mutual funds ownership and firm performance evidence from china mutual funds have emerged and rapidly developed since 2000 in china this study tests empirically the impact of mutual funds ownership on firm performance in china using a large sample for the period of 2001 2005 we find that equity ownership by mutual funds has a positive effect on firm performance the result is robust to several measures of firm performance and various estimations our finding supports recent regulatory efforts in china to promote mutual funds as a corporate governance mechanism and suggests that pooling diffuse minority interests of individual shareholders who are prone to free rider problems via mutual funds is beneficial

a model for supply planning under lead time uncertainty the paper is focused on the search of the optimal values of the planned lead times for the mrp method under lead time uncertainty the problem is to find the planned lead times which minimize the expected backlogging and holding costs the aim of the paper is to give a mathematical formulation of this single level multi item dynamic multi period planning problem for the case where lead time does not depend on the lot size and demand level is constant an auxiliary markov model is proposed some new formulations of optimal control policies are obtained using this markov model

observability and the payback criterion among the enigmas of corporate finance theory that have received little attention is the puzzling use of the payback method as a capital budgeting tool although the payback method has many drawbacks it is widely used in industry see klammer 1972 fremgren 1973 schall sundem and geijsback 1978 1 gordon 1955 attempted to explain this anomaly by observing that the inverse of the payback period is an approximation for the internal rate of return but as sarnat and levy 1969 point out the accuracy of the approximation depends on the life of the project and its irr for low values of irr the inverse of payback is a very poor approximation moreover it is difficult to believe that corporations that use complex and sophisticated technologies need a rule of thumb to approximate something as simple to compute as the irr in fact empirical evidence shows that most firms compute both the irr and the payback period see schall the payback criterion continues to be widely used in industry although there is little support for it among the academicians this paper attempts to find an economic rationale for it by using an incentive model with asymmetric information it argues that when the managers possess private information regarding projects selected for implementation it is in their interest to choose ceteris paribus projects that pay back faster since manager s wages depend on output because their productivity is unknown by choosing projects that pay back fast they hope to improve their reputations i wish to thank milton harris and an anonymous referee for their helpful suggestions while i retain the responsibility for any remaining errors 1 it has been found that payback is rarely used as a primary capital budgeting method it is used as a secondary criterion to a discounted cash flow method such as npv net present value or irr internal rate of return

gift giving guanxi and illicit payments in buyer supplier relations in china analysing the experience of uk companies this paper explores the relationship between gift giving guanxi and corruption through a study of the relationships between uk manufacturing companies in china and their local component suppliers the analysis is based on interviews in the china based operations of 49 uk companies interviews were carried out both with senior often expatriate staff and with local line managers who were responsible for everyday purchasing decisions and for managing relationships with suppliers the results suggest that gift giving is perceived to be a significant problem in uk owned companies in china however the relationship between these payments and established understanding of gift giving within guanxi networks appears to be weak gift giving appears to be associated with illicit payments corruption and the pursuit of self interest firms seek to reduce the incidence of illicit transactions by changing staff roles instituting joint responsibilities which include the separation of different aspects of sourcing purchasing ineasing the involvement of senior staff in the process and through the education of employee and suppliers

the discrete charm of the bourgeoisie quantum and continuous perspectives on innovation and growth this paper discusses the relative merits of discrete versus continuous perspectives on innovation technical change and economic growth it discusses the innovation time series literature in some detail to extract the continuous and clustering properties of the historical record on innovation it then proposes a mosaic avalanche model based on percolation theory and self organized criticality to address this question

impact of ownership on the international involvement of smes this paper analyses the relationship between the internationalisation strategies of smes and types of ownership different types of ownership affect firms and this in turn will influence the internationalisation strategy adopted using a sample of spanish smes our results show that internationalisation is negatively related to family ownership and positively related to corporate ownership we have also observed that the presence of a corporate blockholder in family firms encourages internationalisation these results support the idea that ownership type influences the decision to internationalise

