This document analyzes how different measures of market concentration (the Herfindahl-Hirschman Index and the Dominance Index) explain investment decisions of Mexican manufacturing firms. It reviews relevant literature on market concentration measures and their relationship to investment. The authors use data from Mexico's 2003 Economic Census to construct representative firms for econometric analysis. Regression results suggest that the Dominance Index may better explain investment decisions of Mexican firms compared to the Herfindahl-Hirschman Index. Overall, the results indicate that higher market concentration is associated with lower investment.
Teece's 1985 paper critiques Hymer's emphasis on market power over efficiency in analyzing multinational enterprises (MNEs). Teece argues that MNEs vary in form and motivation, pursuing both efficiency and rent extraction. He identifies three issues with Hymer's analysis: it overlooks efficiency motivations for foreign direct investment, oversimplifies host country controls on MNEs, and underemphasizes dynamic considerations like how market power and efficiency roles may change over time. Empirical literature on MNE impact is mixed, with some evidence they may increase concentration more in developing countries but also spur productivity through knowledge spillovers. FDI in Latin America is heterogeneous but centered on vertical investments, with
Business strategies in transition economiesHusnain Haider
This review summarizes a book that analyzes how unique institutions in transition economies influence business behaviors and strategies. The bulk of the book examines how institutions shape the strategies of different types of firms operating in transition economies, including state-owned enterprises, privatized firms, and entrepreneurial start-ups. It also discusses strategies of foreign firms exporting to or investing in transition economies. The review finds the book provides valuable insights for business executives seeking to understand potential competitors, collaborators, suppliers and customers in transition economies.
This document summarizes a study that examines the determinants of growth in small and medium enterprises (SMEs) in Central and Eastern Europe. The study uses a panel dataset of 560 fast-growing SMEs from six transition economies over five years. It finds that firm size, as measured by total assets, is an important factor in explaining growth in sales revenues. Additionally, factors like leverage, liquidity, growth opportunities, internally generated funds, and productivity are found to influence a firm's growth performance. In contrast, age and ownership do not appear to impact growth. The results suggest that SMEs rely heavily on internal financing to support asset growth but require external capital to fuel sales growth.
This document investigates how profitability of cement companies in Pakistan is influenced by selected financial and economic indicators. It analyzes data from 12 cement companies over 2005-2008. The study finds that only GDP growth has a significant positive impact on profitability. Financial leverage seems to negatively impact profitability, contrary to some theories. Liquidity and sales growth show weak positive relationships with profitability. Average share price also shows a weak positive linkage. The results indicate inconsistencies in company cost structures and that share prices may not fully reflect financial performance. The conclusions could help cement companies better manage profitability.
This document summarizes a study examining what factors determine firm size across industries and countries. The study finds that countries with more efficient judicial systems tend to have larger firms. When accounting for institutional differences, richer countries or those with more developed capital markets do not necessarily have larger firms. The strongest relationship is that industries with low physical capital intensity have larger firms in countries with more efficient judicial systems, supporting theories that emphasize legal protection of "critical resources" like intellectual property.
Effective tax rates and the gç£industrial policy gç¥ hypothesis evidence from...Ronald Girsang
This document summarizes prior research on effective tax rates (ETRs) paid by firms and examines ETRs for Malaysian firms from 1990-1999. It finds that manufacturing firms and hotels in Malaysia paid significantly lower ETRs, consistent with Malaysia's industrial policy of promoting those sectors. Additionally, larger Malaysian firms paid lower ETRs, unlike findings for US firms. The results provide insights into how industrial policy and firm characteristics influence taxation in Malaysia compared to Western countries like the US.
This document discusses how ownership influences business growth through competitive actions. It argues that private owners (both foreign and local) are better able to employ aggressive competitive actions to grow business than state owners. Firms with multiple owners, like international joint ventures, are less able to implement actions that drive growth compared to full ownership. The paper finds support for these arguments in a study of 106 firms in China, showing the principal-principal perspective better explains governance and competition in emerging markets than the principal-agent perspective.
This quantitative analysis report summarizes 16 literature reviews on various economic topics. The reviews analyzed studies on topics such as hypermarket retail store efficiency in Portugal, entrepreneurial environment in Sudan, foreign direct investment in India, and determinants of bank performance in Latin America. The report also includes a descriptive data analysis of FDI, GDP, M2, and human expenditure for a country, as well as regression analysis relating these variables. References are provided for the literature reviewed.
Teece's 1985 paper critiques Hymer's emphasis on market power over efficiency in analyzing multinational enterprises (MNEs). Teece argues that MNEs vary in form and motivation, pursuing both efficiency and rent extraction. He identifies three issues with Hymer's analysis: it overlooks efficiency motivations for foreign direct investment, oversimplifies host country controls on MNEs, and underemphasizes dynamic considerations like how market power and efficiency roles may change over time. Empirical literature on MNE impact is mixed, with some evidence they may increase concentration more in developing countries but also spur productivity through knowledge spillovers. FDI in Latin America is heterogeneous but centered on vertical investments, with
Business strategies in transition economiesHusnain Haider
This review summarizes a book that analyzes how unique institutions in transition economies influence business behaviors and strategies. The bulk of the book examines how institutions shape the strategies of different types of firms operating in transition economies, including state-owned enterprises, privatized firms, and entrepreneurial start-ups. It also discusses strategies of foreign firms exporting to or investing in transition economies. The review finds the book provides valuable insights for business executives seeking to understand potential competitors, collaborators, suppliers and customers in transition economies.
This document summarizes a study that examines the determinants of growth in small and medium enterprises (SMEs) in Central and Eastern Europe. The study uses a panel dataset of 560 fast-growing SMEs from six transition economies over five years. It finds that firm size, as measured by total assets, is an important factor in explaining growth in sales revenues. Additionally, factors like leverage, liquidity, growth opportunities, internally generated funds, and productivity are found to influence a firm's growth performance. In contrast, age and ownership do not appear to impact growth. The results suggest that SMEs rely heavily on internal financing to support asset growth but require external capital to fuel sales growth.
This document investigates how profitability of cement companies in Pakistan is influenced by selected financial and economic indicators. It analyzes data from 12 cement companies over 2005-2008. The study finds that only GDP growth has a significant positive impact on profitability. Financial leverage seems to negatively impact profitability, contrary to some theories. Liquidity and sales growth show weak positive relationships with profitability. Average share price also shows a weak positive linkage. The results indicate inconsistencies in company cost structures and that share prices may not fully reflect financial performance. The conclusions could help cement companies better manage profitability.
This document summarizes a study examining what factors determine firm size across industries and countries. The study finds that countries with more efficient judicial systems tend to have larger firms. When accounting for institutional differences, richer countries or those with more developed capital markets do not necessarily have larger firms. The strongest relationship is that industries with low physical capital intensity have larger firms in countries with more efficient judicial systems, supporting theories that emphasize legal protection of "critical resources" like intellectual property.
Effective tax rates and the gç£industrial policy gç¥ hypothesis evidence from...Ronald Girsang
This document summarizes prior research on effective tax rates (ETRs) paid by firms and examines ETRs for Malaysian firms from 1990-1999. It finds that manufacturing firms and hotels in Malaysia paid significantly lower ETRs, consistent with Malaysia's industrial policy of promoting those sectors. Additionally, larger Malaysian firms paid lower ETRs, unlike findings for US firms. The results provide insights into how industrial policy and firm characteristics influence taxation in Malaysia compared to Western countries like the US.
This document discusses how ownership influences business growth through competitive actions. It argues that private owners (both foreign and local) are better able to employ aggressive competitive actions to grow business than state owners. Firms with multiple owners, like international joint ventures, are less able to implement actions that drive growth compared to full ownership. The paper finds support for these arguments in a study of 106 firms in China, showing the principal-principal perspective better explains governance and competition in emerging markets than the principal-agent perspective.
This quantitative analysis report summarizes 16 literature reviews on various economic topics. The reviews analyzed studies on topics such as hypermarket retail store efficiency in Portugal, entrepreneurial environment in Sudan, foreign direct investment in India, and determinants of bank performance in Latin America. The report also includes a descriptive data analysis of FDI, GDP, M2, and human expenditure for a country, as well as regression analysis relating these variables. References are provided for the literature reviewed.
Factors affecting stock market prices in amman stock exchangeAlexander Decker
This document summarizes a study that examined factors affecting stock market prices on the Amman Stock Exchange. The study used surveys to collect data on how internal factors like dividend policy, firm size, management quality, and financial situation impact stock prices. It found that inflation had the most impact on prices, while the nature of the firm's business had the least. The study recommended that companies get more involved in drafting laws and regulations to strengthen their role in the stock market.
This document summarizes a research paper that examines the relationship between product market strategies (innovator vs imitator), financing strategies (venture capital vs other), and product market outcomes. The authors find that innovator firms are more likely to obtain venture capital financing than imitator firms. They also find that venture capital is associated with a significantly faster time to market, especially for innovator firms. This suggests venture capital plays an important role in supporting innovative companies.
This document discusses integrating the theories of entrepreneurship and the economic theory of the firm. It argues that the concept of entrepreneurship as judgment, where judgment cannot be purchased on the market, means that entrepreneurs need firms to carry out their function. The document reviews how this notion of entrepreneurship as judgment can illuminate key themes in the modern economic theory of the firm, such as the existence of firms, boundaries of firms, and internal organization of firms. It introduces the distinction between productive and destructive entrepreneurship and how this can help understand firm organization.
This document discusses a study on the determinants of capital structure for agriculture sector firms in India. It finds that return on net worth, non-debt tax shield, profitability, and growth are positively related to financial leverage for these firms. Meanwhile, return on capital employed, interest cover ratio, collateralizable value of assets, and size are negatively related to financial leverage. The study uses correlation and regression analysis of data from 18 agriculture sector firms over 9 years to analyze the relationships between leverage and various firm-specific determinants.
Event Study: Market Reactions to New CEO AnnouncementZhuting Meng
- The document analyzes stock market reactions to announcements of new CEOs for 50 US listed companies over 5 years. It finds an average cumulative abnormal return of 1.5% around the announcement dates, indicating market movement with 93.74% certainty.
- It examines factors like past company performance, size, CEO characteristics, and internal vs. external appointments to explain differences in market reactions. Subgroup analyses are conducted based on past performance and voluntary vs. forced departures.
- The results suggest markets react differently to internal vs. external CEO nominations, especially when past performance was poor and departure was forced, or performance was good and departure was voluntary.
This document provides an overview of intellectual capital reporting in Europe. It discusses efforts in Europe to develop guidelines for reporting on intangible assets and knowledge resources, which are important drivers of organizational performance but often not captured in traditional financial reporting. Two major reporting frameworks discussed are the MERITUM guidelines from Europe, which classify intangibles into human, organizational, and customer capital, and the Danish guidelines, which emphasize the dynamic interactions and narratives around knowledge resources. The document also outlines what types of intellectual resources and indicators companies could potentially report on to provide insight into their knowledge assets and management challenges.
This document summarizes a paper that examines behavioral finance versus the efficient market hypothesis and how they can be used to facilitate capital gains. It discusses how behavioral finance incorporates psychological factors that can lead to market inefficiencies and opportunities for gain, unlike the efficient market theory. The paper will analyze works supporting both theories to argue that incorporating behavioral finance can help assess if price movements reflect real changes in company value or irrational investor behavior.
