capacity expansion contraction of a facility with demand augmentation dynamics we analyze the cost effective addition or removal of capacity from a facility governed by demand augmentation dynamics that is if the demand for goods or services exceeds the planned capacity of the facility during any period of a multiperiod planning horizon then additional capacity must be introduced within that period to meet the deficit the paper obtains an optimal management strategy that minimizes the sum of capital labor maintenance and underpro vision costs for n consecutive periods in the face of uncertain demands dynamic programming is used to demonstrate that under certain conditions on the cost functions an inventory like s s policy is optimal appropriately interpreted to define the removal as well as the augmentation of capacity the threshold levels s and s can be evaluated for each period without a costly search procedure in addition we show how to calculate various quantities of interest associated with the optimal policy

outsourcing in us cities ambulances and elderly voters this paper develops a public choice model of city service provision and uses empirical analysis to pin down some of the model s key assumptions many of the largest cities in the united states outsource emergency medical services and analysis of data from the 200 largest us cities finds that a number of variables are significant determinants of emergency ambulance outsourcing including the fraction of a city s voters over the age of 65 this finding provides evidence that elderly voters are important in policy determination and suggests a particular shape for the model s contracting cost curve

does privatization remove restrictive working practices evidence from uk establishments this study investigates the links between privatization and changes in working practices using data from the uk 1990 workplace employees relations survey privatization raises the probability of an establishment of experiencing reduced job demarcation and or increased flexibility in the use of the workforce by managers after exploration no clear association is found between ownership and the level of restrictive working practices

privatization public offerings and political objectives this paper empirically analyses the political and economic objectives underlying privatization on the stock market particularly the factors of sips underpricing are explained and the study analyses whether the change of political parties in government play a role on the issue the paper has two main findings first larger initial returns occurred in the early stages of privatization second the change of government from left wing to right wing did not lead to significantly higher levels of underpricing the results show that governments are quite pragmatic with respect to underpricing maximizing proceeds from sips shows to be more important than ideological differences between parties in government

one for all and all for one privatization and universal service provision in the postal sector universal service provision has a special role for the public utilities sector in many organization for economic co operation and development oecd countries these public utilities have largely been subject to privatization during the last 3 decades efficiency effects of privatization are widely documented while the impacts on the quality and accessibility of the universal service are not much examined by using a unique dataset on privatization for 21 countries over the period 1980 2007 for the postal sector we are able to show that privatization in particular formal privatization has led to a decrease in the quality of the universal service

residual state ownership policy stability and financial performance following strategic decisions by privatizing telecoms we question previous research assuming that privatizing firm performance generally benefits from decreasing state ownership and the passage of time both of which purportedly align principal agent incentives promoting organizational decision making that increases shareholder value when state ownership shifts from majority and controlling to minority and non controlling the performance impact may be positive in the short run particularly where there is instability in the local investment policy environment consistent with this proposition we develop and test hypotheses derived from a minority and non controlling or residual state ownership framework grounded in credible privatization and institutional theory we propose that 1 residual state ownership positively affects shareholder returns after strategic decisions by privatizing firms because it signals state support for managerial initiatives 2 the passage of time since initial privatization negatively affects shareholder returns after strategic decisions by privatizing firms because initial undertakings in support of the privatizing firm are reversed and 3 home country investment policy stability moderates these two effects greater stability obviates the need for residual state ownership and slows policy reversals over time we find empirical support for our residual state ownership framework in event study analyses of cumulative abnormal returns cars associated with 196 major investments announced from 1986 to 2001 by 15 privatizing telecoms from around the world cars are positive at 5 25 state ownership levels but turn negative at higher state ownership levels cars turn sharply negative within 1 2 years from initial privatization dates increasing policy stability diminishes positive ownership and negative time effects on cars results confirm the potential supporting role that residual state ownership can play in enhancing strategic decision making and financial performance by privatizing firms particularly where there is instability in the home country investment policy environment

privatization and globalization an empirical analysis abstract this paper examines the link between globalization measured by foreign direct investment fdi and foreign portfolio investment fpi and privatization of state owned enterprises in a multi country sample that focuses on developing countries we hypothesize that privatization has an effect on fdi fpi as the process of fostering private sector participation is often accompanied by liberalization reforms and by allocations of substantial shares of newly privatized firms to foreign investors similarly we expect fdi fpi to foster privatization efforts as new capital inflows technology and managerial skills that accompany fdi fpi make the environment more prone to competition providing governments with incentives to privatize inefficient firms that need to be turned around this relation is assessed in two ways first in a dynamic panel using a generalized method of moments approach and second through panel causality tests we find a bi directional positive relation between privatization proceeds and globalization particularly in the case of fdi