how to use aggregation and combined forecasting to improve seasonal demand forecasts standard forecasting methods that are designed to cope with seasonal demand often are no longer applicable in practice due to growing assortments and shorter product life cycles demand data may show too high variation or may be insufficient to construct reliable forecast models at the individual item level in this article we present alternative forecasting methods that are based on using demand information from a higher aggregation level and on combining forecasts sales data from two prominent dutch wholesalers are used to illustrate the drawbacks of the standard seasonal forecasting methods and to demonstrate the potential of the new methods the average reduction in forecast error in terms of mse turns out to be three times as large as reported in earlier studies on common seasonal patterns

institutional investment patterns and corporate financial behavior in the united states and japan abstract this paper examines the agency problem between shareholders and debtholders of japanese and u s firms whereas u s institutional investors are restricted from doing so japanese financial institutions take large equity positions in firms to which they lend particularly in firms more susceptible to the agency problem debt ratios of u s firms are negatively related to the firm s potential to engage in risky suboptimal investments whereas japanese debt ratios show no such relation the evidence is consistent with the notion that the agency problem is mitigated to a greater degree in japan than in the u s

on the stock control performance of intermittent demand estimators the purpose of this paper is to assess the empirical stock control performance of intermittent demand estimation procedures the forecasting methods considered are the simple moving average single exponential smoothing croston s method and a new method recently developed by the authors of this paper we first discuss the nature of the empirical demand data set 3000 stock keeping units and we specify the stock control model to be used for experimentation purposes performance measures are then selected to report customer service level and stock volume differences the out of sample empirical comparison results demonstrate the superior stock control performance of the new intermittent demand forecasting method and enable insights to be gained into the empirical utility of the other estimators

corporate governance a critical comparison among international theories codes of best practices and empirical research as strong role played by the financial g lobalized market several countries have adopted rules and principles best practice codes to be shared among all co mpanies in order to provide tools to solve governance problems regulate relations among managers and shareholders this paper seeks to investigate american english german japanese and italian codes of conduct literature agrees that corporate governance archetypes are those anglo saxon and german japanese on the other hand the italian model represents an interesting case study these three models are based on different international theories agency stakeholder resource dependence and stewardship scholars maintain that the agency theory is the most valid of the theories with respect to the existence of international convergence processes thus the objective of the paper is twofold first of all we want to understand which international theory has been adopted by anglo saxon german japanese and italian codes secondly we wish to verify whether empirical research confirms principle efficacy contained in codes of corporate governance from a co mparat ive study among international theories and rules it would emerge that variables contained in the codes would be better explained and regulated under agency approach it should be noted however that each country in spite of the convergence processes towards a single standard of rules is affected by their social and economic background finally we could argue that empirical studies do not often explain critical success factors in the same way of codes although both are the result of best practices

corporate governance of banks a survey this paper reviews the empirical literature on the corporate governance of banks we start by highlighting the main differences between banks and nonfinancial firms and focus on three characteristics that make banks special i regulation ii the capital structure of banks and iii the complexity and opacity of their business and structure next we discuss the characteristics of corporate governance in banks and how they differ from the governance of nonfinancial firms we then review the evidence on three governance mechanisms i boards ii ownership structures and iii executive compensation our review suggests that some of the empirical regularities found in the literature on corporate governance of nonfinancial institutions such as the positive negative association between board independence size and performance do not hold for banks also existing work provides no conclusive results regarding the relationship between different governance mechanisms and various measures for banks performance we discuss potential explanations for these mixed results

italian corporate governance abstract the italian model of corporate governance is characterised by a high degree of ownership concentration both for unlisted and listed companies in the absence of an institutional framework facilitating more dispersed ownership as in the anglo saxon countries or mechanisms for financial supervision as in some continental european countries a limited degree of separation between ownership and control is achieved mainly by using pyramidal groups we analyse some of the effects of this organisational mode on firms financial structure and efficiency we report results on the effects of the limited protection of minority shareholders on the extent to which companies in pyramidal groups succeed in raising external finance and investigate how internal capital markets work in pyramidal groups we also present some results on the relationship between firms performance and governance structures