An empirical assessment of the effect of corporate restructuring in the banki...Alexander Decker
This document summarizes a study that empirically assessed the effect of corporate restructuring in Nigeria's banking industry on economic growth from 1990-2009. The study found that foreign direct investment, aggregate capital to the private sector, pre-tax profits for all banks, and number of bank employees significantly influenced economic growth in Nigeria. It recommends that the Central Bank of Nigeria encourage banks to invest profits in the real economy to boost productive capacity and growth. The introduction provides background on banking industry restructuring through mergers and acquisitions in Nigeria and their theoretical drivers of economic growth.
This presentation by Joshua WRIGHT, Professor, George Mason University and Executive Director of the Global Antitrust Institute, was made during the discussion “Market Concentration” held at the 129th meeting of the OECD Competition Committee on 7 June 2018. More papers and presentations on the topic can be found out at oe.cd/2gw.
This valuation report estimates the fair market value of Sample Industries, Inc. as of June 30, 2010. The report was prepared by American Fortune Business Valuations for Timothy Jones, CEO of Sample Industries, to assist with estate planning purposes. Various valuation approaches were used including asset, income, and market approaches. Comparable company and transaction data were analyzed. Financial statement projections were also created. The concluded fair market value of Sample Industries was $16,800,000 based on the analyses presented in the report.
In recent years, the number of delisting shows dramatically increased in the world particularly
in China. This study will discuss on delisting focus in the context of China’s New Third Board Market (NTBM).
Furthermore, the delisted firms in China's New Third Board Market (NTBM) shows dramatically increased.
Moreover, this research is to make propositional statements and propose a framework to be tested empirically
in future studies. Based on agency theory, we proposed that there will be positive relationship among board
size, board independence,
This document summarizes a journal article that examines how firms' marketing spending before initial public offerings (IPOs) can impact investor responses to the IPO. The summary is:
[1] The article analyzes how pre-IPO marketing spending may help reduce IPO underpricing and increase trading volume by providing information to investors and reducing uncertainty about firm value.
[2] Results from analyzing a large dataset of IPOs from 1996-2005 found that higher pre-IPO marketing spending is associated with lower underpricing and higher trading, though the effects vary depending on firm efficiency and market conditions.
[3] The findings suggest prudent investors could better identify promising IPOs by considering both pre
Stock exchanges face challenges in innovating due to business culture, regulations, and competitive forces. The paper discusses how stock exchanges have innovated in listings and trading, with examples like introducing new security types and order types. However, successful innovation requires an ecosystem with expertise, funding, an open culture, and a supportive regulatory environment. Without addressing these conditions, stock exchanges may struggle to overcome challenges to innovation.
The authors analyze a large stratified random sample of firms that provided them with measures of performance and each firm’s top manager’s perception of the severity of business environment constraints faced by his/her firm. Unlike most existing studies that rely on external and aggregated proxy measures of the business environment, defined to include legal and institutional features, the authors have information from each surveyed firm.
The authors find that foreign ownership and competition have an impact on performance – measured as the level of sales controlling for inputs. Export orientation of the firm does not have an effect on performance once ownership is taken into account. When analyzing the impact of perceived constraints, they show that few retain explanatory power once they are introduced jointly rather than one at a time, or when country, industry and year fixed effects are introduced. Indeed, country fixed effects largely absorb the explanatory power of the constraints faced by individual firms. Replicating the analysis with commonly used country-level indicators of the business environment, they do not find much of a relationship between constraints and performance.
Authored by: Simon Commander, Jan Svejnar
Published in 2007
This document summarizes a study examining the impact of mergers and acquisitions on research and development (R&D) intensity within high-tech industries from 1990-2014. The study uses an event study methodology to analyze stock price reactions around merger announcements. Key findings include:
1) 31.1% of acquiring firms saw positive abnormal stock returns around announcements, while 69% saw negative returns, surprisingly indicating investor pessimism about mergers.
2) 91.3% of target firms saw positive abnormal returns, as expected given they were being acquired.
3) The study aims to determine if event studies can help antitrust agencies evaluate potential pro-competitive or anti-competitive effects of mergers in innovative sectors
Firm characteristics and the extent of voluntary disclosure the case of egyptAlexander Decker
This document summarizes a research study that investigated the association between voluntary disclosure levels in annual reports and firm characteristics of 50 Egyptian companies listed on the Egyptian Stock Exchange from 2007-2010. The study found that firm size and profitability had a significant positive association with voluntary disclosure levels, while auditor size and firm age did not have a significant association. The document provides background on voluntary disclosure and its importance for investors, and reviews prior literature on how firm characteristics may influence disclosure levels. It describes the hypotheses tested regarding the relationship between disclosure and each firm characteristic.
Theories of Foreign Direct Investment- A Comparative Analysispaperpublications3
Abstract: The theories of Foreign Direct Investment explain the utility of foreign investment in the developing country and that have various views to expand the business of local market in these countries. As we know that the Foreign Direct Investment internationalizes the local firms, brings foreign investment which leads to the development, further investment opportunities by the foreign companies and it improves growth rate also etc.
The purpose of this research paper is to know the roles of Foreign Direct Investment theories and identify the similarities and differences in that. Researcher has studied the some theories to get an ideas regarding investment at international level made by the developed countries. As per the first theory named ‘Production Cycle Theory of Vernon’ states that in the first stage, foreign companies establish their plants in local country, start operational activities for local people and exports surplus to the other countries. The second theory named ‘The theory of Exchange Rates on Imperfect Markets’ explains that exchange increases stimulated Foreign Direct Investment made by US, while a foreign currency appreciation has reduced American Foreign Direct Investment. The third theory named ‘Internationalization Theory’ describes that domestic company under its conditions internationalizes its marketing and other operation activities in the foreign market through Foreign Direct Investment and the last theory named ‘Dunning’s Electic Theory’ covers some advantages like for e.g. Ownership, Location and Internationalization etc. which are derived by combining the country locations. The following are ownership advantages; Monopoly advantages in the form of privileged access to markets through ownership of natural limited resources, patents, trademarks, technology, knowledge broadly defined so as to contain all forms of innovation activities, Economics of large size such as economies of scale and scope, greater access to financial capital. ‘Location’ advantage includes; the economic benefit consists of quantitative and qualitative factors of production, cost of transport, telecommunications, market size etc. Political advantages; the common and specific government policies that affect Foreign Direct Investment flows and social advantages; includes distance between the home and home countries, cultural diversity, attitude towards strangers etc.
Comparisons of Foreign Multinationals and Local Firms in Asian Manufacturing...Nicha Tatsaneeyapan
This document summarizes a paper that compares economic characteristics of foreign multinational corporations (MNCs) and local firms in five Asian countries over time. The paper finds that foreign MNCs generally had larger shares of exports but smaller shares of employment and production compared to local firms. Foreign MNCs also tended to have higher labor productivity, capital productivity, capital intensity, profit rates, and import/export levels. Differences between wholly foreign and partially foreign firms, and between MNCs from different home countries, were also statistically significant in many cases. The paper aims to provide a quantitative analysis of differences between foreign and local firms in Asian manufacturing over time.
International Financial Institutions, Middle East, North Africa a primer for ...Dr Lendy Spires
Preface What is this primer? The purpose of this Primer is to shed light on the operations and impacts of international financial institutions (IFIs) that are active in the Middle East and North Africa (MENA), such as the World Bank and the International Monetary Fund, and to reveal how individuals and communities can hold those institutions accountable. The Primer aims at helping civil society groups in the region to more actively and critically engage with those IFIs in setting the development agenda and shaping policies and investments in their countries. What is the “MENA region”? BIC’s MENA program considers the region to be made up of the following predominantly Arabic-speaking countries: Morocco, Algeria, Tunisia, Libya, Egypt, West Bank and Gaza, Jordan, Syria, Lebanon, Iraq, Kuwait, Bahrain, Qatar, United Arab Emirates, Oman, Yemen, and Saudi Arabia. BIC also includes Iran and Israel within its MENA program. However, the countries defined as “MENA” vary from one institution to another, either for political reasons or simply because of the geographic mandate of the institution. The table on Page 6 shows the countries considered part of the MENA region by each IFI discussed in this Primer. The wide range of economic and political conditions of the countries in the MENA region means that relations with IFIs vary considerably from one government to the next. Conflict-affected countries such as Lebanon, Iraq and Palestine, depend to a great extent on IFIs for financing and coordination of donor activities. A smaller number of the region’s countries that are considered “poor”, like Yemen, also rely fairly heavily on financing from IFIs. However, most countries in MENA are considered “middle income countries” by IFIs, and thus are not eligible for grants or the lowest-interest loans that the institutions offer. These countries are also better able to turn to other sources like private banks and commercial investors, to borrow money. Still other countries in the region are world-renowned for their oil riches, and thus are actually in the position of being “donor” countries rather than borrowers at
Factors affecting stock market prices in amman stock exchangeAlexander Decker
This document summarizes a study that examined factors affecting stock market prices on the Amman Stock Exchange. The study used surveys to collect data on how internal factors like dividend policy, firm size, management quality, and financial situation impact stock prices. It found that inflation had the most impact on prices, while the nature of the firm's business had the least. The study recommended that companies get more involved in drafting laws and regulations to strengthen their role in the stock market.
This document summarizes a research paper that examines the relationship between product market strategies (innovator vs imitator), financing strategies (venture capital vs other), and product market outcomes. The authors find that innovator firms are more likely to obtain venture capital financing than imitator firms. They also find that venture capital is associated with a significantly faster time to market, especially for innovator firms. This suggests venture capital plays an important role in supporting innovative companies.
This document discusses integrating the theories of entrepreneurship and the economic theory of the firm. It argues that the concept of entrepreneurship as judgment, where judgment cannot be purchased on the market, means that entrepreneurs need firms to carry out their function. The document reviews how this notion of entrepreneurship as judgment can illuminate key themes in the modern economic theory of the firm, such as the existence of firms, boundaries of firms, and internal organization of firms. It introduces the distinction between productive and destructive entrepreneurship and how this can help understand firm organization.
This document discusses a study on the determinants of capital structure for agriculture sector firms in India. It finds that return on net worth, non-debt tax shield, profitability, and growth are positively related to financial leverage for these firms. Meanwhile, return on capital employed, interest cover ratio, collateralizable value of assets, and size are negatively related to financial leverage. The study uses correlation and regression analysis of data from 18 agriculture sector firms over 9 years to analyze the relationships between leverage and various firm-specific determinants.
Event Study: Market Reactions to New CEO AnnouncementZhuting Meng
- The document analyzes stock market reactions to announcements of new CEOs for 50 US listed companies over 5 years. It finds an average cumulative abnormal return of 1.5% around the announcement dates, indicating market movement with 93.74% certainty.
- It examines factors like past company performance, size, CEO characteristics, and internal vs. external appointments to explain differences in market reactions. Subgroup analyses are conducted based on past performance and voluntary vs. forced departures.
- The results suggest markets react differently to internal vs. external CEO nominations, especially when past performance was poor and departure was forced, or performance was good and departure was voluntary.