incumbent employees resistance to implementing privatization policy abstract the recent anti privatization trend in latin america france and south africa is a reminder that employees resist privatization because pre privatization firms tend to be over manned and to pay excessive wages we study the effect of employees resistance on the successful implementation of privatization in a stylized model in which the government interacts with employees of an unknown type the analysis clarifies some of the difficulties associated with the implementation process furthermore although common sense dictates that the government negotiates with the employees before finding an outside buyer we show that sometimes it is better off contacting an investor first

toward a theory of regulation for developing countries following jean jacques laffont s lead the efficient operation and expansion of infrastructures in developing countries is crucial for growth and poverty reduction however recent reforms aimed at improving the performance of these sectors have had limited success evidence suggests that in many instances this was because the traditional regulatory theory relied on by policymakers was not suitable for the institutional context in developing countries this article surveys more recent theoretical work focusing on problems with regulation in these countries at the heart of the survey is the work of jean jacques laffont who in the last decade of his life set about developing a theoretical framework for regulation in developing countries we consider the implications of his work which focused on the key institutional limitations faced in developing countries we then discuss where experience suggests that there are important omissions from this modeling bringing in extensions and alternative approaches pursued by other authors we conclude by summarizing the key ways in which regulatory policy will be different when institutions are weak overall we find that an understanding of the institutional context and its implications are crucial when designing a regulatory framework for developing countries

the politician and his banker should the european union grant state aid through an institution like the european investment bank this paper evaluates the efficiency of different measures for granting state aid we use a theoretical model with firms that differ in their creditworthiness and compare different types of subsidies with indirect subsidization through public banks we find that in a large parameter range the politician prefers public banks to direct subsidies because they avoid windfall gains to entrepreneurs and they economize on screening costs for similar reasons they may increase social welfare relative to subsidies one important prerequisite for this result is that public banks must not be allowed to fully compete with private banks however from a welfare perspective a politician uses public banks inefficiently often

testing limits to policy reversal evidence from indian privatizations abstract we examine the effect of regime change on privatization in the 2004 indian election the pro reform bjp was unexpectedly defeated by a less reformist coalition stock prices of government controlled companies that had been slated for privatization by the bjp dropped 3 5 relative to private firms government controlled companies that were under study for possible privatization fell 7 5 relative to private firms this is consistent with investor belief of a point of no return where advanced reforms are more difficult to reverse further analysis suggests that layoffs combined with the privatization announcement served as a credible commitment to privatize

corporate governance provisions and firm ownership firm level evidence from eastern europe we study differences in the use of two corporate governance provisions e cumulative voting and proxy by mail voting e in a sample of about 220 firms located in four eastern european countries after controlling for other firm characteristics we find that firms that have a large minority blockholder are more likely to allow cumulative voting we do not find any significant relationship between the use of these corporate governance provisions and foreign ownership we conclude that the use of cumulative voting is associated with the presence of large minority shareholders 2006 published by elsevier ltd jel classification g34 p2

leviathan resists the endogenous relationship between privatization and firm performance using a panel dataset of privatized cement firms in turkey this paper models and finds support for the simultaneous relationship between privatization and firm performance it is found that favorable short run performance weak market potential higher employment lower socio economic development concentrated voter preferences and weaker representation of right wing parties in the firms locality delay the timing of privatization the paper also finds that privatization increases output in the medium term by reducing the labor stock and promoting the adoption of more advanced technology such that production shifts from constant to decreasing returns to scale

share issue privatizations as financial means to political and economic ends abstract this study examines how political and economic factors affect the offer price share allocation and other terms governments choose when they privatize state owned enterprises via a public share offering using a 59 country sample of 630 share issue privatizations sips with total proceeds of over 446 billion during the period 1977 1997 we find that governments consistently underprice sip offers tilt their share allocation patterns to favour domestic investors impose control restrictions on privatized firms and typically use fixed price offers rather than book building or competitive tender offers all to further political and economic policy objectives

