Essays on Financial Analyst Forecasts and Recommendations

The trade of the financial analyst is currently a much-debated issue in today’s media. As a large part of the investment analysis is conducted under the broker firms’ regime, the incentives of the financial analyst and the investor do not always align. The broker firm’s commercial incentives may be to maximise its commission from securities trading and underwriting fees. The purpose of this thesis is to extend our understanding of the work of a financial analyst, the incentives he faces and how these affect his actions. The first essay investigates how the economic significance of the coverage of a particular firm impacts the analysts’ accuracy of estimation. The hypothesis is that analysts put more effort in analysing firms with a relatively higher trading volume, as these firms usually yield higher commissions. The second essay investigates how analysts interpret new financial statement information. The essay shows that analysts underreact or overreact to prior reported earnings, depending on the short-term pattern in reported earnings. The third essay investigates the possible investment value in Finnish stock recommendations, issued by sell side analysts. It is established that consensus recommendations issued on Finnish stocks contain investment value. Further, the investment value in consensus recommendations improves significantly through the exclusion of recommendations issued by banks. The fourth essay investigates investors’ behaviour prior to financial analysts’ earnings forecast revisions. Lately, the financial press have reported cases were financial analysts warn their preferred clients of possible earnings forecast revisions. However, in the light of the empirical results, it appears that the problem of analysts leaking information to some selected customers does not appear systematically on the Finnish stock market.

Three Essays on the Volatility of Finnish Stock Returns (summary section only)

First, in Essay 1, we test whether it is possible to forecast Finnish Options Index return volatility by examining the out-of-sample predictive ability of several common volatility models with alternative well-known methods; and find additional evidence for the predictability of volatility and for the superiority of the more complicated models over the simpler ones. Secondly, in Essay 2, the aggregated volatility of stocks listed on the Helsinki Stock Exchange is decomposed into a market, industry-and firm-level component, and it is found that firm-level (i.e., idiosyncratic) volatility has increased in time, is more substantial than the two former, predicts GDP growth, moves countercyclically and as well as the other components is persistent. Thirdly, in Essay 3, we are among the first in the literature to seek for firm-specific determinants of idiosyncratic volatility in a multivariate setting, and find for the cross-section of stocks listed on the Helsinki Stock Exchange that industrial focus, trading volume, and block ownership, are positively associated with idiosyncratic volatility estimates––obtained from both the CAPM and the Fama and French three-factor model with local and international benchmark portfolios––whereas a negative relation holds between firm age as well as size and idiosyncratic volatility.

Essays on Managing Knowledge and Work Related Wellbeing

This study explores the relationship between Intellectual Capital and Maintenance of Work Ability. Intellectual Capital is the central framework for analysing the increasing knowledge-intensiveness of business life. It is characteristic of Intellectual Capital that the intersection of human capital, internal structures and external structures is essential. Maintenance of Work Ability, on the other hand, has been the leading paradigm for Finnish occupational health and safety activities since the late 1980s. It is also a holistic approach that emphasises the interdependence of competence, work community, work environment and health as the key to work-related wellbeing. This thesis consists of five essays that scrutinise the focal phenomena both theoretically and empirically. The conceptual model that results from the first research essay provides a general framework for the whole thesis. The case study in the second essay supports a division of intangible assets into generative and commercially exploitable intangibles introduced in the first essay and further into the primary and secondary dimension of generative intangibles. Further scrutiny of the interaction of generative intangible assets in essay three reveals that employees’ wellbeing enhances the readiness to contribute to the knowledge creation process. The fourth essay shows that the MWA framework could benefit knowledge-intensive work but this would require a different approach than has been commonly adopted in Finland. In essay five, deeper analysis of the MWA framework shows that its potential results from comprehensive support of the functioning of an organisation. The general conclusion of this thesis is that organisations must take care of their employees’ wellbeing in order to secure innovativeness that is the key to surviving in today’s competitive business environment.

Increasing Knowledge Focus - a Means for Entrepreneurs to Remain on a Growth Path: Essays on the Role and Nature of Knowledge Management in Finnish SMEs (summary section only)

