Dynamic Hedging with Credit Default Swaps: Empirical Evidence from the European Monetary Union

This thesis investigates the effectiveness of time-varying hedging during the financial crisis of 2007 and the European Debt Crisis of 2010. In addition, the seven test economies are part of the European Monetary Union and these countries are in different economical states. Time-varying hedge ratio was constructed using conditional variances and correlations, which were created by using multivariate GARCH models. Here we have used three different underlying portfolios: national equity markets, government bond markets and the combination of these two. These underlying portfolios were hedged by using credit default swaps. Empirical part includes the in-sample and out-of-sample analysis, which are constructed by using constant and dynamic models. Moreover, almost in every case dynamic models outperform the constant ones in the determination of the hedge ratio. We could not find any statistically significant evidence to support the use of asymmetric dynamic conditional correlation model. In addition, our findings are in line with prior literature and support the use of time-varying hedge ratio. Finally, we found that in some cases credit default swaps are not suitable instruments for hedging and they act more as a speculative instrument.

A Bridge Builder or a Raconteur? How Japan Manoeuvres the Global Development Discourse within the TICAD Process

Japan has been a major actor in the field of development cooperation for five decades, even holding the title of largest donor of Official Development Assistance (ODA) during the 1990s. Financial flows, however, are subject to pre-existing paradigms that dictate both donor and recipient behaviour. In this respect Japan has been left wanting for more recognition. The dominance of the so called ‘Washington Consensus’ embodied in the International Monetary Fund (IMF) and the World Bank has long circumvented any indigenous approaches to development problems. The Tokyo International Conference on African Development (TICAD) is a development cooperation conference that Japan has hosted since 1993 every five years. As the main organizer of the conference Japan has opted for the leading position of African development. This has come in the wake of success in the Asian region where Japan has called attention to its role in the so called ‘Asian Miracle’ of fast growing economies. These aspirations have enabled Japan to try asserting itself as a major player in directing the course of global development discourse using historical narratives from both Asia and Africa. Over the years TICAD has evolved into a continuous process with ministerial and follow-up meetings in between conferences. Each conference has produced a declaration that stipulates the way the participants approach the question of African development. Although a multilateral framework, Japan has over the years made its presence more and more felt within the process. This research examines the way Japan approaches the paradigms of international development cooperation and tries to direct them in the context of the TICAD process. Supplementing these questions are inquiries concerning Japan’s foreign policy aspirations. The research shows that Japan has utilized the conference platform to contest other development actors and especially the dominant forces of the IMF and the World Bank in development discourse debate. Japan’s dominance of the process is evident in the narratives found in the conference documents. Relative success has come about by remaining consistent as shown by the acceptance of items from the TICAD agenda in other forums, such as the G8. But the emergence of new players such as China has changed the playing field, as they are engaging other developing countries from a more equal level.

E-PORT. Improving efficiency of Finnish port community by intelligent systems Final report of the Mobile Port project