This document provides an overview of intellectual capital reporting in Europe. It discusses efforts in Europe to develop guidelines for reporting on intangible assets and knowledge resources, which are important drivers of organizational performance but often not captured in traditional financial reporting. Two major reporting frameworks discussed are the MERITUM guidelines from Europe, which classify intangibles into human, organizational, and customer capital, and the Danish guidelines, which emphasize the dynamic interactions and narratives around knowledge resources. The document also outlines what types of intellectual resources and indicators companies could potentially report on to provide insight into their knowledge assets and management challenges.
This document summarizes a paper that examines behavioral finance versus the efficient market hypothesis and how they can be used to facilitate capital gains. It discusses how behavioral finance incorporates psychological factors that can lead to market inefficiencies and opportunities for gain, unlike the efficient market theory. The paper will analyze works supporting both theories to argue that incorporating behavioral finance can help assess if price movements reflect real changes in company value or irrational investor behavior.
An empirical assessment of the effect of corporate restructuring in the banki...Alexander Decker
This document summarizes a study that empirically assessed the effect of corporate restructuring in Nigeria's banking industry on economic growth from 1990-2009. The study found that foreign direct investment, aggregate capital to the private sector, pre-tax profits for all banks, and number of bank employees significantly influenced economic growth in Nigeria. It recommends that the Central Bank of Nigeria encourage banks to invest profits in the real economy to boost productive capacity and growth. The introduction provides background on banking industry restructuring through mergers and acquisitions in Nigeria and their theoretical drivers of economic growth.
This presentation by Joshua WRIGHT, Professor, George Mason University and Executive Director of the Global Antitrust Institute, was made during the discussion “Market Concentration” held at the 129th meeting of the OECD Competition Committee on 7 June 2018. More papers and presentations on the topic can be found out at oe.cd/2gw.
This valuation report estimates the fair market value of Sample Industries, Inc. as of June 30, 2010. The report was prepared by American Fortune Business Valuations for Timothy Jones, CEO of Sample Industries, to assist with estate planning purposes. Various valuation approaches were used including asset, income, and market approaches. Comparable company and transaction data were analyzed. Financial statement projections were also created. The concluded fair market value of Sample Industries was $16,800,000 based on the analyses presented in the report.
In recent years, the number of delisting shows dramatically increased in the world particularly
in China. This study will discuss on delisting focus in the context of China’s New Third Board Market (NTBM).
Furthermore, the delisted firms in China's New Third Board Market (NTBM) shows dramatically increased.
Moreover, this research is to make propositional statements and propose a framework to be tested empirically
in future studies. Based on agency theory, we proposed that there will be positive relationship among board
size, board independence,
This document summarizes a journal article that examines how firms' marketing spending before initial public offerings (IPOs) can impact investor responses to the IPO. The summary is:
[1] The article analyzes how pre-IPO marketing spending may help reduce IPO underpricing and increase trading volume by providing information to investors and reducing uncertainty about firm value.
[2] Results from analyzing a large dataset of IPOs from 1996-2005 found that higher pre-IPO marketing spending is associated with lower underpricing and higher trading, though the effects vary depending on firm efficiency and market conditions.
[3] The findings suggest prudent investors could better identify promising IPOs by considering both pre
Stock exchanges face challenges in innovating due to business culture, regulations, and competitive forces. The paper discusses how stock exchanges have innovated in listings and trading, with examples like introducing new security types and order types. However, successful innovation requires an ecosystem with expertise, funding, an open culture, and a supportive regulatory environment. Without addressing these conditions, stock exchanges may struggle to overcome challenges to innovation.
The authors analyze a large stratified random sample of firms that provided them with measures of performance and each firm’s top manager’s perception of the severity of business environment constraints faced by his/her firm. Unlike most existing studies that rely on external and aggregated proxy measures of the business environment, defined to include legal and institutional features, the authors have information from each surveyed firm.
The authors find that foreign ownership and competition have an impact on performance – measured as the level of sales controlling for inputs. Export orientation of the firm does not have an effect on performance once ownership is taken into account. When analyzing the impact of perceived constraints, they show that few retain explanatory power once they are introduced jointly rather than one at a time, or when country, industry and year fixed effects are introduced. Indeed, country fixed effects largely absorb the explanatory power of the constraints faced by individual firms. Replicating the analysis with commonly used country-level indicators of the business environment, they do not find much of a relationship between constraints and performance.
Authored by: Simon Commander, Jan Svejnar
Published in 2007
This document summarizes a study examining the impact of mergers and acquisitions on research and development (R&D) intensity within high-tech industries from 1990-2014. The study uses an event study methodology to analyze stock price reactions around merger announcements. Key findings include:
1) 31.1% of acquiring firms saw positive abnormal stock returns around announcements, while 69% saw negative returns, surprisingly indicating investor pessimism about mergers.
2) 91.3% of target firms saw positive abnormal returns, as expected given they were being acquired.
3) The study aims to determine if event studies can help antitrust agencies evaluate potential pro-competitive or anti-competitive effects of mergers in innovative sectors
Firm characteristics and the extent of voluntary disclosure the case of egyptAlexander Decker
This document summarizes a research study that investigated the association between voluntary disclosure levels in annual reports and firm characteristics of 50 Egyptian companies listed on the Egyptian Stock Exchange from 2007-2010. The study found that firm size and profitability had a significant positive association with voluntary disclosure levels, while auditor size and firm age did not have a significant association. The document provides background on voluntary disclosure and its importance for investors, and reviews prior literature on how firm characteristics may influence disclosure levels. It describes the hypotheses tested regarding the relationship between disclosure and each firm characteristic.
Theories of Foreign Direct Investment- A Comparative Analysispaperpublications3
Abstract: The theories of Foreign Direct Investment explain the utility of foreign investment in the developing country and that have various views to expand the business of local market in these countries. As we know that the Foreign Direct Investment internationalizes the local firms, brings foreign investment which leads to the development, further investment opportunities by the foreign companies and it improves growth rate also etc.
The purpose of this research paper is to know the roles of Foreign Direct Investment theories and identify the similarities and differences in that. Researcher has studied the some theories to get an ideas regarding investment at international level made by the developed countries. As per the first theory named ‘Production Cycle Theory of Vernon’ states that in the first stage, foreign companies establish their plants in local country, start operational activities for local people and exports surplus to the other countries. The second theory named ‘The theory of Exchange Rates on Imperfect Markets’ explains that exchange increases stimulated Foreign Direct Investment made by US, while a foreign currency appreciation has reduced American Foreign Direct Investment. The third theory named ‘Internationalization Theory’ describes that domestic company under its conditions internationalizes its marketing and other operation activities in the foreign market through Foreign Direct Investment and the last theory named ‘Dunning’s Electic Theory’ covers some advantages like for e.g. Ownership, Location and Internationalization etc. which are derived by combining the country locations. The following are ownership advantages; Monopoly advantages in the form of privileged access to markets through ownership of natural limited resources, patents, trademarks, technology, knowledge broadly defined so as to contain all forms of innovation activities, Economics of large size such as economies of scale and scope, greater access to financial capital. ‘Location’ advantage includes; the economic benefit consists of quantitative and qualitative factors of production, cost of transport, telecommunications, market size etc. Political advantages; the common and specific government policies that affect Foreign Direct Investment flows and social advantages; includes distance between the home and home countries, cultural diversity, attitude towards strangers etc.
Comparisons of Foreign Multinationals and Local Firms in Asian Manufacturing...Nicha Tatsaneeyapan
This document summarizes a paper that compares economic characteristics of foreign multinational corporations (MNCs) and local firms in five Asian countries over time. The paper finds that foreign MNCs generally had larger shares of exports but smaller shares of employment and production compared to local firms. Foreign MNCs also tended to have higher labor productivity, capital productivity, capital intensity, profit rates, and import/export levels. Differences between wholly foreign and partially foreign firms, and between MNCs from different home countries, were also statistically significant in many cases. The paper aims to provide a quantitative analysis of differences between foreign and local firms in Asian manufacturing over time.
International Financial Institutions, Middle East, North Africa a primer for ...Dr Lendy Spires
Preface What is this primer? The purpose of this Primer is to shed light on the operations and impacts of international financial institutions (IFIs) that are active in the Middle East and North Africa (MENA), such as the World Bank and the International Monetary Fund, and to reveal how individuals and communities can hold those institutions accountable. The Primer aims at helping civil society groups in the region to more actively and critically engage with those IFIs in setting the development agenda and shaping policies and investments in their countries. What is the “MENA region”? BIC’s MENA program considers the region to be made up of the following predominantly Arabic-speaking countries: Morocco, Algeria, Tunisia, Libya, Egypt, West Bank and Gaza, Jordan, Syria, Lebanon, Iraq, Kuwait, Bahrain, Qatar, United Arab Emirates, Oman, Yemen, and Saudi Arabia. BIC also includes Iran and Israel within its MENA program. However, the countries defined as “MENA” vary from one institution to another, either for political reasons or simply because of the geographic mandate of the institution. The table on Page 6 shows the countries considered part of the MENA region by each IFI discussed in this Primer. The wide range of economic and political conditions of the countries in the MENA region means that relations with IFIs vary considerably from one government to the next. Conflict-affected countries such as Lebanon, Iraq and Palestine, depend to a great extent on IFIs for financing and coordination of donor activities. A smaller number of the region’s countries that are considered “poor”, like Yemen, also rely fairly heavily on financing from IFIs. However, most countries in MENA are considered “middle income countries” by IFIs, and thus are not eligible for grants or the lowest-interest loans that the institutions offer. These countries are also better able to turn to other sources like private banks and commercial investors, to borrow money. Still other countries in the region are world-renowned for their oil riches, and thus are actually in the position of being “donor” countries rather than borrowers at
The document provides information about legislation and the legislative process in the UK. It discusses why new laws are needed, how Parliament makes laws through Acts of Parliament and delegated legislation, and the process bills go through to become Acts. It describes the roles of the House of Commons and House of Lords in creating legislation. It also outlines some criticisms of the legislative process and methods of controlling delegated legislation.
1) EuroGeographics is an association of 56 national mapping agencies in 45 European countries that works to bring interoperable geospatial reference data to benefit society.
2) The European Location Framework (E.L.F.) is a technical infrastructure that delivers authoritative, cross-border geospatial reference data for analyzing and understanding information connected to places and features.
3) E.L.F. will provide consistent geospatial reference data at global, regional, national, and local levels to support decision making and emergency response across Europe.
Proponiamo interventi di teambuilding, teamworking, leadership, comunicazione, gestione dei conflitti, negoziazione, diversity training, problem solving, coaching sia indoor sia outdoor.
Teoria e pratica vengono opportunamente miscelate dai nostri consulenti e formatori e le lezioni sono studiate per essere interessanti e interattive: i partecipanti vengono coinvoli in prima persona nell’esperienza diretta dell’insegnamento.
Bruno Meessen - Getting incentives right in public health systems in low-inco...RikuE
The document discusses improving incentives in public health systems in low-income countries through an organizational economic analysis. It proposes adopting a health district strategy with a referral hospital, health centers, and a district office to efficiently deliver primary health care in a decentralized manner. However, the low performance of government-owned health facilities may be partly due to issues with institutional arrangements like fixed salaries and a lack of accountability. The document puts forth several propositions, including linking funding to performance, to reform public health systems and give the health district strategy a better chance at success.