This study explores the role and nature of knowledge management (KM) in small and medium-sized companies (SMEs). Even though the role of knowledge as a competitive advantage is commonly recognized in the SME sector, almost no attention has been paid to the managing and developing of knowledge in SMEs. This thesis consists of three different sub-studies that were reported in four individual essays. The results of the questionnaire study indicate that nearly all companies that responded to the questionnaire (N = 108) found intangible assets, i.e. knowledge resources to be their main source of competitive advantage. However, only less than a third of the companies actively deal with knowledge management. The results also indicate a significant correlation between activity in knowledge management and sustainable organic growth of the company. The interview study (N = 10) explored the context and motives of the SMEs for managing their intangible assets, and the concrete practices of knowledge management. It turned out that KM facilitated change management, clarification of the vision and new strategy formulation. All the interviewed companies were aiming at improved innovation process, new ways of doing business and attaining an increased “knowledge focus” in their business. Nearly all also aspired to grow significantly. Thus, KM provides a strategy for these SMEs to guarantee their survival and sustainability in the turbulent markets. The action research was a process to assess and develop intangible resources in three companies. The experienced benefits were the clarification of future focus and strategy, creation of a common language to discuss strategic issues within the company, as well as improved balance of different categories of intangible assets. After the process all the case companies had developed in the chosen key areas. Thus, by systematic knowledge management the implementation of new strategic orientation (knowledge focusing) was facilitated. The findings can be summarized in two main points. First, knowledge management seems to serve the purpose of change, renewal and new strategic orientation in the SMEs. It also seems to be closely related to organic growth and innovation. All of these factors can be considered dimensions of entrepreneurship. Second, the conscious development of intangible assets can increase the balance of different categories of intangible assets and the overall knowledge focusing of business. In the case companies, this in turn facilitated the path to the improved overall performance.

Becoming to Know: Essays on Extended Epistemology of Knowledge Creation

This qualitative, explorative study, which comprises four essays, focuses on knowledge management (KM). It seeks to answer the question: How can the knowledge creation theory of KM benefit from social learning theories? While studying the five development phases of knowledge creation theory of KM through 1995-2008 and applying some social learning theories in essays, the concepts of knowing, learning and becoming have emerged. Drawing on these three concepts and on becoming ontology and extended epistemology as research philosophies the study suggests the ‘becoming epistemology’ concept and develops the ‘becoming to know’ framework. The framework proposes becoming as phronesis of dialectic interactions between learning and knowing. It shows how becoming to know evolves as an interplay between concrete experience and logical thinking in the present and in a living context. The proposed framework could be considered a contribution to the current development phase of the knowledge creation theory of KM because it illustrates how ontological and epistemological knowledge spirals come together, which is the essence of the knowledge creation theory of KM.

Sensemaking in the Third Space - Essays on French-Finnish Bicultural Experiences in Organizations and Their Narratives (summary section only)

Research on cross-cultural and intercultural aspects in organizations has been traditionally conducted from an objectivist, functionalist perspective, with culture treated as an independent variable, and often the key explanatory factor. In order to do justice to the ontological relativity of the phenomena studied, more subjectivist research on intercultural interactions, and especially on their relationships with the dynamics of cultural identity construction, is needed. The present research seeks to address this gap by focusing on bicultural interactions in organizations, as they are experienced by the involved individuals. It is argued that such bicultural situations see the emergence of a space of hybridity, which is here called a ‘third space’, and which can be understood as providing ‘occasions for sensemaking’: it is this individual sensemaking that is of particular interest in the empirical narrative study. A first overall aim of the study is to reach an understanding of the dynamics of bicultural interactions in organizations; an understanding not only of the potential for learning and emancipatory sensemaking, but also of the possibility of conflict and alienatory ordering (this is mainly addressed in the theoretical essays 1 and 2). Further, a second overall aim of the study is to analyze the reflexive identity construction of four young French expatriates involved in such bicultural interactions in organizations in Finland, in order to examine the extent to which their expatriation experiences have allowed for an emancipatory opportunity in their cases (in essays 3 and 4). The primary theoretical contribution in this study lies in its new articulation of the dynamics of bicultural interactions in organizations. The ways in which the empirical material is analyzed bring about methodological contributions: since the expatriates’ accounts are bound to be some kind of construction, the analysis is made from angles that point to how the self-narratives construct reality. There are two such angles here: a ‘performative’ one and a ‘spatial’ one. The most important empirical contributions lie in the analysis of, on the one hand, the alternative uses that the young expatriates made of the notion of ‘national culture’ in their self-narratives, and, on the other hand, their ‘narrative practices of the third space’: their politics of escape or stabilization, their exploration of space or search for place, their emancipation from their origin or return to home as only horizon.

Moral Education in the Japanese Primary School Curricular Revision at the Turn of the Twenty-first Century: Aiming at a Rich and Beautiful Kokoro