The management of port-related supply chains is challenging due to the complex and heterogeneous operations of the ports with several actors and processes. That is why the importance of information sharing is emphasised in the ports. However, the information exchange between different port-related actors is often cumbersome and it still involves a lot of manual work and paper. Major ports and port-related actors usually have advanced information systems in daily use but these systems are seldom interoperable with each other, which prevents economies of scale to be reached. Smaller ports and companies might not be equipped with electronic data transmission at all. This is the final report of the Mobile port (MOPO) project, which has sought ways to improve the management and control of port-related sea and inland traffic with the aid of ICT technologies. The project has studied port community systems (PCS) used worldwide, evaluated the suitability of a PCS for the Finnish port operating environment and created a pilot solution of a Finnish PCS in the port of HaminaKotka. Further, the dry port concept and its influences on the transportation system have been explored. The Mobile Port project comprised of several literature reviews, interviews of over 50 port-related logistics and/or ICT professionals, two different kinds of simulation models as well as designing and implementing of the pilot solution of the Finnish PCS. The results of these multiple studies are summarised in this report. Furthermore, recommendations for future actions and the topics for further studies are addressed in the report. The study revealed that the information sharing in a typical Finnish port-related supply chain contains several bottlenecks that cause delays in shipments and waste resources. The study showed that many of these bottlenecks could be solved by building a port community system for the Finnish port community. Almost 30 different kinds of potential services or service entities of a Finnish PCS were found out during the study. The basic requirements, structure, interfaces and operation model of the Finnish PCS were also defined in the study. On the basis of the results of the study, a pilot solution of the Finnish PCS was implemented in the port of HaminaKotka. The pilot solution includes a Portconnect portal for the Finnish port community system (available at https://www.portconnect.fi) and two pilot applications, which are a service for handling the information flows concerning the movements of railway wagons and a service for handling the information flows between Finnish ports and Finland-Russian border. The study also showed that port community systems can be used to improve the environmental aspects of logistics in two different ways: 1) PCSs can bring direct environmental benefits and 2) PCSs can be used as an environmental tool in a port community. On the basis of the study, the development of the Finnish port community system should be continued by surveying other potential applications for the Finnish PCS. It is also important to study if there is need and resources to extend the Finnish PCS to operate in several ports or even on a national level. In the long run, it could be reasonable to clarify whether there would be possibilities to connect the Finnish PCS as a part of Baltic Sea wide, European-wide or even worldwide maritime and port-related network in order to get the best benefit from the system

THE IMPACT OF GUANXI TO MULTINATIONAL COMPANIES BUSINESS PERFORMACE, CORPORATE REPUTATION, NEGOTIATIONS AND MANAGEMENT IN CHINA

The modern business development of China began during 1978 and during the last decades Chinese have created one of the most dynamic and strongest economies in the world. China is now second largest trading power calculated in dollars. The special characteristic of this economic development is that it is not copy of any existing economy, instead the developments have been strongly influenced by the Chinese cultural characteristics. One cultural characteristic, guanxi, which is a “network of services and counter- services” is argued to be major component of successful business in China where these changes of services happen between people but also between companies. Obtaining introductions and the guanxi when doing business in China will give attentive audience and security for companies business. Despite the evidenced importance of guanxi, China´s business environment is rapidly changing towards Western economies, which might then reduce the importance of guanxi. Therefore the current impact of guanxi is a important topic to study. The main purpose of this study is to explore the impact of guanxi for Western big and small sized multinational companies´ business processes when doing business in China. This study looks What is the impact of guanxi in contemporary Chinese business environment for foreign companies doing business in China. Sub-questions in this research focus on what is the impact of guanxi on corporate reputation, management and negotiations. Findings present a mixed view where the importance of guanxi is not anymore critical, especially among younger people in the cities, however guanxi was clearly important outside the cities and when dealing with government officials. Efficient use of guanxi can be extremely profitable especially during early stages of business operations and guanxi plays role when bargaining prices and ensuring product quality from the factories. Therefore guanxi should be considered as essential element for successful business in China.

The purpose of consumer co-operation: implications for the management and governance of co-operatives

Extant research on consumer co-operation has acknowledged that the corporate purpose of consumer co-operatives deviates significantly from the purpose of investor-owned firms (IOFs – the dominant form in market economies and in theory development in the field of business economics) and also suggested that the management of consumer co-operatives differs from the management of IOFs. Despite this, there is a scarcity of research focusing on the management of consumer co-operatives in general and the ways this different purpose manifests in their management in particular. In other words, research on consumer cooperatives has only started to discover the importance of identifying the premises of these organizations and generating management and organization theories that take them into account. The overall objective of this study is to map out some of the implications that the purpose of consumer co-operation has for the management and governance of consumer co-operatives. To put it more precisely, by combining interview data gathered from Finnish consumer cooperatives (S Group, OP Bank Group and POP Bank) and extant literature, this study aims to generate or elaborate on definitions and outlines of the features that co-operative purpose poses for the strategic management, governance and managerial competence needed for consumer co-operatives. The study consists of two parts. The first part introduces the research topic, methods and publications, as well as discusses the overall outcomes. The second part consists of four publications that address the research questions from different viewpoints. The analyses of this study indicate that due to the purpose of consumer co-operation, the roles of locality and regionality become emphasized in their management. While locality and regionality are potential sources of competitive advantage for consumer co-operatives, geographic boundness sets significant boundary conditions for the strategic management of these organizations. Further, the purpose of consumer co-operation may pose several challenges to governance and set specific competence demands for the managers of these organizations. Associating the observations from various streams of research on management and governance with the purpose of consumer co-operation and examining these issues further, the thesis contributes to elaboration of theory in the field. While the thesis is by no means comprehensive (but instead reflects a co-operative research project in its early stages), it does shed light on some key ideas of management and governance and offers leads to theory and, thereby, will prove useful to elaborators, disseminators and appliers of knowledge on co-operation.