what s different about banks abstract negotiable certificates of deposit cd s trade in the capital market in competition with other securities like commercial paper and bankers acceptances if cd s must pay lenders competitive monetary interest the reserve tax on cd s is borne by bank borrowers viability of the tax means there must be something special about bank loans that makes some borrowers willing to pay higher interest rates than those on other securities of equivalent risk moreover there must be something special about banks that prevents other intermediaries from competing to assure that it never pays to finance loans with cd s

european corporate governance trading off liquidity against control abstract ownership dispersion is a pre requisite for liquid stock markets but it entails a collective action problem individual investors have no incentives to engage in direct monitoring legal devices can provide solutions along three dimensions one they can concentrate or dilute voting power two they can affect liquidity three they can give the right or wrong monitoring incentives this paper shows how these devices are used and how they can depress liquidity legal constraints aimed at strengthening minority protection can reduce the scope for monitoring destroy liquidity and even create incentives for minority abuse for example one share one vote restrictions encourage the formation of pyramidal holding companies the search for solutions that concentrate voting power provide liquidity and protect minorities continues

ownership structure speculation and shareholder intervention an institution holding shares in a firm can use information about the firm both for trading speculation and for deciding whether to intervene to improve firm performance intervention increases the value of the institution s existing shareholdings but intervention only increases the institution s trading profits if it enhances the precision of the institution s information relative to that of uninformed traders thus the ability to speculate can increase or decrease institutional intervention we examine key factors that affect the intervention decision the usefulness of short swing provisions and restricted shares in encouraging institutional intervention and implications for ownership structure across different firms institutional investors hold an ever greater fraction of corporate america s equity traditionally these institutions were stock pickers who tried to beat the market through trading if a firm whose stock they held seemed headed for trouble these investors headed for the door the wall street rule more recently some of these institutions have been using the ownership rights attached to their shares to pressure firms to act in the shareholders interest some have even argued that there is a synergy between gathering information for use in trading shares speculation and intelligently pressuring firms to improve performance intervention we argue that these motives can also conflict analyzing these motives allows us to predict which firms are most likely to attract institutional intervention which in turn has crosssectional implications for firm ownership structure recent examples suggest that institutional investors with large stakes sometimes intervene and sometimes follow the wall street rule so that there is indeed a choice to be studied in the early 1990s there was a wave of activism by a variety of large institutional investors among them calpers the california public employees pension fund putnam management a mutual fund manager and j p morgan a bank holding company these institu

founders heirs and corporate opacity in the united states abstract we argue that information about firm activities can vary substantially in the presence of founder or heir ownership thereby influencing the risks borne by minority investors we explore two hypotheses with regard to these controlling shareholders and corporate transparency focusing on their role as monitor in place and their potential to exploit firm opacity to accrue private benefits of control to test these notions we create an opacity index that ranks the relative transparency of the two thousand largest industrial us firms and find founder and heir ownership in 22 and 25 of these firms respectively our analysis indicates that in large publicly traded companies both founder and heir firms are significantly more opaque than diffuse shareholder firms we also find that founder and heir controlled firms exhibit a negative relation to performance in all but the most transparent firms surprisingly additional tests reveal that concerns about divergences in ownership versus control management type dual class shares and board influence appear to be substantially less important than corporate opacity in explaining the performance impacts of founder and heir control finally we decompose corporate opacity into disclosure and market scrutiny components finding that the disclosure quality component appears to be of greater importance to investors however irrespective of whether these controlling shareholders create or stay in the firm because of corporate opacity our analysis suggests that founders and heirs in large publicly traded firms exploit opacity to extract private benefits at the expense of minority investors

blockholdings in europe an international comparison abstract we preview empirical work by the european corporate governance network on the size of block shareholdings in europe the most salient finding is the extraordinarily high degree of concentration of shareholder voting power in continental europe relative to the u s a and the u k thus the relationship between large controlling shareholders and weak minority shareholders is at least as important to understand as the more commonly studied interface between management and dispersed shareholders