Este documento menciona varios lugares y sitios importantes de España como La Alhambra en Granada, la mezquita de Córdoba, Peñón de Ifach en Calpe y las Fallas de Valencia. También habla sobre la pradera de San Isidro en Madrid, el museo Reina Sofía, el acueducto de Segovia, Tazones en Asturias, el Camp Nou y el Bernabéu. Finalmente, describe lugares de interés en el pequeño pueblo de Villaviciosa de Odón como la cueva de la Mora,
Este documento menciona varios aspectos culturales típicos de España como fiestas populares como el Corpus Cristi, San Juan y el Carnaval, monumentos históricos como el Monasterio de Guadalupe y lugares emblemáticos de ciudades como Barcelona y Villaviciosa, y también describe trajes, comidas y celebraciones regionales características de Madrid, Galicia y Sevilla.
Las Tecnologias de Informacion y Comunicaciónkeyner96
Las Tecnologías de la Información y Comunicación (TIC) se refieren a las tecnologías utilizadas para almacenar, procesar y distribuir información. Proporcionan acceso a información, comunicación rápida e interactividad. Aportan grandes beneficios a la educación y la salud, pero también plantean desafíos como la falta de privacidad y el aislamiento.
1. The document discusses the importance of community relations for educational institutions in Nigeria. It notes that maintaining good relationships with host communities is vital for academic growth and development, as fracases between institutions and communities have become common.
2. It describes how community relations involves institutions understanding community needs and expectations, and participating in community activities. This helps protect the institution, increase enrollment, and create a supportive operating environment.
3. The document recommends some community relations strategies for educational institutions, like providing employment, admissions, and resources to local communities. It argues this would enhance institutions' performance and the development of education in Nigeria overall.
This document discusses the copper mining industry in Zambia and the impact of privatization and the recent copper boom. It notes that while copper mining is a major industry and employer in Zambia, providing over 10% of GDP, the development agreements signed with foreign investors provide them major tax breaks and exemptions. As a result, Zambia receives a relatively small portion of the revenue and profits from copper extraction. There are also concerns about environmental degradation and lack of benefits for local communities from the privatized mines. The document examines whether Zambians have truly benefited from the copper boom.
Revised RED présentation ATN at GHC 290507 reducedLisa Nichols
The document summarizes efforts to strengthen routine vaccination coverage in the districts of Niafunké and Goundam in Mali's Timbuktu region through implementation of the Reach Every District (RED) approach between 2005-2006. Key results included increasing vaccination coverage in Goundam from 15% to 70% and in Niafunké from 35% to 62%. The RED approach strengthened linkages between communities and health services and engaged partners at all levels of planning, implementation, monitoring and resource mobilization, leading to sustained higher vaccination rates. Lessons learned highlighted the importance of regular microplanning, performance agreements between partners, and community health workers in increasing coverage and reducing dropouts.
Kristine Farla's dissertation contains four empirical studies on how institutions and policies impact economic development. The studies find that:
1) Countries with stronger property rights, contract enforcement, and competition see greater financial development, even when controlling for financial policies.
2) Pro-business policies that support industry development, like innovation, have a stronger positive effect on growth than pro-market policies aimed at competition.
3) Previous findings that foreign direct investment negatively impacts domestic investment are sensitive to methodology. The dissertation finds foreign investment may actually stimulate domestic investment through technology spillovers.
4) Firm-level data shows investment is influenced by both micro and macro factors. Stronger property rights and less corruption encourage
07. the determinants of capital structurenguyenviet30
This document summarizes a research paper that investigates how firms in capital market-oriented economies (UK, US) and bank-oriented economies (France, Germany, Japan) determine their capital structures. Using panel data and regression analysis, the paper finds that firm size and tangibility of assets increase leverage, while profitability, growth opportunities, and share price performance decrease leverage in both types of economies. However, the impacts of some determinants vary between countries depending on differences in institutions and traditions. The paper also finds that firms have target leverage ratios but adjust to them at different speeds across countries.
This document summarizes several studies on capital structure and the determinants of a firm's capital structure. It discusses five empirical studies conducted between 1982-2004 that analyzed factors like firm size, growth opportunities, profitability, and country-level institutional differences that influence whether firms use more debt or equity in their capital structure. The studies found support for theories like the pecking order theory and trade-off theory in determining capital structure. Overall, the document reviews literature on capital structure theories and empirical evidence on how various firm characteristics and country-level factors impact capital structure decisions.
This document summarizes several studies on capital structure that were conducted between 1982 and 2009. The studies examined factors that influence a firm's capital structure decisions, such as profitability, growth opportunities, firm size, asset composition, and country-specific institutional factors. The studies generally found support for theories like the pecking order theory and trade-off theory in explaining capital structure choices. For example, more profitable firms tended to rely more on internal financing rather than debt, while firm size and asset composition influenced target debt levels. However, the studies also found that capital structure decisions are impacted by firm-specific and country-level institutional differences.
This study brings to an academia table the discussion on whether investment incentives are a
motivator or a gift and also explores the moderating effects of Investors‟ Perceptions on Stock market
Performance. By use of key word characters the search initially identified 93 published and unpublished research
papers and after a tentative scrutiny, 66 papers were selected in a random sampling manner in order to give the
birth to this discussion paper. Exploratory research design was used. The key objective of this article was to
investigate on the question as to whether incentives are a gift or a motivator. The study findings reveal than
investor perceptions affects stock market performance more than incentives do. The paper concludes that the
availability, adequacy, and timeliness of relevant information about marketable securities are important for both
pricing efficiency and market confidence. Investment incentives work well in an ideal world to promote
investment while investors‟ perceptions are relevant in the real world. Hence, stock market incentives were
concluded as being a gift and not a motivator for investors to make investment decisions at the stock market.
Understanding Stock Returns as a Combination of Speculative and Fundamental G...ijtsrd
The Indian stock market returns are largely speculative in nature. Taking twenty stocks off of the Sensex, the Total return of the stock was split into the fundamentally arising returns and the speculative return. This revealed the speculative nature of the Indian Stock market. What this means is that, the good stocks with strong fundamentals may have a low total return as a result of low speculative returns, similarly fundamentally weak stocks may potentially have high speculative returns, resulting in high total returns. Thus, a bifurcation of this sort can help investors with different investment objectives, horizons and risk appetite, invest to achieve their goals. Sanishtha Bhatia | Anshika Lara | Danvi Shah | Shanav Jalan | Shreejit Sawant "Understanding Stock Returns as a Combination of Speculative and Fundamental Growth: An Emperical Study" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-4 | Issue-5 , August 2020, URL: https://www.ijtsrd.com/papers/ijtsrd31742.pdf Paper Url :https://www.ijtsrd.com/economics/finance/31742/understanding-stock-returns-as-a-combination-of-speculative-and-fundamental-growth-an-emperical-study/sanishtha-bhatia
This document summarizes a study on the relationship between capital structure and economic performance of firms in Italy from 2007-2011. The study found:
1) A positive correlation between debt and performance measures (ROE, ROA, ROI) for medium manufacturing, large service, and small service firms.
2) A negative correlation for large manufacturing, small manufacturing, and some measures for large/small service firms.
3) No correlation for medium service firms.
The results indicate the relationship between capital structure and performance is complex and varies between different sizes and sectors of Italian firms.
The paper has an empirical study on the degree of China trust market competition based on PanzarRosse model, using the panel data of 43 trust companies during the year of 2008-2012.The empirical result shows
that China trust has market structure of monopolistic competition. Furthermore, the paper reveals the factors
leading to China turst market structure of monopolistic competition, which includes the declining trend in the
degree of China turst market concentration, prominent homogenization of trust products, and obvious features of
the administrative region segmentation.
Impact of profitability, bank and macroeconomic factors on the market capital...inventionjournals
Panel data has been collected for 44 Middle Eastern banks that are operated during 2005 to 2014 in different Middle Eastern countries. Secondary data has been collected primarily through the DataStream database. The study is conducted to investigate the impact of profitability, bank and macroeconomic factors on the market capitalization of the Middle Eastern banks. Results of Hausman test have explained that fixed effect model is appropriate for the analysis. The result of multiple regression have shown that market capitalization has positive relationship with ROI while negative relationship with credit risk, inflation, and year dummy for the Middle Eastern banks. Furthermore, no relationship has been observed between market capitalization and the ROA, ROE, growth and exchange rate for the Middle Eastern banks.
Mergers and acquisitions in the banking sector: the role of the institutional...Alberto Asquer
This document summarizes a study examining how political institutions affect mergers and acquisitions (M&A) in the banking sector. The study analyzed over 6,800 M&A deals from 50 countries between 1983-2010. Political governance indicators were used to represent institutional environment. Regression models found that domestic M&A numbers and values were higher in countries with more "contestable" political regimes, characterized by electoral competitiveness and pluralism. However, the relationship was weaker for cross-border M&As. The findings provide partial support that institutional factors influence M&A activity in the financial sector.
What is a business and how do firms set prices. mario samuel camacho compressedMario Samuel Camacho
This document explores the definition of firms and how firms set prices. It begins by defining a firm as a business organization that allows for management of resources to reduce costs and maximize profits. It then discusses factors that motivate firms to adjust prices, including rational choice theory of profit maximization by weighing costs and benefits. The document outlines several key factors that influence how businesses set prices, such as costs, competitive pressures, industry-specific factors, and seasonality. It also examines economic concepts like monopoly power, product differentiation, and elasticity of demand that impact pricing decisions. The report provides an overview of the functionality of firms and price-setting mechanisms from an economic perspective.
ROLE OF CORPORATE REPORTING IN EMERGING ECONOMIES AS INVESTMENT INFORMATIONIAEME Publication
The present study is based on the information about corporate reporting parameter
and their standardized functionality procedure and distinctive perception about
corporate disclosure is mandatory to understand the basic requirement of each and
every person associated with investment. These financial information is accessed and
required by many users at different phases of analyzing company strength and
functioning structure. In this study we have tried to establish basic requirements that
will be required on regular basis by individual investor at different phases.
The Relationship between Foreign Trade and Financial Performance of the Liste...IOSRJBM
The main objective of this study was to determine the relationship between foreign trade and financial performance of the listed manufacturing companies in Nigeria. The study focused on the 32 listed companies randomly drawn from the 74 listed manufacturing companies in Nigeria. The secondary data extracted from the financial statement of these companies were subjected to both descriptive and inferential statistics. The result shows a significant positive relationship between the two variables. It was therefore recommended that the management and the board of directors of the listed manufacturing companies should intensify efforts on how the locally produced products will be able to penetrate into the foreign countries as it was discovered that majority of the goods produced by the manufacturing companies in Nigeria are consumed locally
This document summarizes the current state of research on corporate entrepreneurship (CE) among emerging market firms. It reviews literature from 2000-2019 that examines CE related to innovation, strategic renewal, and new venturing in emerging economies. The review finds that while research exists on these topics separately, there is a lack of holistic examination of CE incorporating all three aspects. It concludes that more research is needed to understand how country-level differences in emerging markets impact firms' CE activities and competitive strategies. The document provides directions for future research to address these gaps.
The document summarizes William Beaver's perspectives on major areas of capital markets research over the past ten years. It discusses five key areas: market efficiency, Feltham-Ohlson modeling, value relevance, analysts' behavior, and discretionary behavior. Regarding market efficiency, it notes that recent studies have found evidence of market inefficiency in areas like post-earnings announcement drift and market-to-book ratios. It also discusses links between market efficiency and analysts' behavior in processing accounting information.