This study examines values education in Japanese schools at the beginning of the millennium. The topic was approached by asking the following three questions concerning the curricular background, the morality conveyed through textbooks and the characterization of moral education from a comparative viewpoint: 1) What role did moral education play in the curriculum revision which was initiated in 1998 and implemented in 2002? 2) What kinds of moral responsibilities and moral autonomy do the moral texts develop? 3) What does Japanese moral education look like in terms of the comparative framework? The research was based on curriculum research. Its primary empirical data consisted of the national curriculum guidelines for primary school, which were taken into use in 2002, and moral texts, Kokoro no nôto, published by the Ministry of Education in the same context. Since moral education was approached in the education reform context, the secondary research material involved some key documents of the revision process from the mid-1990s to 2003. The research material was collected during three fieldwork periods in Japan (in 2002, 2003 and 2005). The text-analysis was conducted as a theory-dependent qualitative content analysis. Japanese moral education was analyzed as a product of its own cultural tradition and societal answer to the current educational challenges. In order to understand better its character, secular moral education was reflected upon from a comparative viewpoint. The theory chosen for the comparative framework, the value realistic theory of education, represented the European rational education tradition as well as the Christian tradition of values education. Moral education, which was the most important school subject at the beginning of modern school, was eliminated from the curriculum for political reasons in a school reform after the Second World War, but has gradually regained a stronger position since then. It was reinforced particularly at the turn of millennium, when a curriculum revision attempted to respond to educational and learning problems by emphasizing qualitative and value aspects. Although the number of moral lessons and their status as a non-official-subject remained unchanged, the Ministry of Education made efforts to improve moral education by new curricular emphases, new teaching material and additional in-service training possibilities for teachers. The content of the moral texts was summarized in terms of moral responsibility in four moral areas (intrapersonal, interpersonal, natural-supranatural and societal) as follows: 1) continuous self-development, 2) caring for others, 3) awe of life and forces beyond human power, and 4) societal contribution. There was a social-societal and emotional emphasis in what was taught. Moral autonomy, which was studied from the perspectives of rational, affective and individuality development, stressed independence in action through self-discipline and responsibility more than rational self-direction. Japanese moral education can be characterized as the education of kokoro (heart) and the development of character, which arises from virtue ethics. It aims to overcome egoistic individualism by reciprocal and interdependent moral responsibility based on responsible interconnectedness.

A Shared European History? Perceptions of Imperialism and Islam in Matriculation Examination Essays and History Textbooks

The European Union (EU) is faced with a continuous decrease in public support. There is a tension between the growing Euroscepticism and the concurrent academic discourse of a shared European identity. Informed and inspired by the current debates, this Master’s Thesis investigates the potential of a shared past to create shared identity. It also addresses the logic of cultural exclusion that is often connected to collective cultural identities. The source material is a combination of exam essays, written as answers to the history tests in the Finnish matriculation examinations of 2005-2008, and upper secondary school history textbooks. From the sources, current perceptions of Islam (as Europe’s Other) and the age of imperialism (as a debated period from Europe’s past) among the youth are studied. Through the analysis the thesis aims to indicate the level of consensus within the pupils’ identification with the past and with Europe. This objective is pursued through examining the pupils’ perceptions of Europe’s past and its relationship to non-European cultures and countries as they are manifested in the essays, and reflecting upon the level of influence that history textbooks as representatives of national hegemonic historical narratives might have on the contents, framings and emphases with and through which the pupils approach, imagine, and reproduce Europe’s past. The approach is based on previous research on the presence of history and the field of textbook research. The theoretical categories with which the sources are analyzed are derived primarily from literature on identity, European integration, history and memory, postcolonial criticism, and theorizations of European identity. Results of the research project suggest that the rhetoric of European superiority, despite its apparent demise, still resonates in contemporary understandings of Europeanness. Dominant perceptions of imperialism comprise of European agency and colonial submission, dominant perceptions of the Islamic world of fundamental difference. Identification with European history among the Finnish youth is rather shallow when examined through perceptions of imperialism; the Islamic world is perceived as Other and its representations are dominated by recent and contemporary international relations.

On the principles of Japanese forest policy since 1950.

XVIII IUFRO World Congress, Ljubljana 1986.

Essays on labour demand and wage formation

The first essay in this thesis is on gender wage differentials among manufacturing sector white-collar workers. The wage differential is decomposed into firm, job (within-firm) and individ-ual-level components. Job-level gender segregation explains over half of the gap, while firm-level segregation is not important. After controlling for firm, job and individual characteristics, the remaining unexplained wage cap to the advantage of men is six per cent of men s mean wage. In the second essay, I study how the business cycle and gender affect the distribution of the earnings losses of displaced workers. The negative effect of displacement is large, persistent and strongest in the lowest earnings deciles. The effect is larger in a recession than in a recov-ery period, and in all periods women s earnings drop more than men s earnings. The third essay shows that the transition from steady employment to disability pension de-pends on the stringency of medical screening and the degree of experience-rating of pension costs applied to the employer. The fact that firms have to bear part of the cost of employees disability pension costs lowers both the incidence of long sick leave periods and the probabil-ity that sick leave ends in a disability pension. The fourth and fifth essays are studies on the employment, wage and profit effects of a re-gional payroll tax cut experiment conducted in northern and eastern Finland. The results show no statistically significant effect on any of the response variables.