Kunnan optimikoko Suomessa

Tämän diplomityön päätavoitteena on tutkia voidaanko kunnille löytää optimaalinen kokoluokka Suomessa. Työn muita tavoitteita on tutkia voidaanko vastaava optimikoko löytää myös kahdelle kunnan tehtävistä, joiksi tässä tutkimuksessa on valittu sosiaali- ja terveystoimi sekä perusopetus. Lisäksi työssä tutkitaan miten paljon maakuntien välillä on tehokkuuseroja. Tutkimusmenetelminä on käytetty laskelmia, case -analyysiä, tilinpäätösanalyysiä ja tilastollisia menetelmiä. Työssä tehokkuutta mitattiin neljällä osa-alueella, jotka olivat tehokkuus toimintakatteen suhteen, tehokkuus toimintakustannusten suhteen, sosiaali- ja terveystoimen tehokkuus sekä perusopetuksen tehokkuus. Optimikoon määrityksien yhteydessä saatuihin tehokkuuslukuihin yhdistettiin kuntakohtaiset toimintaympäristötekijät kuten työttömyys ja väestön ikäjakauma. Työn lopputulos oli, että kunnan optimikoko Suomessa olisi noin 35 tuhatta asukasta, mutta erot välillä 25-40 tuhatta asukasta olivat pienet. Kustannustietojen perusteella kaikkein tehottomin kuntakokoluokka oli alle 3 tuhannen asukkaan kuntakoko, mutta toimintaympäristötekijöiden huomioimisen jälkeen kaikkein tehottomimmaksi osoittautui suurimmat yli 120 tuhannen asukkaan kunnat.

Interdependence of Emerging Eastern European stock markets

One of the main developments in the global economy during the past decades has been the growth of emerging economies. Projections for their long-term growth, changes in the investment climate, corporate transparency and demography point to an increasing role for these emerging economies in the global economy. Today, emerging economies are usually considered as financial markets offering opportunities for high returns, good risk diversification and improved return-to-risk ratios. However, researchers have noted that these advantages may be in decline because of the increasing market integration. Nevertheless, it is likely that certain financial markets and specific sectors will remain partially segmented and somewhat insulated from the global economy for the year to come. This doctoral dissertation investigates several stock markets in Emerging Eastern Europe (EEE), including the ones in Russia, Poland, Hungary, the Czech Republic, Bulgaria and Slovenia. The objective is to analyze the returns and financial risks in these emerging markets from international investor’s point of view. This study also examines the segmentation/integration of these financial markets and the possibilities to diversify and hedge financial risk. The dissertation is divided into two parts. The first includes a review of the theoretical background for the articles and a review of the literature on EEE stock markets. It includes an overview of the methodology and research design applied in the analysis and a summary of articles from the second part of this dissertation and their main findings. The second part consists of four research publications. This work contributes to studies on emerging stock markets in four ways. First, it adds to the body of research on the pricing of risk, providing new empirical evidence about partial stock market segmentation in EEE. The results suggest that the aggregate emerging market risk is a relevant driver for stock market returns and that this market risk can be used to price financial instruments and forecast their performance. Second, it contributes to the empirical research on the integration of stock markets, asset prices and exchange rates by identifying the relationships between these markets through volatility and asset pricing. The results show that certain sectors of stock markets in EEE are not as integrated as others. For example, the Polish consumer goods sector, the Hungarian telecommunications sector, and the Czech financial sector are somewhat isolated from their counterparts elsewhere in Europe. Nevertheless, an analysis of the impact of EU accession in 2004 on stock markets suggests that most of the EEE markets are becoming increasingly integrated with the global markets. Third, this thesis complements the scientific literature in the field of shock and volatility spillovers by examining the mechanism of spillover distribution among the EU and EEE countries. The results illustrate that spillovers in emerging markets are mostly from a foreign exchange to the stock markets. Moreover, the results show that the effects of external shocks on stock markets have increased after the enlargement of the EU in 2004. Finally, this study is unique because it analyzes the effects of foreign macroeconomic news on geographically closely related countries. The results suggest that the effects of macroeconomic announcements on volatility are significant and have effect that varies across markets and their sectors. Moreover, the results show that the foreign macroeconomic news releases, somewhat surprisingly, have a greater effect on the EEE markets than the local macroeconomic news. This dissertation has a number of implications for the industry and for practitioners. It analyses financial risk associated with investing in Emerging Eastern Europe. Investors may use this information to construct and optimize investment portfolios. Moreover, this dissertation provides insights for investors and portfolio managers considering asset allocation to protect value or obtain higher returns. The results have also implications for asset pricing and portfolio selection in light of macroeconomic news releases.