This document analyzes structural changes in the Brazilian industry from 1982-1997, a period of economic and institutional uncertainty. It explores how macroeconomic changes interacted with firm behaviors and industrial structure at the micro level. The analysis focuses on how firms adapted strategies in areas like sales, finance, production and investment to develop flexibility in responding to uncertainty. While uncertainties decreased after 1994, the analysis suggests firms developed in different ways and uncertainty still influences industry composition.
Corporate debt policy remained a significant, but a challenging decision for managers entrusted with the responsibility to improve the value of the firm. Thus, this study examines the factors influencing the capital structure decisions of firms in Nigeria. The study employs a panel data regression model to analyze data from firms in Nigeria for the period 2011 to 2015. The result of the empirical analysis reveals that firms in Nigeria have a preference to finance economic operations from retained earnings and the use of short-term debt on rollover basis. The finding of this study confirms that debt decreases with profitability and growth opportunities. The findings show that asset tangibility and firm size have a positive and significant relationship with debt policy of firms in Nigeria. The analysis also reveals that managerial ownership has a negative and significant relationship with debt ratio of firms in Nigeria. The study shows a non-significant positive relationship between non-debt tax shields and debt. The study demonstrates that the trade-off and pecking order theories both explains the factors influencing capital structure decisions of firms in Nigeria. Therefore, this study suggests the need for stakeholders to develop the financial markets and make it accessible for firms to obtain long-term financing for economic growth and development.
Creative Accounting and Impact on Management Decision MakingWaqas Tariq
The study was conducted to appraise the impact of creative accounting on management decisions of selected companies listed in the Nigerian Stock Exchange. With the background, the main objective of the study includes the examination of the extent to which macro-manipulation of financial statement affects management decisions; to examine the extent to which macro-manipulation of financial statement affects share price performance; and to determine the impact of misreported assets and liabilities as well as making recommendations to help remedy some of the problems. The research method used was descriptive and the primary data collected were summarized and tabulated. These were picked in line with the hypothesis variables of the study so as to determine their validity. It was observed that the application of creativity in financial statement reporting significantly affects the decision of management to recapitalize the firm upward or dispose of it reserves. The study concluded that creative accounting through macro-manipulation of financial statements affects a firm’s price and capital market performance. In view of the study, the researcher recommended that the application of creative accounting on management decision should be to avoid misreporting of assets and liabilities in their financial report, and that management decision towards creative accounting should be geared towards the relative advantage principle and good corporate governance which encourage challenges to current ways of thinking and not manipulating for self interest.
This study examines changes over 4 years in inter-firm cooperation and social networks in Chile's salmon farming cluster. It finds that while access to skilled labor and joint product development intensified, most dimensions of cooperation did not significantly change or decreased over time. Contrary to expectations, firms acted more individualistically in areas impacting competitive advantage. Overall cooperation trends less rather than more, despite literature highlighting benefits. Lessons include the need for trade associations to facilitate informal social interactions to potentially foster further cooperation.
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This document provides a summary of Mauricio Ramirez Grajeda's education and professional experience. It lists that he received a Ph.D from Ohio State University in 2006, has worked as a researcher and professor at the University of Guadalajara since 2008, and is a member of Mexico's National Research System since 2008. It also notes that he has published papers in academic journals and books and taught economics courses at several universities.
Guillermo Sierra Juárez tiene una amplia experiencia académica y profesional en finanzas. Obtuvo doctorados en ciencias financieras y maestrías en economía e investigación de operaciones. Ha trabajado en bancos como Santander y BBVA Bancomer evaluando riesgos. También ha enseñado en varias universidades sobre temas de finanzas cuantitativas.
Willy Cortez es un profesor e investigador en la Universidad de Guadalajara, México. Ha obtenido doctorados en economía de la Universidad de Notre Dame y American University. Ha publicado numerosos artículos y capítulos de libros sobre temas económicos de México. Actualmente dirige la Maestría en Economía en la Universidad de Guadalajara y la Revista EconoQuantum.
Jonas Hedlund is a visiting professor at the University of Guadalajara in Mexico who received his PhD in Economics from the University of Alicante in Spain in 2011. His fields of interest include applied game theory, behavioral economics, and microeconomic theory. He has taught various economics courses in Spain, Sweden, and Mexico and has published papers on topics like communication costs, imitation, and social learning.
El documento presenta el currículum vitae de Rafael Salvador Espinosa Ramírez, profesor e investigador de la Universidad de Guadalajara. Detalla sus estudios de licenciatura, maestría y doctorado, su trayectoria profesional como profesor e investigador, sus distinciones y reconocimientos académicos, sus publicaciones y libros, y su experiencia dirigiendo tesis de posgrado.
La Dra. Valdez es una profesora investigadora en la Universidad de Guadalajara con un doctorado en Economía del Desarrollo de la Universidad de East Anglia en el Reino Unido y una maestría en Economía Regional. Imparte cursos de posgrado y ha trabajado en instituciones de desarrollo internacional como el BCIE. Sus líneas de investigación incluyen el mercado laboral, crecimiento económico y pobreza, con un enfoque en el trabajo infantil y la educación.
Mauricio Ramírez Grajeda is a Mexican economist who received his Ph.D from Ohio State University in 2006. He has since worked as a researcher and professor at Universidad de Guadalajara and has published papers in several academic journals. His research focuses on development economics, spatial econometrics, and analyzing economic phenomena in Mexico like trade, crime, and consumption patterns using quantitative methods.
Este currículum vitae presenta la información personal, educación y experiencia laboral de Leonardo A. Gatica Arreola, profesor asociado en la Universidad de Guadalajara. Detalla su educación formal que incluye un Ph.D. en Economía de la Universidad de Texas en Austin y maestrías del Colegio de México y UNAM. También enumera sus publicaciones, conferencias, trabajos en proceso y experiencia docente en varias universidades mexicanas.
Este currículum vitae resume la experiencia académica y profesional de Guillermo Sierra Juárez. Obtuvo varios grados de posgrado como un doctorado en ciencias financieras y maestrías en economía e investigación de operaciones. Trabajó en bancos como Santander y BBVA Bancomer en cargos relacionados con riesgos financieros. También enseñó en varias universidades sobre temas de finanzas e investigación. Publicó artículos sobre procesos estocásticos y valuación de derivados financieros.
Baruch Ramírez-Rodríguez es un economista empírico con experiencia en diseño y evaluación de programas sociales. Tiene un PhD de la Universidad de East Anglia y experiencia como profesor e investigador en universidades de México y Reino Unido. Se ha desempeñado como consultor para varias agencias gubernamentales mexicanas y ha participado en numerosos proyectos de investigación sobre temas de pobreza, transferencias monetarias y seguridad alimentaria.
El documento presenta el currículum vitae de Antonio Ruiz Porras, profesor-investigador de la Universidad de Guadalajara. Posee estudios de doctorado, maestrías y licenciatura en economía. Ha trabajado como profesor en varias universidades mexicanas y en el Reino Unido. Sus áreas de investigación incluyen finanzas, banca, economía internacional y desarrollo económico. Ha publicado numerosos artículos y capítulos de libros.
Mauricio Ramírez Grajeda is a Mexican economist born in 1970. He received his Ph.D from Ohio State University in 2006. He has since worked as a professor and researcher at various universities in Mexico. His research focuses on development economics, spatial econometrics, and international trade. He has published over 20 papers and book chapters on these topics.
Este documento estudia empíricamente el efecto de las transferencias locales (públicas y privadas) en la probabilidad de alternancia partidista en los municipios de Jalisco, México. Los resultados del modelo de duración muestran que las transferencias privadas evitaron la primera alternancia, mientras que los modelos de panel indican que las transferencias públicas fueron más efectivas para mantener el poder entre administraciones consecutivas. El documento también revisa la literatura sobre el uso estratégico de recursos públicos para mantenerse en el poder.
Este documento presenta un modelo para analizar cómo la distancia ideológica entre partidos políticos afecta negativamente la provisión de bienes públicos. El modelo argumenta que una mayor distancia ideológica entre los partidos y los ciudadanos hace que sea más rentable para los partidos el uso clientelar del empleo gubernamental, asignando más recursos a este fin y menos a bienes públicos. Esto ocurre sin que medie un conflicto social, sino debido a que una mayor distancia ideológica hace menos costoso para los partidos atra
This document analyzes the adequacy of GARCH models for analyzing oil price behavior. It applies two non-parametric tests, the Hinich portmanteau test and REVERSE test, to the Mexican oil price series to explore non-linear dependence and time irreversibility. The results suggest strong evidence of a non-linear structure and time irreversibility, implying that innovations are not independent and identically distributed. The non-linear dependence is also found to be episodic rather than consistent, according to a windowed test. Therefore, the study concludes that GARCH models cannot fully capture the properties of the oil price series.
Este documento presenta un modelo formal para analizar cómo los procesos democráticos electorales y la transparencia afectan la eficiencia gubernamental. A pesar de que la teoría sugiere que estos factores deberían incentivar un mejor desempeño, la evidencia empírica muestra que a menudo los gobiernos siguen siendo ineficientes. El documento explora por qué ocurre esto, concluyendo que incluso con rendición de cuentas y transparencia, existen incentivos para usar el empleo burocrático como patron
Este documento busca identificar episodios de dependencia no lineal en el tipo de cambio mexicano entre 1995 y 2010 utilizando el estadístico de Bicorrelación Hinich Portmanteau. Se encuentran 22 ventanas temporales significativas que rechazan la hipótesis de linealidad, las cuales podrían estar asociadas a eventos políticos y económicos. Los modelos ARCH/GARCH no son adecuados para analizar esta serie debido a que no pueden capturar la dependencia no lineal.
Este documento presenta un modelo formal para analizar cómo la competencia política influye en la eficiencia del gobierno en cuanto al tamaño de la burocracia y la provisión de bienes públicos. El modelo muestra que la competencia política genera incentivos para un exceso de empleo burocrático y una provisión ineficiente de bienes públicos, en contraste con argumentos que relacionan positivamente la competencia política y la eficiencia del gobierno.
Este documento discute la Teoría Espacial del Voto (TEV) como una vertiente de la economía política neoclásica que ayuda a entender las políticas públicas implementadas por los gobiernos cercanos a las elecciones. La TEV supone que el objetivo de los actores políticos es complacer al mayor número de electores posible para ganar adherentes y elecciones, en lugar de asumir que el gobierno actúa de manera benevolente. El documento también revisa brevemente el surgimiento de la economía política como campo y sus principales aportes.
Este documento presenta un modelo espacial de competencia política para analizar cómo la provisión de bienes públicos y el tamaño de la burocracia se ven afectados por la competencia entre dos partidos políticos. El modelo supone que los partidos compiten en un espacio ideológico unidimensional y que uno de los partidos en el gobierno usa recursos públicos para producir bienes públicos y emplear trabajadores. Los resultados muestran que en cualquier equilibrio político-económico, la burocracia es excesiva y la prov
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How to Identify the Best Crypto to Buy Now in 2024.pdfKezex (KZX)
To identify the best crypto to buy in 2024, analyze market trends, assess the project's fundamentals, review the development team and community, monitor adoption rates, and evaluate risk tolerance. Stay updated with news, regulatory changes, and expert opinions to make informed decisions.