board composition political connections and performance in state owned enterprises this paper analyses the effects of board composition on the behaviour and performance of a sample of 114 italian local public utilities for which information about 1630 directors during 1994 2004 has been collected this period is particularly interesting because of the legal changes that forced many firms to alter their juridical form and allowed the entrance of private investors we investigate whether board size and or board composition do affect decisions about employment and how they ultimately impact on performance our main findings indicate that politically connected directors representing the state or the local municipality dominate boards of directors in the italian public utilities in the period under investigation politically connected directors exert a positive and significant effect on employment while they impact negatively on performance

infrastructure privatization and changes in corruption patterns the roots of public discontent abstract this paper offers a theory of how the degree of corruption that prevails in a society responds to changes in the ownership structure of major public service providers we show that there are cases in which privatization even though it fosters investments in infrastructure also opens the door to more corruption the public dissatisfaction towards privatization is then crucially affected by the changes in the degree and pattern of corruption our model thus helps understand the seemingly paradoxical situation prevailing in latin america where most studies find that privatizations have been efficiency enhancing and have fostered investments and at the same time popular dissatisfaction with the process is extremely high especially among the middle class we show that this line of explanation is consistent with the evidence from surveys in the region

towards an equilibrium level of market reform how politics affects the dynamics of policy change in this article we examine the dynamics of economic reforms that are implemented by incumbent policy makers interested in maintaining their political power we use a sample of 86 countries over a time period going from 1980 to 2001 and find that the achievement of an equilibrium level of market liberalization is highly costly our results are robust to endogenity and model specification

privatization financial development property rights and growth abstract this study analyzes how prevailing institutional arrangements i e property rights contracting rights political institutions and corporate governance practices affect privatized firms performance capital markets development and economic growth most of the studies surveyed show that privatization enhances privatized firms performance efficiency and profitability which percolates to economic growth privatized firms performed better in countries with better regulatory and legal frameworks partial privatization may be beneficial in countries with weak institutions namely the french civil law countries the stronger the economic and the governing institutions the easier it is for privatized firms to thrive and contribute to economic growth overall privatization allows firms to achieve improved efficiency while driving the development of the financial sector

public and private sector wages interactions in a general equilibrium model it is common wisdom that public sector wages are not determined in the same way as private sector wages at the same time the empirical evidence available for oecd countries finds a strong positive correlation between public and private sector wages in this paper we develop a model that is consistent with a political economy view of the determination of public sector wages and employment while being consistent with the said empirical evidence public finance constraints are crucial in booms governments expand employment and wages while in downturns lack of tax revenues forces the government to cut back the wage bill

ownership and firm innovation in a transition economy evidence from china we examine innovation performance of firms in a transition economy from an ownership perspective we focus specifically on the relationship between ownership structures and firm innovation performance drawing on data from 548 chinese firms we find volume of patent registration to be most strongly influenced by foreign ownership in the firm along with firm affiliation within a business group the influence of state and institutional ownership on innovation performance is positive but lagged contrary to expectations insider ownership leads to lower innovation performance and concentrated ownership has no significant impact our study has two principal contributions firstly we utilize a comprehensive treatment of ownership characteristics overcoming weakness in previous studies that have used a more narrow focus on ownership type secondly we contribute to understanding of how firms in transition economies build indigenous capabilities for innovation by drawing attention to the interplay of foreign and domestic control of agents innovation

firm growth and ownership in transition countries this paper uses data from firm level surveys to investigate firm performance for state owned privatized and de novo private firms in romania bulgaria and hungary after controlling for life cycle size and product market effects i find that de novo private firms outperform privatized and state owned ones c 1997 elsevier science s a

simultaneous capacity and production management of short life cycle produce to stock goods under stochastic demand this paper derives the optimal simultaneous capacity and production plan for a shortlife cycle produce to stock good under stochastic demand capacity can be reduced as well as added at exogenously set unit prices in both cases studied with and without carryover of unsold units a target interval policy is optimal there is a usually different target interval for each period such that capacity should be changed as little as possible to bring the level available into that interval our contribution in the case of no carry over is a detailed characterization of the target intervals assuming demands increase stochastically at the beginning of the life cycle and decrease thereafter in the case of carry over we establish the general result and show that capacity and inventory are economic substitutes the target intervals decrease in the initial stock level and the optimal unconstrained base stock level decreases in the capacity level in both cases optimal service rates are not necessarily constant over time a numerical example illustrates the results