business ties and proxy voting by mutual funds abstract the magnitude of mutual funds business ties with their portfolio firms is documented and is linked to funds proxy votes at specific firms and to overall voting practices aggregate votes at the fund family level indicate a positive relation between business ties and the propensity to vote with management votes at specific firms however reveal that funds are no more likely to vote with management of client firms than of non clients because the votes took place when funds knew their votes would be publicly scrutinized fund families with a larger client base may have adopted voting policies that led to less frequent opposition to management at all firms

home bias foreign mutual fund holdings and the voluntary adoption of international accounting standards we test the assertion that a consequence of voluntarily adopting international accounting standards ias is the enhanced ability to attract foreign capital using a unique database that reports firm level holdings of over 25 000 mutual funds from around the world our multivariate tests find that average foreign mutual fund ownership is significantly higher among ias adopters we also find that ias adopters in poorer information environments and with lower visibility have higher levels of foreign investment consistent with firms using ias adoption to provide more information and or information in a more familiar form to foreign investors taken together our findings are consistent with voluntary las adoption reducing home bias among foreign investors and thereby improving capital allocation efficiency

does structure influence growth a panel data econometric assessment of relatively less developed countries 1979 2003 neo schumpeterian streams of research emphasize the close relationship between changes in economic structure in favor of high skill and high tech branches and rapid economic growth they identify the emergence of a new technological paradigm in the 1970s strongly based on the application of information and communication technologies icts arguing that in such periods of transition and emergence of new techno economic paradigms the intermediate development countries and the countries which are not at the technological frontier have higher opportunities to catch up although this debate is theoretically well documented the empirics seem to lag behind the theory in this article we contribute to this literature by adding enlightening evidence on the issue more precisely we relate the growth experiences of countries which had relatively similar economic structures in the late 1970s with changes occurring in these countries structures between 1979 and 2003 the results reveal a robust relationship between structure and labor productivity growth and lend support to the view that producing though not user ict related industries are strategic branches of economic activity copyright 2011 the author 2011 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

law and finance common law and civil law countries compared an empirical critique the theory of law and finance argues that the common law system provides a better framework for financial development and economic growth than the civil law tradition this paper identifies a number of problems that cast doubt on the soundness of the empirical basis of this literature however this analysis supports the idea that the legal tradition is a major factor in shaping corporate law in particular while there is not much evidence that common law countries protect financial investors better than civil law countries i find support for the assumption that financial investors are treated differently across legal families

the association between outside directors institutional investors and the properties of management earnings forecasts we investigate the relation of the board of directors and institutional ownership with the properties of management earnings forecasts we find that firms with more outside directors and greater institutional ownership are more likely to issue a forecast and are inclined to forecast more frequently in addition these forecasts tend to be more specific accurate and less optimistically biased these results are robust to changes specification granger causality tests and simultaneous equation analyses the results are similar in the pre and post regulation fair disclosure reg fd eras additional analysis suggests that concentrated institutional ownership is negatively associated with forecast properties this association is less negative in the post reg fd environment which is consistent with reg fd reducing the ability of firms to privately communicate information to select audiences

the decision to go public an overview abstract firms motives for going public are reviewed and significant cross country differences in the propensity to seek a listing are documented and discussed