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
Discovering Delhi - India's Cultural Capital.pptxcosmo-soil
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The Rise and Fall of Ponzi Schemes in America.pptxDiana Rose
Ponzi schemes, a notorious form of financial fraud, have plagued America’s investment landscape for decades. Named after Charles Ponzi, who orchestrated one of the most infamous schemes in the early 20th century, these fraudulent operations promise high returns with little or no risk, only to collapse and leave investors with significant losses. This article explores the nature of Ponzi schemes, notable cases in American history, their impact on victims, and measures to prevent falling prey to such scams.
Understanding Ponzi Schemes
A Ponzi scheme is an investment scam where returns are paid to earlier investors using the capital from newer investors, rather than from legitimate profit earned. The scheme relies on a constant influx of new investments to continue paying the promised returns. Eventually, when the flow of new money slows down or stops, the scheme collapses, leaving the majority of investors with substantial financial losses.
Historical Context: Charles Ponzi and His Legacy
Charles Ponzi is the namesake of this deceptive practice. In the 1920s, Ponzi promised investors in Boston a 50% return within 45 days or 100% return in 90 days through arbitrage of international reply coupons. Initially, he paid returns as promised, not from profits, but from the investments of new participants. When his scheme unraveled, it resulted in losses exceeding $20 million (equivalent to about $270 million today).
Notable American Ponzi Schemes
1. Bernie Madoff: Perhaps the most notorious Ponzi scheme in recent history, Bernie Madoff’s fraud involved $65 billion. Madoff, a well-respected figure in the financial industry, promised steady, high returns through a secretive investment strategy. His scheme lasted for decades before collapsing in 2008, devastating thousands of investors, including individuals, charities, and institutional clients.
2. Allen Stanford: Through his company, Stanford Financial Group, Allen Stanford orchestrated a $7 billion Ponzi scheme, luring investors with fraudulent certificates of deposit issued by his offshore bank. Stanford promised high returns and lavish lifestyle benefits to his investors, which ultimately led to a 110-year prison sentence for the financier in 2012.
3. Tom Petters: In a scheme that lasted more than a decade, Tom Petters ran a $3.65 billion Ponzi scheme, using his company, Petters Group Worldwide. He claimed to buy and sell consumer electronics, but in reality, he used new investments to pay off old debts and fund his extravagant lifestyle. Petters was convicted in 2009 and sentenced to 50 years in prison.
4. Eric Dalius and Saivian: Eric Dalius, a prominent figure behind Saivian, a cashback program promising high returns, is under scrutiny for allegedly orchestrating a Ponzi scheme. Saivian enticed investors with promises of up to 20% cash back on everyday purchases. However, investigations suggest that the returns were paid using new investments rather than legitimate profits. The collapse of Saivian l
How Poonawalla Fincorp and IndusInd Bank’s Co-Branded RuPay Credit Card Cater...beulahfernandes8
The eLITE RuPay Platinum Credit Card, a strategic collaboration between Poonawalla Fincorp and IndusInd Bank, represents a significant advancement in India's digital financial landscape. Spearheaded by Abhay Bhutada, MD of Poonawalla Fincorp, the card leverages deep customer insights to offer tailored features such as no joining fees, movie ticket offers, and rewards on UPI transactions. IndusInd Bank's solid banking infrastructure and digital integration expertise ensure seamless service delivery in today's fast-paced digital economy. With a focus on meeting the growing demand for digital financial services, the card aims to cater to tech-savvy consumers and differentiate itself through unique features and superior customer service, ultimately poised to make a substantial impact in India's digital financial services space.
University of North Carolina at Charlotte degree offer diploma Transcripttscdzuip
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Confirmation of Payee (CoP) is a vital security measure adopted by financial institutions and payment service providers. Its core purpose is to confirm that the recipient’s name matches the information provided by the sender during a banking transaction, ensuring that funds are transferred to the correct payment account.
Confirmation of Payee was built to tackle the increasing numbers of APP Fraud and in the landscape of UK banking, the spectre of APP fraud looms large. In 2022, over £1.2 billion was stolen by fraudsters through authorised and unauthorised fraud, equivalent to more than £2,300 every minute. This statistic emphasises the urgent need for robust security measures like CoP. While over £1.2 billion was stolen through fraud in 2022, there was an eight per cent reduction compared to 2021 which highlights the positive outcomes obtained from the implementation of Confirmation of Payee. The number of fraud cases across the UK also decreased by four per cent to nearly three million cases during the same period; latest statistics from UK Finance.
In essence, Confirmation of Payee plays a pivotal role in digital banking, guaranteeing the flawless execution of banking transactions. It stands as a guardian against fraud and misallocation, demonstrating the commitment of financial institutions to safeguard their clients’ assets. The next time you engage in a banking transaction, remember the invaluable role of CoP in ensuring the security of your financial interests.
For more details, you can visit https://technoxander.com.
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Clive Bolton, CEO, Life Insurance M&G Plc
Jim Boyd, CEO, Equity Release Council
Molly Broome, Economist, Resolution Foundation
Nida Broughton, Co-Director of Economic Policy, Behavioural Insights Team
Jonathan Cribb, Associate Director and Head of Retirement, Savings, and Ageing, Institute for Fiscal Studies
Joanna Elson CBE, Chief Executive Officer, Independent Age
Tom Evans, Managing Director of Retirement, Canada Life
Steve Groves, Chair, Key Retirement Group
Tish Hanifan, Founder and Joint Chair of the Society of Later life Advisers
Sue Lewis, ILC Trustee
Siobhan Lough, Senior Consultant, Hymans Robertson
Mick McAteer, Co-Director, The Financial Inclusion Centre
Stuart McDonald MBE, Head of Longevity and Democratic Insights, LCP
Anusha Mittal, Managing Director, Individual Life and Pensions, M&G Life
Shelley Morris, Senior Project Manager, Living Pension, Living Wage Foundation
Sarah O'Grady, Journalist
Will Sherlock, Head of External Relations, M&G Plc
Daniela Silcock, Head of Policy Research, Pensions Policy Institute
David Sinclair, Chief Executive, ILC
Jordi Skilbeck, Senior Policy Advisor, Pensions and Lifetime Savings Association
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Market concentration measures and investment decisions in mexican manufacturing firms
1. ACCOUNTING & TAXATION ♦ Volume 2♦ Number 1 ♦ 2010
MARKET CONCENTRATION MEASURES AND
INVESTMENT DECISIONS IN MEXICAN
MANUFACTURING FIRMS
Antonio Ruiz-Porras, University of Guadalajara
Celina López-Mateo, University of Guadalajara
ABSTRACT
We study how different measures of market concentration explain investment decisions of Mexican
manufacturing firms. The Herfindahl-Hirschman Index is the traditional measure of market structure
concentration. The Dominance Index is a competition measure used by Mexican regulators. The
econometric assessments suggest that investment decisions of Mexican firms can be better explained by
the Dominance Index than by the Herfindahl-Hirschman Index. Thus our results suggest that the
Mexican Dominance Index might be useful as a measure of market structure and competition. The results
also suggest that market concentration reduces investment. These conclusions are based on several
econometric assessments.
JEL: L40; L22; L60
KEYWORDS: Dominance Index, Herfindahl-Hirschman Index, Investment, Mexico, Manufacturing
INTRODUCTION
T raditional economic theory indicates that the maximization of profits explains the behavior and
decisions of firms. Particularly, from the view of financial economics, firms are considered as
flows of financial streams that depend on investments. Such view explains why the study of
optimal investment decisions and their determinants is considered an important research field for
economists.
Here we study the determinants of investment decisions in Mexican manufacturing firms because studies
for emerging economies are relatively scarce. Particularly, we focus on how market concentration, as a
proxy of market structure and competition, influences investment decisions. The assumption underlying
our study is that Mexican firms face constraints imposed by its competitors and by nature.
In the literature, competition constraints are analyzed with market concentration indexes. In this study we
follow this practice. The Herfindahl-Hirschman Index (HHI) is the usual measure of competition.
However it is not the only one. An alternative measure is the Dominance Index (DI) proposed by Garcia
Alba (1990). The main difference between these measures is that the DI explicitly accounts the size of
firms to measure competition.
We analyze how these two measures of market concentration may explain investment decisions of
Mexican manufacturing firms. We focus on micro, small, medium and large size firms. We control for
certain firm characteristics that capture the constraints that firms face by nature. They include firm size,
cash flow, capital intensity and investment opportunities.
The contributions of this research focus on two areas. The former contributions relate to the literature on
investment determinants. Traditional studies focus on developed economies, not in emerging ones. The
second contribution is methodological. To the best of our knowledge, econometric comparisons of the
HHI and the DI as market concentration measures do not exist.
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2. A. Ruiz-Porras, C. López-Mateo | AT ♦ Vol. 2 ♦ No. 1 ♦ 2010
The paper is organized as follows. Section 2 reviews the literature. Section 3 describes the
methodological design: data, variables and model specification. Section 4 shows our regression results.
Section 5 discusses them in terms of their implications for economic policy. Section 6 concludes.
LITERATURE REVIEW AND BACKGROUND
Here we review the economic literature about firm investment decisions. The review follows the
guidelines of the Structure-Conduct-Performance (SCP) paradigm. We begin our review by describing
the concentration indexes analyzed in this investigation. Then we indicate some studies that have
analyzed the determinants of investment decisions on empirical and theoretical grounds.
Traditional industrial organization studies analyze firms under the basis of the SCP paradigm. This
paradigm explains firms´ decisions and their performance in terms of the notion of market structure. In
such studies, the Herfindahl-Hirschman Index (HHI) is the standard measure of market structure and
concentration.
The HHI measures market structure under the assumption that firms of a market are identical and that
competition is symmetric. Thus the HHI is an adequate measure of concentration and competition when
big differences do not exist among the firms. Methodologically, the index is measured as the inverse of
the number of firms. Its construction only takes into account the concentration of output.
The Dominance Index (DI) is a measure used by Mexican regulators since the nineties. Garcia Alba
(1990) developed it to assess how differences in firms´ size may affect the strategic interactions in the
market. In fact, the DI assesses the capacity of two o more small firms to compete against large firms.
Thus it is an index that considers how total output is allocated among the firms
Market concentration indexes have been subject to criticism under methodological basis. Particularly, Ten
Kate (2006) argues that the DI is a hybrid between a concentration index and an inequality index. He also
argues that changes in strategic interactions may not be properly taken into account with the index.
Moreover he argues that identical firms are not necessarily better competitors than different ones.
The relevance of the discussion regarding market concentration indexes is not only methodological.
Some theoretical studies explicitly suggest that market structure modifies the behavior of firms. The
paper of Akdoğu and MacKay (2006) is relevant for our purposes because they argue that investment
decisions depend on the strategic interactions prevailing in the markets. Moreover, in a later study they
confirm that investment depends inversely on industry concentration (Akdoğu and MacKay, 2008).
Empirical evidence is not conclusive. For example, Lee and Hwang (2003) do not find any relationships
between market structure determinants and investment decisions in the Korean telecommunication
industry. Indeed they conclude that market structure (measured by the HHI) is not a determinant of
Research and Development (R&D) investment. However, in another study Escrihuela-Villar (2008)
concludes that investment depends directly on market concentration.
Interestingly both studies, Lee and Hwang (2003) and Escrihuela-Villar (2008), indicate that certain
determinants are necessary to understand the relationships between market structure and investment.