understanding the soft budget constraint we propose a clarification of the notion of a soft budget constraint a concept widely used in the analysis of socialist transitional and market economies our interpretation is broad enough to embrace most existing approaches to soft budget constraint phenomena and provides a classification of their causes and consequences in light of this interpretation we then review the theoretical literature on the subject and compare it with those on other dynamic commitment problems in economics

mixed bundling auctions we study multi object auctions where agents have private and additive valuations for heterogeneous objects we focus on the revenue properties of a class of dominant strategy mechanisms where a weight is assigned to each partition of objects the weights influence the probability with which partitions are chosen in the mechanism this class contains efficient auctions pure bundling auctions mixed bundling auctions auctions with reserve prices and auctions with pre packaged bundles for any number of objects and bidders both the pure bundling auction and separate efficient auctions for the single objects are revenue inferior to an auction that involves mixed bundling

the pitfalls of water privatization failure and reform in malaysia summary this paper examines why private participation in infrastructure ppi in water continues to be promoted despite poor results in developing countries it argues that the main characteristics of infrastructure discourage private investment and necessitate state subsidies which dilute private risks and incentives and facilitate rent seeking as a result ppi is characterized by public financing selective private investments and inconclusive efficiency gains this is reflected globally and in malaysia where ppi continues to be promoted because it provides captive rents the political factors that drive ppi invariably compromise institutional solutions as malaysia s water sector reforms illustrate

agency problem institutions and technology policy explaining taiwan s semiconductor industry development abstract taiwan has made significant progress in the semiconductor industry with government agencies and bureaucrats as the driving forces over the past 30 years taiwan s impressive achievement in the semiconductor industry clearly indicates that the government failures and agency problem usually associated with deep government involvement did not occur in taiwan why is that the case this paper proposes a principal agent framework for technology policy and applies the framework to discuss the institutional arrangements through which bureaucrats were controlled effectively in executing the semiconductor industry policies in taiwan by analyzing the institutional and organizational arrangements taiwanese leaders made to mitigate the agency problem this paper brings bureaucrats into the popular developmental state theory and emphasizes that the success of state intervention should not be taken for granted and it also brings politics into technology policy analysis and stresses the importance and complexity of agency problem in technology policy

correlated information and mechanism design in models of asymmetric information possession of private information leads to rents for the possessors this induces mechanism designers to distort away from efficiency the authors show that this is an artifact of the presumption that information is independently distributed rent extraction in a large class of mechanism design games is analyzed and a necessary and sufficient condition for arbitrarily small rents to private information is provided additionally the two person bargaining game is shown to have an efficient solution under first order stochastic dominance and a hazard rate condition similar conditions allow full rent extraction in milgrom weber auctions

czech privatisation 25 years later privatisation is still a hot political topic today and divides economists as well as politicians and the general public the paper aims to capture the czech privatisation in its historical economic and political contexts the first part explains the difference between transitional privatisation and standard privatisation the second part examines the interests in the privatisation process the third part discusses the privatisation methods used in the czech republic the fourth part offers an international comparison

the financial and operating performance of privatized firms during the 1990s this study compares the pre and postprivatization financial and operating performance of 85 companies from 28 industrialized countries that were privatized through public share offerings for the period from 1990 through 1996 we document significant increases in profitability output operating efficiency and dividend payments and significant decreases in leverage ratios for our full sample of firms after privatization and for most subsamples examined capital expenditures increase significantly in absolute terms but not relative to sales employment declines but insignificantly combined with results from two previous directly comparable studies these findings strongly suggest that privatization yields significant performance improvements during the past two decades the privatization of state owned enterprises has moved from being a radical almost desperate policy initiative of the thatcher government in britain to being an accepted economic policy for governments of all ideological stripes according to gibbon 1998 860 billion has been raised by governments worldwide through privatizations with the bulk of this total coming since 1987 and at least one commentator roche 1996 predicts that no less than 6 trillion will be raised through privatizations over the next two decades in 1997 alone sales of public enterprises totaled a record 161 billion worldwide with more than 110 billion of the total coming during the second half of the year and 1998 s total of almost 140 billion indicates that the pace shows no sign of slackening as we approach a new millennium