blocks liquidity and corporate control the paper develops a simple model of corporate ownership structure in which costs and benefits of ownership concentration are analyzed the model cornpares the liquidity benefits obtained through dispersed corporate ownership with the benefits from efficient management control achieved by some degree of ownership concentration the paper reexamines the free rider problem in corporate control in the presence of liquidity trading derives predictions for the trade and pricing of blocks and provides criteria for the optimal choice of ownership structure the recent incomplete contracting approach in corporate finance has considerably improved our understanding of how small firms determine their capital structure the basic setting considered in this line of research is one where a founder manager seeks funding from one or several financiers the main premise is that the founder manager in her dealings with the financiers is primarily concerned with maintaining her private benefits of control for small firms these are often quite large relative to the financial returns thus for a small firm the problem of determining the financial structure often reduces to the problem of how to obtain fundingr while giving away as little control as possible to the financiers of course most financiers insist on some form of protection so that the final compromise reached in most financial contracts for small firms is one resembling a debt contract or a venture capital contract which protects the founder manager s control as long as the firm is performing adequately this perspective for small firms does not extend naturally to large firms because the private benefits of control of the managers for large firms are likely to be small relative to the firm s monetary returns so that protection of these benefits is not an overriding consideration moreover large firms

demand forecasting for multiple slow moving items with short requests history and unequal demand variance modeling the lead time demand for the multiple slow moving inventory items in the case when the available requests history is very short is a challenge for inventory management the classical forecasting technique which is based on the aggregation of the stock keeping units to overcome the mentioned historical data peculiarity is known to lead to very poor performance in many cases important for industrial applications an alternative approach to the demand forecasting for the considered problem is based on the bayesian paradigm when the initially developed population averaged demand probability distribution is modified for each item using its specific requests history this paper follows this approach and presents a new model which relies on the beta distribution as a prior for the request probability and allows to account for disparity in variance of demand between different stock keeping units to estimate the model parameters a special computationally effective technique based on the generalized method of moments is developed simulation results indicate the superiority of the proposed model over the known ones while the computational burden does not increase

the rise of clusters of innovative industries in belgium during the industrial epoch abstract this article presents the notion of cluster of innovative industries in order to analyse long term techno industrial change in belgium this notion accounts for strong and dynamic techno economic linkages interdependencies and complementarities that may occur between a set of industries for a particular period of time each cluster has its roots in a set of closely related major innovations that link particular industries to each other through a dynamic process of transfer and feedback of technology via various mechanisms we identified a number of 12 clusters of innovative industries that have emerged in the leading industrial countries since the first industrial revolution we also present empirical outcomes concerning the extent to which belgium participated in these clusters during the industrial epoch the belgian case shows that lagging countries are incapable of developing fully these clusters major components of the clusters were either missing or underdeveloped or they emerged with a considerable delay due to first mover advantages among other reasons

are there schumpeterian waves of innovations this paper responds to a recent criticism of the empirical evidence of bunching of innovations an examination of various long run innovation samples shows that there is indeed very poor evidence of innovation waves in the time before the mid 19th century thereafter however two long waves of major innovations occur both having a lead of approximately 10 15 years over the economic long wave as identified in an earlier study a t test confirms that these waves can be clearly distinguished from random fluctuations in the final section some suggestions for further research are outlined

the accuracy of a modified croston procedure a modified croston procedure to forecast intermittent demand is reviewed the modified procedure published in this journal in 2004 consists of a new method for estimating the mean demand and a smoothing method for estimating the variance of the forecasted demand rate it is found that the smoothed variance estimate is based on an invalid measure of forecast accuracy moreover it is shown that the method of forecasting mean demand produces biased forecasts the accuracy of this method is assessed using simulated data and the mean square error measure and compared with croston s method and single exponential smoothing it is found that croston s method is generally more accurate than its modification particularly for strongly intermittent series

islamic corporate governance risk sharing and islamic preferred shares the recent financial crises including the asian and subprime crises indicated the need to reinforce corporate governance mechanisms in emerging and developing market economies corporate governance refers to all the factors that affect firm processes including among others financing strategies firms must avoid debt financing instruments and adopt financing instruments that allow for risk sharing rather than risk shifting because all recent financial crises were in essence debt crises the primary objective of this paper is to examine the principles of risk sharing promoted by islamic finance and study their implications for corporate governance the secondary objective of this paper is to propose a pricing model for a new risk sharing financial instrument islamic preferred shares ips that was recently discussed by zarka and al suhaibani shariah compatible preference shares the sharia basis and economic rationale working paper sabic chair for islamic financial market studies 2012 we study the implications of this new instrument as a powerful tool for corporate governance in the case of islamic markets we explain the possible contribution of ips to agency cost reduction sharia screening costs and ethical corporate governance