Concretely, both studies indicate that firm size and investment opportunities determine investment
decisions. Particularly, Escrihuela-Villar (2008) finds that large firms invest more than small ones.
Evidence from developed economies confirms that further determinants are necessary to analyze the
relationships between market structure and investment. Mishra (2007) and Czarnitzk and Binz (2008)
find direct relationships among investment intensity, market structure and firm size. Bøhren, Cooper and
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3. ACCOUNTING & TAXATION ♦ Volume 2♦ Number 1 ♦ 2010
Priestley (2007), D’Erasmo (2007) and Ughetto (2008), also find direct relationships among investment
decisions and cash flow, firm size and capital intensity. De Marzo and Fishman (2007) find that
investments for small and medium firms are sensitive to cash flows.
Empirical research on the relationships between market structure and investment for emerging economies
are limited. Existing studies mostly focus on other determinants of investment decisions. For example,
Adelegen and Ariyo (2008) and Bokpin and Onumah (2009) find that firm size, cash flow and investment
opportunities may explain investment decisions. The first study focuses on the Nigerian economy. The
second one analyses manufacturing firms in several emerging markets.
We emphasize that further studies are necessary to understand the relationships among market structure
and investment decisions in emerging economies. Here we propose an econometric analysis with the HHI
and DI measures of market concentration to analyze such relationships. We include some complementary
determinants according the findings of previous studies. The methodological issues and outcomes
regarding such analysis are described in the following sections.
METHODOLOGY
Here we describe the methodological design of the investigation. Specifically, we describe the sources of
data and the indicators used in the econometric assessments. Furthermore we describe the econometric
modeling and testing procedure used to analyze the relationships among market structure and investment
decisions in the Mexican manufacturing firms.
Data Sources
We use data from the “Economic Census 2003” reported by the Mexican Bureau of Statistics (INEGI).
Such census is constructed accordingly to the North-American-Industry-Classification-System (NAICS).
We use a longitudinal data set because data of previous censuses are built with non-comparable
methodologies. In Mexico census data are collected every five years. Currently, data for the census
collected in 2008 is not available.
In the census, firm-level data are not available due to confidentiality reasons. We deal with such
constraint by constructing a set of four representative firms for each of the 182 industries. We build the
representative firms accordingly to the number of employees. A micro firm has no more than 10
employees. A small firm has between 11 and 50. A medium firm has between 51 and 250. A large firm
has at least 251 employees. This classification follows the one of the Mexican Economics Ministry for
manufacturing firms.
The census classifies firms of each industry into groups according to the number of employees. For
example, the first group includes firms with 0 to 2 employees. The second group includes firms with 3 to
5, and so on. The census has 12 classificatory groups for each of the 182 industries. As we have
indicated, the Mexican Economics Ministry uses a different classification for the firms. Table 1 shows
the relationships between both classifications.
The first step to build a variable that describes the behavior for a representative firm of size j of industry i
is to calculate a weight indicator. We use the mean of the number of employees by group to calculate it.
This is calculated as follows:
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4. A. Ruiz-Porras, C. López-Mateo | AT ♦ Vol. 2 ♦ No. 1 ♦ 2010
n ijt M jt
Pijt =
∑n
t
ijt M jt
(1)
i = 1, ...,182
j = 1, 2, 3, 4
t = 1, ...,12
where Pijt is the weighted indicator of the industry i, size j, group t; nijt is the number of firms of the
industry i, size j, group t; Mjt is the mean of the number of employees of size j in group t; the subindex i
refers to the i-th industry; the subindex j refers to the firm of size j (micro, small, medium and large
firms); the subindex t refers to the t-th groups included in the size-j classification.
Table 1: The Census and the Mexican Economics Ministry Classifications for the Firms of an Industry
Census´ Classification Employees in the Firms Mean of Employees in Type of Firm According to Firms´ Size
of Firms in the Industry that Belong to Group t the Firms that Belong the Mexican Economics According to the
i(t) to Group t (Mjt) Ministry´ classification Type of Firm (j)
1 0-2 1 Micro 1
2 3-5 4 Micro 1
3 6-10 8 Micro 1
4 11-15 13 Small 2
5 16-20 18 Small 2
6 21-30 25 Small 2
7 31-50 40 Small 2
8 51-100 75 Medium 3
9 101-250 175 Medium 3
10 251-500 375 Large 4
11 501-1000 750 Large 4
12 1000+ Large 4
This table shows the relationships between the Economic Census´ classification and the one of the Mexican Economics Ministry. The census
classifies firms of each industry into groups according to the number of employees. The census has 12 classificatory groups for each of the 182
industries. Mexican Economics Ministry´ classification for manufacturing firms considers four types. A micro firm has no more than 10
employees. A small firm has between 11 and 50. A medium firm has between 51 and 250. A large firm has at least 251 employees. The mean of
employees for the firms of the twelfth group is the average of employees with respect to the total of firms in the twelfth group.
The second step is to use the weighted indicator of each one of the four representative firms of industry i
to estimate each variable assessed econometrically. We multiply Pijt by each variable included in the
census classification for each one of the twelve groups of firms Vijt (see Table 2 for a list of variables).
Such multiplications added accordingly to each subindex t will provide us with a variable each
representative firm of size j of the industry i.
RFij = ∑P t
ijt Vijt
i = 1, ...,182 (2)
j = 1, 2, 3, 4
t = 1, ...,12
where RFij is a variable associated to the representative firm of the industry i, size j; Pijt is the weighted
indicator of the industry i, size j, group t.
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5. ACCOUNTING & TAXATION ♦ Volume 2♦ Number 1 ♦ 2010
Variables
Here we describe the main variables used in our study. We use the ones proposed by Bøhren, Cooper and
Priestley (2007) and Akdoğu and Mackay (2008). The variables used in the econometric assessments are
summarized in the following table:
Table 2: Investment and Its Determinants (Variables)
Variables Measures Indicator of the Census
Investment Fixed capital expenditures Gross fixed capital formation
(Value of fixed assets bought
during 2003 minus the value of
fixed assets sales)
Investment opportunities Ratio of output to capital Ratio of production value to fixed
capital stock
Market concentration Market concentration measures Herfindhal-Hirschman Index
Dominance Index
Cash flow Earnings Net earnings
Firm size Fixed assets Total value of fixed assets
Capital intensity Ratio of capital to labor Ratio of fixed capital stock to
number of employees
This table shows the variables and indicators used in the econometric assessments. The dependent variable is investment. The other variables
are the independent variables used in this investigation. The table includes the definitions of the variables (indicators) according to the
Economic Census of INEGI (Mexican Bureau of Statistics).
The measures of market concentration are the HHI and the DI indexes. We do not build indexes for each
industry because certain groups of industries can be considered, for practical purposes, as competitors in
the same market. We deal with this fact by grouping the industries in subsectors. We estimate 21
subsector level measures of market concentration. We use the total number of firms that belong to each
group of industries to build the measure that corresponds to each subsector.
The measure of market concentration assumes that all the firms in a subsector are in the same market.
Under that assumption, we define the HHI as follows:
n
HHI s = ∑m
k =1
2
ks (3)
where mks represents the share of the firm k in the total product of the subsector s; n is the number of
firms in the subsector s.
The Dominance Index is estimated in the same way as the HHI. Firms using similar raw material inputs,
similar capital equipment, and similar labor are classified in the same subsector. Thus, we estimate again
21 subsector level measures of market concentration. Again, the measure of market concentration
assumes that all the firms in a subsector are in the same market. Under that assumption, we define the DI
as:
DI s = ∑M ts Yts (4)
where Mts is the share of the production of the group t in the production of the subsector s; Yts is the firm
average production of the group t, subsector s.
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6. A. Ruiz-Porras, C. López-Mateo | AT ♦ Vol. 2 ♦ No. 1 ♦ 2010
Modeling Specification and Econometric Techniques
We use a log-linear functional form specification to describe the relationships between market structure
and investment. Such specification allows the regression coefficients to measure the elasticity of
investment with respect to each independent variable (determinant). Moreover, the log transformation
reduces the possibility of heteroscedasticity problems. Thus the model specification is:
ln I ij = α 0 + α1 ln IOij + α 2 ln CFij + α 3 ln Sij + α 4 ln MC ij + α 5 ln KI ij + ε ij (5)
where Iij is investment; IOij represents the investment opportunities; CFij is cash flow; Sij is the size of the
firm; MCij is the market concentration; KIij represents the capital intensity; eij is the random error term.
The analysis relies on several estimations of the equation (5). Concretely it relies on two sets of
regressions. The first set includes estimations that use the HHI index as measure of market concentration.
The second set uses estimations with the DI index. Each set is conformed by four regressions that assess
how market concentration relates to investment for firms of a specific size (micro, small, medium and
large). We use Ordinary Least Squares (OLS) for estimation purposes in both sets of regressions. In
addition, we use specification-error Ramsey tests. The tests allow us to validate the econometric
assumptions regarding the functional specification form and to detect omitted-variable bias.
EMPIRICAL ASSESSMENT
Table 3 reports the summary of descriptive statistics of the variables. The variable means seem to depend
on the size of the firms. The means associated to micro firms are smaller than the ones of small firms.
The means associated to medium firms are smaller than the ones of large firms. These facts support the
necessity to differentiate firms by size.
Table 3: Summary Statistics
Std. Std.
Obs Mean Dev. Min. Max. Obs Mean Dev. Min. Max.
Variables Micro firms Medium firms
Investment 118 16.66 5.61 3.82 31.48 147 16.91 3.44 5.29 24.98
Cash flow 118 28.28 5.24 9.11 42.73 147 24.53 3.39 8.67 30.90
Firm size 118 26.45 5.01 12.76 40.00 147 22.79 3.40 7.48 31.60
Capital intensity 118 8.86 1.77 0.16 13.65 147 8.51 1.86 3.32 16.52
Investment
opportunities 118 -2.09 1.75 -14.01 1.11 147 0.24 1.17 -4.28 2.97
HHI 118 -5.65 0.77 -6.74 -2.04 147 -5.45 0.87 -6.74 -2.04
DI 118 -3.21 1.01 -5.35 -1.11 147 -3.16 1.10 -5.35 -1.11
Variables Small firms Large firms
Investment 107 24.10 6.18 5.25 38.00 118 22.04 8.57 5.86 37.63
Cash flow 107 40.43 5.67 10.04 51.46 118 31.04 11.11 10.32 47.82
Firm size 107 36.32 5.76 6.51 49.51 118 29.07 10.46 9.44 44.52
Capital intensity 107 12.42 2.44 3.17 21.33 118 10.32 3.72 3.14 19.97
Investment
opportunities 107 -1.82 1.60 -5.07 3.53 118 -0.46 1.87 -4.63 3.86
HHI 107 -5.53 0.92 -6.74 -2.04 118 -5.47 0.89 -6.74 -2.04
DI 107 -3.17 1.05 -5.35 -1.11 118 -3.28 1.14 -5.35 -1.16
This table shows summary statistics. It presents measures of central tendency. Also, this table shows the independent and dependent variables
used in model specification. The dependent variable is investment. Summary statistics is presented for micro, small, medium and large firms.
Values are expressed in natural logarithms.