the performance of privatized firms in the czech republic abstract with the growing importance of privatizations as a part of government policy most empirical studies of these privatizations conclude that firm performance immediately improves following privatization privatization has been the most important part of the transition from the centrally planned economies of central and eastern europe and has a larger impact on those economies than privatizations in other countries however few studies have looked at the performance of firms following mass privatization this study uses 453 separate firms 101 firms privatized in both waves for a total of 554 observations in the first and second waves of czech voucher privatization using methodology from previous studies we find that while the overall effects from privatization are positive the effects vary by privatization wave size and industry firms privatized in the first wave performed worse decline in performance following privatization than firms privatized in the second wave we also fail to find ownership concentration or debt as an important factor in restructuring the firm i believe that the results are consistent with two hypotheses first economic and political structure surrounding the privatization waves plays an important part in the success of privatization stable environments both political and economic help privatized firms restructure and improve operating performance as well as attract foreign investors and capital even in less developed countries but in transitional economies undergoing mass privatization in rapidly changing and developing economic and political environments hinder firms from restructuring and improving performance following privatization results are also consistent with the hypothesis that firms with a longer preparation period prior to privatization an implicit seasoning improve performance following privatization

approximately optimal auctions for correlated bidders abstract we consider the design of dominant strategy incentive compatible revenue maximizing auctions for an indivisible good when bidders values are drawn from a correlated distribution for independent distributions myerson showed that the optimal auction for risk neutral bidders remains incentive compatible regardless of bidders risk attitudes we show that for correlated distributions the same is true when only two bidders are involved whereas for more bidders randomization can generate strictly more revenue however for risk neutral bidders we show this gain is never more than a 5 3 factor this is a consequence of two results of independent interest 1 a polynomial time derandomization of auctions for two bidders 2 a polynomial time computable deterministic auction that 5 3 approximates the optimal revenue extractable from risk neutral bidders moreover we give a polynomial time algorithm to compute optimal auctions for a constant number of bidders and for any number of bidders we give polynomial time algorithms with approximation factors arbitrarily close to 3 2

full privatization through controlling rights transfer in china the extent of its success this article investigates the effect of the second step of privatization in china which is full privatization through controlling rights transfer after share issue partial privatization it finds that fully privatized firms perform worse than state controlled enterprises expropriation by private block shareholders is greater than that by state block shareholders furthermore increase in expropriation is negatively related to performance change the results suggest that full privatization may not yield the expected efficiency gains in transition economies with weak legal system they also emphasize the importance of preventing private block shareholders from exploiting minority shareholders in the process of full privatization

privatization and efficiency from principals and agents to political economy ad i pavia abstract we survey the theoretical literature on privatization and efficiency by tracing its evolution from the applications of agency theory to recent contributions in the field of political economy the former extend the theory of regulation with incomplete information to address privatization issues comparing state owned enterprises with private regulated firms the benefits of privatization may derive either from the constraints it places on malevolent agents or from the impossibility of commitment by a benevolent government because of incomplete contracts contributions dealing with political economy issues separate privatization from restructuring decisions they either explore bargaining between managers and politicians or analyse the impact of privatization shaped by political preferences on efficiency the theoretical results regarding the relation between privatization and efficiency do not lead to any definitive conclusion privatization may increase productive efficiency when restructuring takes place whereas its effects on allocative efficiency still remain uncertain

tax farming redux experimental evidence on performance pay for tax collectors performance pay for tax collectors has the potential to raise revenues but might come at a cost if it increases the bargaining power of tax collectors vis a vis taxpayers we report the first large scale field experiment on these issues where we experimentally allocated 482 property tax units in punjab pakistan into one of three performance pay schemes or a control after two years incentivized units had 9 4 log points higher revenue than controls which translates to a 46 higher growth rate the scheme that rewarded purely on revenue did best increasing revenue by 12 9 log points 64 higher growth rate with little penalty for customer satisfaction and assessment accuracy compared to the two other schemes that explicitly also rewarded these dimensions the revenue gains accrue from a small number of properties becoming taxed at their true value which is substantially more than they had been taxed at previously the majority of properties in incentivized areas in fact pay no more taxes but instead report higher bribes the results are consistent with a collusive setting in which performance pay increases collectors bargaining power over taxpayers who have to either pay higher bribes to avoid being reassessed or pay substantially higher taxes if collusion breaks down