the relationship between firm investments in technological innovation and political action economic theory recognizes the importance of investments in both technological innovation and political activity in firm behavior and extensive research exists which examines independently these expenditures however surprisingly little attention is devoted to analyzing technological innovation and political action expenditures jointly technological innovation and political action are two of the options firms face regarding how to achieve lower costs or market power the characteristics of these choices not only affect the degree to which each is used but also have widely divergent normative and policy implications for society furthermore many forms of technological innovation require regulatory approval so that firms may use the two forms of investment in conjunction with each other in addition to treating them as separate investment alternatives this paper investigates the relationships between firm investments in technological innovation and political activity both forms of investment seek to lower costs and or create market advantage but economists have long recognized the social importance of technological innovation to economic growth while treating most firm political activity as inefficient growing social concerns surrounding declining innovation productivity and growth and increasing firm political activity suggest that these are timely dimensions to explore jointly in the next section i discuss the relationship between firm investments in technological innovation and political action this discussion motivates the subsequent empirical modelling presented in section iii because of the possibility of simultaneity between firm spending in research and development rd these results hold true to various degrees over industries and industry groups section vi offers conclusions and suggestions for further research

player and referee roles held jointly the effect of state ownership on china s regulatory enforcement against fraud this article examines the impact of the prevailing state ownership in the chinese stock market on corporate governance and the financial regulatory system respectively as the internal and external monitoring mechanisms to deter corporate fraud and protect investors in line with the literature that state ownership exaggerates the agency problem we find that the retained state ownership in privatised firms increases the incidence of regulatory enforcements against fraud for the state owned enterprises soes however larger state ownership is associated with a lower incidence of enforcement actions this is attributed to the mutual political affiliation of the fraudulent soes and the regulatory commission a new regulation solutions for listed firm checks promulgated in march 2001 has mitigated this effect by empowering the regulatory commission to increase the severity of regulatory conditions our evidence confirms the improvement in the regulatory environment and investor protection in the chinese stock market brought about by the regulatory reform and development

do privatized banks in middle and low income countries perform better than rival banks an intra industry analysis of bank privatization abstract this paper presents a comprehensive analysis of the pre and post privatization operating performance and stock market performance of privatized banks and their rivals in middle and low income countries first we find that privatization announcements elicit negative abnormal returns for rival banks the effects are more pronounced for subsequent tranche sales where the proportion of government ownership in the privatized bank is reduced second we observe that the privatized banks underperformed the benchmark index in the long run investors who bought shares of the privatized banks on the first day of trading and held them for 5 years instead of investing in the market index lost 24 of their wealth the underperformance is consistent with the negative long run returns that have been documented for initial public offerings third we document marginal improvements in the post privatization operating performance of the privatized banks though the privatized banks in middle and low income countries are better capitalized than rival banks they carry higher problem loans and are overstaffed relative to other private banks in the post privatization period since most of the sample firms are partially privatized we submit that perhaps the continued government ownership of the privatized banks might have hindered managers ability to restructure the firms

mutual fund activism and market regulation during the pre ifrs period the case of earnings informativeness in china from an ethical perspective this paper investigates the emerging effect of mutual fund involvement on the agency problem between majority and minority shareholders during the pre ifrs period in china indicated by earnings informativeness from an ethical perspective we find that the presence of mutual fund hampers earnings informativeness implying that mutual funds in general at their early stage in china are not yet capable of serving as an effective monitor this finding is in sharp contrast to the role of institutional investors in mature markets as documented in the literature however mutual funds affiliated with banks have been found to be effective to improve earnings informativeness of chinese listed companies and the impact is more pronounced among those affiliated with joint equity banks compared to their counterparts affiliated with state owned banks