Table 4 reports the regression outcomes for the first set of regressions. Apparently, the HHI coefficient is
positive and significant only for micro firms. Firm size coefficients are positive and significant,
independently of the type of firm. In most cases, the coefficients associated to cash flows and investment
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7. ACCOUNTING & TAXATION ♦ Volume 2♦ Number 1 ♦ 2010
opportunities are significant. Investment opportunities and firm size coefficients are positive and
significant for small firms. The cash flow coefficient is negatively correlated with investment decisions
and is statistically significant. Medium and large firms show similar patterns. In all cases, the results
show high values of R2. In addition, the joint significance F tests suggest that the independent variables
are necessary to explain investment decisions.
Table 4: HHI Concentration Measures and Investment Decisions in Mexican Manufacturing Firms (OLS
Regressions)
Firm Size Micro Small Medium Large
Regression indicators
Investment opportunities 0.39 1.91*** 1.55*** 1.60***
(1.14) (5.36) (3.56) (4.86)
Herfindahl- Hirschman Index (HHI) 0.67*** 0.24 -0.056 -7.50
(2.98) (0.92) (-0.35) (-0.70)
Cash flow -0.40 -1.62*** -1.27*** -1.16***
(-1.21) (-4.60) (-2.90) (-3.55)
Firm size 1.47*** 2.70*** 2.26*** 2.15***
(4.63) (7.44) (4.75) (5.61)
Capital intensity 0.02 -0.06 0.02 0.02
(0.24) (-0.44) (0.19) (0.18)
Constant -6.57*** -2.84 -4.11*** -3.76***
(-2.69) (-1.09) (-3.45) (-4.91)
Observations 118 107 147 118
F 225.16*** 134.10*** 109.58*** 444.44***
Prob > F 0.00 0.00 0.00 0.00
R2 0.91 0.86 0.79 0.95
This table reports results for OLS regressions. They use the Herfindahl- Hirschman Index as a proxy of market structure. The dependent
variable is investment. The results are presented for firm size. The t-statistics are given in parenthesis. ***, **, and * indicate significance at
the 1, 5 and 10 percent levels respectively.
Table 5 reports the regression outcomes for the second set of regressions. Here we find that the DI
coefficient is a negative and statistically significant for medium and large firms. The coefficients
associated to investment opportunities are positive and significant in most cases. Cash flow coefficients
are negative and statistically significant. The coefficients associated to firm size are positive and
significant in all cases.
Table 5: DI Concentration Measures and Investment Decisions in Mexican Manufacturing Firms (OLS
Regressions)
Firm size Micro Small Medium Large
Regression Indicators
Investment opportunities 0.17 1.87*** 1.68*** 1.57***
(0.49) (5.23) (3.83) (4.80)
Dominance Index (DI) 0.11 -0.04 -0.20* -4.43*
(0.62) (-0.19) (-1.66) (-1.82)
Cash flow -0.21 -1.58*** -1.41*** -1.15***
(-0.64) (-4.48) (-3.18) (-3.57)
Firm size 1.27*** 2.64*** 2.40*** 2.13***
(3.92) (7.35) (5.01) (5.63)
Capital intensity 0.17 -0.03 0.02 0.05
(0.49) (-0.24) (0.18) (0.50)
Constant -10.50*** -4.34* -4.42*** -3.53***
(-4.82) (-1.81) (-4.38) (-4.62)
Observations 118 107 147 118
F 207.74*** 132.86*** 112.14*** 456.12***
Prob > F 0.00 0.00 0.00 0.00
R2 0.90 0.86 0.79 0.95
This table reports results for OLS regressions. They use the Dominance Index as a proxy of market structure. The dependent variable is
investment. The results are presented for firm size. The t-statistics are given in parenthesis. ***, **, and * indicate significance at the 1, 5 and
10 percent levels respectively.
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8. A. Ruiz-Porras, C. López-Mateo | AT ♦ Vol. 2 ♦ No. 1 ♦ 2010
Like in the previous set of regressions, the results show high values of R2. Such values confirm that the
explanatory variables can explain investment decisions. Again the F tests confirm that the set of
independent variables explains them. So, apparently both sets of regression may provide similar
information. The only exception relies on the positive and significant coefficient associated to the market
concentration variable for micro firms in the first set of regressions.
We support the robustness of our previous results with specification-error Ramsey tests. Such tests allow
us to deal with the differences of information. Here we use two versions of the Ramsey test. The first
one, the traditional RESET test, uses powers of the estimated independent variable as regressors. The
second one uses powers of the RHS variables. The null hypothesis is that the model is adequately
specified in both versions of the test.
The outcomes of the tests of both sets of regressions suggest that the econometric assessments for small,
medium and large firms do not have specification errors. The modeled relationships between market
concentration and investment decisions seem adequate in most cases. However, the exception is referred
to micro firms. For these firms, the regressions suggest the existence of omitted variable-bias and/or
incorrect functional forms.
The Ramsey tests suggest that the differences reported between the two sets of regressions should not be
considered relevant. In fact, the comparison of the reported outcomes and tests suggest that the
regressions that include the DI index might be better than the ones that include the HHI index. We
support this statement on the basis that the only significant coefficients associated to the concentration
variables appear in the second set of regressions (see Table 5). As we have indicated, the regression of
the first set associated to the micro firms has specification errors (see Tables 4 and 6).
Here is important to point out that the outcomes suggest that how market concentration affects investment
decisions depends on the size of the firms. According to the regressions with the DI index, it seems that
concentration significantly reduces investment for medium and large size firms. When firms are micro or
small ones, the evidence is not conclusive due to specification errors and non significant variables (see
Table 5).
Table 6: Model Validation (Specification Tests)
Firm size Micro Small Medium Large
Models with Herfindhal-Hirschaman Index (HHI)
Ramsey test
(H0: Model has no specification error) 7.06*** 0.85 2.24* 0.82
Prob > F 0.0002 0.4720 0.0859 0.4875
Ramsey test, rhs
(H0: model has no omitted variables) 2.66*** 0.76 0.80 0.81
Prob > F 0.0020 0.7197 0.6788 0.6655
Models with Dominance Index (DI)
Ramsey test
(H0: model has no omitted variables 7.68*** 0.90 2.35* 0.43
Prob > F 0.0001 0.4465 0.0750 0.7287
Ramsey test, rhs
(H0: model has no omitted variables) 2.84*** 0.75 0.74 0.66
Prob > F 0.0011 0.7295 0.7434 0.8123
This table shows results of Ramsey test. It is used to detect specification errors. This table shows two versions of the of the Ramsey test. Ramsey
test (rhs) uses powers of the independent variables. Instead Ramsey test uses powers of the fitted values of the dependent variable. ***, **, and
* indicate significance at the 1, 5 and 10 percent levels respectively.
We conclude by indicating that the evidence supports the view that market concentration reduces
investment, at least in medium and large firms. Thus, according to our results, competition may promote
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9. ACCOUNTING & TAXATION ♦ Volume 2♦ Number 1 ♦ 2010
investment. Furthermore the evidence provides elements to support the statistical adequacy of the DI
index as an adequate measure of market concentration. Moreover, the results suggest that the regressions
that include the DI index might be better than the ones that include the HHI index.
DISCUSSION
Here we have assessed the relationships between market structure and investment decisions in the
Mexican manufacturing firms. The assessments suggest that market concentration may reduce
investment, at least in medium and large firms. Thus, competition may promote investment.
Furthermore, they confirm that certain firm characteristics may be useful to explain investment decisions.
Particularly, firm size seems an important determinant.
However, it is interesting to point out that some findings seem counter intuitive. For example, capital
seems not to influence investment decisions. Furthermore, cash flows seem to have an inverse
relationship with investment. We believe that such findings may be explained on the basis that
manufacturing firms are intensive in labor. When firms are labor-intensive, investments may rely on new
“costly” workers that reduce cash flows.
Methodologically, the assessment procedure seems useful to explain the investment decisions of small,
medium and large firms. Furthermore, it supports the hypothesis that investment decisions in micro firms
may depend on other determinants, in addition to the market structure ones. Ekanem and Smallbone
(2007) include, among these determinants, the intuition, the social networks and the experience of the
entrepreneurs.
Empirically, we believe that the most interesting findings relate to the usefulness of the different market
concentration measures. Our econometric assessment suggests that the Dominance Index (DI) is a better
determinant of investment decisions than the Herfindahl-Hirschman Index (HHI). In practice, this finding
implies that the degree of competition can affected by differences in the size of the firms in the market.
Thus regulators may need to consider these differences when dealing with competition issues.
We conclude by indicating that our findings have implications for regulatory and policy purposes.
Probably, the most important one is associated to the necessity to promote the Dominance Index as an
alternative measure of market competition. Another one relates to the necessity to encourage competition
among the Mexican firms in order to increase investment. Finally, a third one relates to the necessity to
encourage studies on the determinants of investment in micro and small size firms because our evidence
is not conclusive.
CONCLUSIONS
We have studied how alternative measures of market concentration, as proxy indicator of market
structure, may explain investment decisions of Mexican manufacturing firms. Here we have focused on
the HHI and the DI measures. We have developed an econometric analysis that uses data for the last
census available in Mexico (2003). We have controlled by firm size, cash flow, capital intensity and
investment opportunities.
Methodologically, the empirical study has relied on two regression sets. The first set includes estimations
that use the HHI index as measure of market concentration. The second one includes estimations that use
the DI index. We have used OLS techniques for estimation purposes. In addition, we have used Ramsey
tests to validate the econometric outcomes. We have used data of the census to build the indicators of the
182 industries that integrate the Mexican manufacturing sector.
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10. A. Ruiz-Porras, C. López-Mateo | AT ♦ Vol. 2 ♦ No. 1 ♦ 2010
Our findings confirm that market structure may influence investment decisions. Concretely they suggest
that concentration may reduce investment. Thus they confirm the findings of Akdoğu and MacKay
(2008). Our findings also suggest that the DI index is a better determinant than the HHI one.
Furthermore, they suggest that firm size and investment opportunities have a direct relationship with
investment. Cash flows, on the other hand, have an inverse one. Interestingly, capital intensity is not
related to investment decisions.
We believe that our study provides some ideas for further research. For example, extensions of our
analysis could be used to analyze investment decisions in firms that provide financial and non-financial
services. The “Economic Census 2008”, when available, may provide data useful for comparison
purposes. Finally, our results also suggest that further studies on the determinants of investments in micro
and small firms may be necessary.
REFERENCES
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Mishra, V. (2007) “The Determinants of R&D Expenditure of Firms: Evidence from a Cross-Section of
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BIOGRAPHY
Antonio Ruiz-Porras is professor and researcher in the Department of Quantitative Methods at the
University of Guadalajara. Address for correspondence: Departamento de Métodos Cuantitativos.
Universidad de Guadalajara, CUCEA. Periférico Norte 799. Núcleo Universitario Los Belenes, 45140.
Zapopan, Jalisco, México. Telephone: ++ (52) (33) 3770 3300 ext. 5291. Fax: ++ (52) (33) 3770 3300
ext. 5227. Email: antoniop@cucea.udg.mx
Celina López-Mateo is student in the Doctoral Program of Economic and Managerial Sciences at the
University of Guadalajara. Address for correspondence: Programa Doctoral en Ciencias Económico-
Administrativas. Universidad de Guadalajara, CUCEA. Periférico Norte 799. Núcleo Universitario Los
Belenes, 45140. Zapopan, Jalisco, México. Email: celinalm@gmail.com
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