customer ownership and quality provision in public services under asymmetric information the implementation of projects producing external effects is often a source of disagreement and conflict between hosting and nonhosting communities the article focuses on the impact of participatory ownership on conflict resolution and social welfare in the presence of asymmetric information and imperfect quality monitoring we show that in such situations the participatory solution may help solve deadlocks that money transfers to a for profit operator cannot solve the analysis highlights three main factors behind this fact first a customer owned cooperative internalizes at least partially the external effects generated by the project second the alignment of cooperative members preferences with those of the social planner reduces in some cases eliminates the distortions caused by information asymmetries third cooperatives require less costly monitoring than their for profit counterparts we also show that cooperatives productive inefficiency with respect to for profits may emerge endogenously as a consequence of a lower pressure to compete on costs for the market

a theory of privatisation public enterprises around the world have proved to be highly inefficient primarily because they pursue strategies such as excess employment that satisfy the political objectives of politicians who control them privatization of public enterprises can raise the cost to politicians of influencing them since subsidies to private firms necessary to force them to remain inefficient are politically harder to sustain than wasted profits of the state firms in this way privatization leads to efficient restructuring of firms moreover privatization is more effective when combined with a tight monetary policy and when the new owners of firms are profit maximizing investors rather than their employees or even managers copyright 1996 by royal economic society

bayesian and dominant strategy implementation in the independent private values model we prove in the standard independent private values model that the outcome in terms of interim expected probabilities of trade and interim expected transfers of any bayesian mechanism can also be obtained with a dominant strategy mechanism

privatization and the economic performance of irish sugar greencore as one of ireland s largest agribusiness companies the irish sugar company played a key role in the country s economic development in the twentieth century the company was privatized in 1991 under the new name greencore and has since transformed from a largely commodity based agribusiness into an international convenience food company this article analyses the financial and economic performance of the company in the 10 years before and after privatization it finds that the change from public to private ownership was not strongly associated with improved financial performance and productivity as the company had experienced rapid growth and improvement in the pre privatization period these findings run counter to perspectives such as public choice theory that suggest a positive relationship between privatization and company performance performance in the post privatization period was strongly influenced by greater exposure to market forces in the company s expanding food division however it is sur

privatization under incomplete information and bankruptcy risk abstract we study privatization under moral hazard and adverse selection we show that if the fraction of efficient investors is either insignificant or productivity differences between efficient and inefficient investors are negligible the government would offer a pooling contract and sell the same fraction of equity to both types of investors the lower the productivity difference the greater the equity stake offered to investors on the other hand if the fraction of efficient investors is significant or productivity differentials are large the optimal policy consists of a dual method of privatization in which it offers two methods of privatization to outside investors the first method consists of a sale of 100 equity together with a subsidy and charges higher price under the second option the investor pays a smaller price but buys less than 100 equity without any subsidy efficient investors opt for the first method while inefficient investors prefer the second the dual privatization method screens investors and provides them with maximum incentives to invest while minimizing the risk of post privatization bankruptcy

capacity expansion under stochastic demands we consider the problem of optimally meeting a stochastically growing demand for capacity over an infinite horizon under the assumption that demand for product follows either a nonlinear brownian motion or a non markovian birth and death process we show that this stochastic problem can be transformed into an equivalent deterministic problem consistent with earlier work by a manne the equivalent problem is formed by replacing the stochastic demand by its deterministic trend and discounting all costs by a new interest rate that is smaller than the original in approximate proportion to the uncertainty in the demand

greasing the wheels of bank lending evidence from private firms in china abstract bribery rather than firm performance largely determines the extent to which private firms access bank credit in china bribery enables an economic outcome whereby firms with better economic performance are awarded larger loans these firms also pay more in terms of bribes although satisfactory firm performance does determine whether firms can access loans it does so only for loans originated by the big four banks for loans originated by smaller banks performance is not essential for firms to secure loan access our evidence sheds light on the surprising finding of earlier studies that chinese banks use commercial logic in their lending practices despite being endowed with a weak institutional framework

institutional investors political connections and the incidence of regulatory enforcement against corporate fraud we investigate two under explored factors in mitigating the risk of corporate fraud and regulatory enforcement against fraud namely institutional investors and political connections the role of institutional investors in the effective monitoring of a firm s management is well established in the literature we further observe that firms that have a large proportion of their shares held by institutional investors have a lower incidence of enforcement actions against corporate fraud the importance of political connections for enterprises whether in a developed market such as the united states or an emerging market such as china has been established by previous studies however we find evidence of another positive effect of political connections they may reduce the incidence of enforcement action against corporate fraud we also find that political connections play a more significant role in reducing regulatory enforcement incidents against non state owned enterprises and firms in weaker legal environments whereas institutional ownership plays a more important role in reducing regulatory enforcement incidents against state owned enterprises

