that defaulted on their bank debt in France, Germany, and the United Kingdom, we find that large differences in creditors' rights across countries lead banks to adjust their lending and reorganization practices to mitigate costly aspects of bankruptcy law. In particular, French banks respond to a creditor-unfriendly code by requiring more collateral than lenders elsewhere, and by relying on collateral forms that minimize the statutory dilution of their claims in bankruptcy. Despite such adjustments, bank recovery rates in default remain sharply different across the three countries, reflecting very different levels of creditor protection. [ABSTRACT FROM AUTHOR]

We investigate how the deregulation of the French banking industry in the 1980s affected the real behavior of firms and the structure and dynamics of product markets. Following deregulation, banks are less willing to bail out poorly performing firms and firms in the more bank-dependent sectors are more likely to undertake restructuring activities. At the industry level, we observe an increase in asset and job reallocation, an improvement in allocative efficiency across firms, and a decline in concentration. Overall, these findings support the view that a more efficient banking sector helps foster a Schumpeterian process of “creative destruction.” [ABSTRACT FROM AUTHOR]

This article examines a new database that details corporate risk management activity in the North American gold mining industry. I find little empirical support for the predictive power of theories that view risk management as a means to maximize shareholder value. However, firms whose managers hold more options manage less gold price risk, and firms whose managers hold more stock manage more gold price risk, suggesting that managerial risk aversion may affect corporate risk management policy. Further, risk management is negatively associated with the tenure of firms' CFOs, perhaps reflecting managerial interests, skills, or preferences. [ABSTRACT FROM AUTHOR]

This article examines whether capital flow restrictions, originally enacted for balance of payments reasons, also had the intended effect of isolating the national segments of the international equity market. Specific focus is given to measures adopted in the U.S., Great Britain and France. Arbitrage would assure that the market price of a security in one country would be equal to the market price of the same security in the second country, given that there are instantaneous information flows and no barriers to capital movements. However, the prices for a given security differs between markets, and such price differentials can be viewed as indicators of the impact of different capital control measures.

As noted earlier, the purpose of this study is to analyze the market model with respect to a large foreign stock market sample, to comment upon our findings and, when possible, analyze comparative results with U.S. studies. This necessitated the establishment and refinement of a major data base for French securities. This data base consisting of several hundred common stocks and also numerous industry indices is now available for future research. [ABSTRACT FROM AUTHOR]

The article focuses on a study that measured the investment performance of French mutual funds, as examples of internationally diversified portfolios. The article examines the differences between French mutual funds, or SICAV, and mutual funds found in the United States. One of the differences between the two is that SICAV hold both domestic and foreign securities, with the largest foreign positions in stocks and bonds listed on the New York Stock Exchange. Another difference is that most SICAVs have been established, marketed and managed by French banks, which is a practice not allowed under U.S. law.

The article focuses on variable return bonds. Particular attention is given to how this relates to French investors. A variable return bond offers the buyer a minimum interest return and a par redemption value. In addition, either the interest or the redemption value or both may be made greater by some agreed reference index. The variability of return can function only in the upward direction. The article discusses is the development of variable return bonds in France, private issues of variable-return bonds, and characteristics of variable-return bonds.