capacity expansion with interrupted demand growth abstract in most long range planning problems accurate forecasting of demand growth is often difficult sometimes unexpected shocks in the economy occur and disrupt the predicted growth rate of demand for example growth can unexpectedly cease for and indeterminate length of time due to crucial occurrnces such as wars economic recessions or oil price shocks in this paper we examine the effects of unforeseen demand plateaus on the capacity expansion problem of sizing and timing production facilities we assume that demand for capacity follows a stochastic process that is we allow for plateaus to happen at random future times and to continue for an uncertain duration when the demand process is generated by an alternating renewal process we show that demand plateaus result in a modified discounting rate and a modified import cost

the impact of state aid on the survival and financial viability of aided firms we estimate the causal impact of restructuring aid granted by the european commission between 2003 and 2012 on the survival and financial viability of aided firms using a comprehensive dataset we find that restructuring aid increases a firm s average survival time by 8 to 15 years and decreases the hazard rate by 58 to 68 percent depending on the definition of firm survival further analysis finds strong support that in the longer run aid receiving firms have a significantly higher probability to improve their financial viability than the counterfactual group

on the virtues of privatization when government is benevolent abstract this paper shows that privatizing a public firm can be welfare improving even if the government is a welfare maximizer we consider a setup where the firm s owner a profit maximizing entrepreneur or a benevolent government employs a manager who can invent and implement an innovative production technology wage arrangements are optimal given the verifiable information all parties behave rationally and the information structure is the same in both governance modes nevertheless privatization turns out to be preferable in a wide variety of situations government ownership yields the first best if producing under the old technology is not viable

soft budget constraints and the property rights theory of ownership abstract modeling the government make or buy decision hart and colleagues hart o shleifer s and vishny r w 1997 the proper scope of government theory and an application to prisons quarterly journal of economics 112 1127 1161 assume government providers are exogenously more replaceable than private providers instead we posit government managers soft incentives arise endogenously from their lack of control rights because of rationally softer budget constraints

the global economy as instituted process the case of central and eastern europe i argue that economic globalization indicated by the tremendous rise in world foreign direct investment fdi in recent decades is not driven simply by investor considerations of economic risk and return but is significantly shaped by the construction of demand for foreign capital by receiving states states signal this demand through the levels of formal and substantive legitimacy they grant to fdi they institutionalize globalization in formal rule as a normatively desirable development strategy states substantiate this commitment by providing domestic and foreign actors with ideational and organizational resources to facilitate fdi to illustrate this argument i use the case of central and eastern europe which was largely closed to global capital before the collapse of communism analyses of quantitative and qualitative data show that substantive legitimacy granted to fdi by host states more than formal regulations determined the size of foreign capital flows into postsocialist countries in the

technical scale and allocative efficiencies of turkish banking industry this paper investigates input and output efficiency in the turkish banking industry to understand the impact of size international variables ownership control and governance on profit cost allocative technical pure technical and scale efficiency measures employing a non parametric approach along with a parametric approach we estimate the efficiency of turkish banks over the 1988 1996 period this period allows us to account for the changes in the macro economy and regulatory treatment of the turkish banking industry over time our results suggest that the heterogeneous characteristics of banks have significant impact on their efficiency moreover cost and profit efficiencies of the turkish banks have exacerbated over time results also indicate that the dominant source of inefficiency in turkish banking is due to technical inefficiency rather than allocative inefficiency which is mainly attributed to diseconomies in scale to the extent that they chose an inefficient level of production bank management is responsible for scale inefficient operations however increasing demand for banking services in the nineties fueled by the state s increasing demand for funds to finance chronic budget deficits and high growth policies and the oligopolistic nature of the turkish banking market do not justify scale adjustments our policy suggestions are that the government implement financial reform packages that foster competition in the banking market and that the industry devise incentive schemes to improve managerial efficiency

optimal multi object auctions this paper analyses optimal auctions of several objects in the first model bidders have a binary distribution over their valuations for each object in which case the optimal auction is efficient the optimal auction takes one of two formats either objects are sold in independent auctions or a degree of bundling is introduced in the sense that the probability a bidder wins one object is increasing in her value for the other the format of the optimal auction may depend upon the number of bidders in the second model the restriction to binary distributions is relaxed and the optimal auction is then inefficient

predicting corporate governance in emerging markets abstract this paper investigates what predicts corporate governance in emerging markets specifically we examine what predicts governance changes and the level of governance itself to conduct this study we utilize a unique dataset from alliancebernstein that consists of monthly firm level corporate governance ratings for 24 emerging market countries for almost seven years since the alliancebernstein ratings are time series data they allow us to determine the direction of change in a firm s corporate governance and the timing of these changes using these data we find two main results first as firms grow they are more likely to improve their governance second the level of political risk where the firm resides is negatively and significantly related to the level of firm governance but positively and significantly related to changes in firm governance hence firm governance is better in countries with lower political risk but firms are more likely to improve their governance in countries with higher political risk

competition and decentralisation in government bureaucracies abstract recent reforms to the provision of welfare services by the public sector have transferred control rights in production from politicians to managers and simultaneously introduced competition between public sector suppliers we derive conditions under which a self interested politician will introduce either competition and or managerial control for services where quality matters we show that both competition and managerial control give incentives for greater managerial effort however the cost of competition is higher taxes and the cost of decentralisation is a loss of political benefits the politician will introduce these reforms if the political benefits from higher value service outweigh these costs

varieties of capitalism and the internationalization of state owned enterprises this article sheds light on how the internationalization of state owned enterprises is influenced by the state involvement in ownership and by the home country s institutional settings integrating international business literature with the debate on the varieties of capitalism we contend that state dominated enterprises internationalize more less than privately owned enterprises in coordinated liberal market economies whereas they exhibit an inconstant behavior in state influenced market economies our analysis on a sample of enterprises pertaining to 20 oecd countries supports our hypotheses this article adds to studies on the influence of institutions on firms internationalization and has implications for both managers and policymakers

government in transition abstract the speed of economic reforms is not the only important determinant of the success of the transition to a market economy the transition of government from a communist state to an institution supporting a market economy is as critical survey evidence shows that russia lags significantly behind poland in the transition of its government which may account for its inferior economic performance despite adopting similar economic reforms i argue that the lack of turnover of old communist politicians and the creation of inappropriate electoral and fiscal incentives for these politicians may account for the poor performance of the russian government and suggest some strategies for improving the situation

coase versus the coasians who should enforce laws or contracts judges or regulators many coasians though not coase himself advocate judicial enforcement we show that the incentives facing judges and regulators crucially shape this choice we then compare the regulation of e nancial markets in poland and the czech republic in the 1990s in poland strict enforcement of the securities law by a highly motivated regulator was associated with a rapidly developing stock market in the czech republic hands off regulation was associated with a moribund stock market i introduction at the heart of economists traditional skepticism about government regulation is the coase theorem coase 1960 the theorem states that when property rights are well dee ned and transaction costs are zero market participants will organize their transactions in ways that achieve efe cient outcomes when they can do so it is not necessary for the government to engage in corrective actions through taxes regulations or even legal rules financial markets are often used to demonstrate the coase theorem s case against regulation advocates of the regulation of these markets point to a variety of potential failures such as the ability of security issuers to expropriate both potential and existing investors through misrepresentation or proe t diversion investors fear of such expropriation prevents e rms from raising external funds and keeps efe cient projects from being undertaken not so reply the coasians they point out that most securities transactions take place between sophisticated adults and that both the buyers and the issuers of securities have available to them a vast range of private arrangements to achieve efe ciency including contracts such as corporate charters certie cation by intermediaries and various forms of bonding such contracts render most laws and regulations unnecessary stigler 1964 easterbrook and fischel 1991

politicians bureaucrats and targeted redistribution abstract the paper argues that for political reasons elected politicians are more likely to be engaged in targeted redistribution than appointed bureaucrats it uses the example of patronage jobs in the u s local governments to provide empirical support for this claim it shows that the number of public employees is higher for elected chief executives this difference is stronger in public services with bigger private public wage differential and it increases during election years it also finds that the number of public employees increases with the age of bureaucrats while there is no such relationship in the case of politicians which is consistent with younger bureaucrats having stronger career concerns