Market integration, return and volatility dynamics; empirical evidence from African stock markets

Frontier and Emerging economies have implemented policies with the objective of liberalizing their equity markets. Equity market liberalization opens the domestic equity market to foreign investors and as well paves the way for domestic investors to invest in foreign equity securities. Among other things, equity market liberalization results in diversification benefits. Moreover, equity market liberalization leads to low cost of equity capital resulting from the lower rate of return by investors. Additionally, foreign and local investors share any potential risks. Liberalized equity markets also become liquid considering that there are more investors to trade. Equity market liberalization results in financial integration which explains the movement of two markets. In crisis period, increased volatility and co-movement between two markets may result in what is termed contagion effects. In Africa, major moves toward financial liberalization generally started in the late 1980s with South Africa as the pioneer. Over the years, researchers have studied the impact of financial liberalization on Africa’s economic development with diverse results; some being positive, others negative and still others being mixed. The objective of this study is to establish whether African stock-markets are integrated into the United States (US) and World market. Furthermore, the study helps to see if there are international linkages between the Africa, US and the world markets. A Bivariate- VAR- GARCH- BEKK model is employed in the study. In the study, the effect of thin trading is removed through series of econometric data purification. This is because thin trading, also known as non-trading or inconsistency of trading, is a main feature of African markets and may trigger inconsistency and biased results. The study confirmed the widely established results that the South Africa and Egypt stock markets are highly integrated with the US and World market. Interestingly, the study adds to knowledge in this research area by establishing the fact that Kenya is very integrated with the US and World markets and that it receives and exports past innovations as well as shocks to and from the US and World market.

Commercialization of Modern Renewable Energy

The threat of global warming and its consequences are widely recognized, and the question of how to proceed with the long transition towards fossil fuel -neutral economies concerns many nations and people. At the same time the world’s primary energy use is predicted to increase significantly during the next decades as a result of global population and welfare increase. Improved energy efficiency and increased use of renewable energy sources in the world’s energy mix play important roles in the future energy production and consumption. The objective of this thesis is to study how novel renewable energy technologies, such as distributed small-scale bio-fueled combined heat and power production and wind power technologies could be commercialized efficiently. A wide array of attributes may contribute to the diffusion of new products. In general, the bioenergy and wind power technologies are in emerging phases, and the diffusion stage varies from country to country. The effects of firms’ technology choices, collaboration and alliances are studied in this thesis. Furthermore, the roles of national energy infrastructure and energy support schemes in the commercialization of new renewable energy products are explored. The empirical data is based on energy expert interviews, financial and patent data, and literature reviews of different case studies. The thesis comprises two parts. The first part provides an overview of the study, and the second part includes six research publications. The results reveal that small-scale bio-fueled combined heat and power production and wind power technologies are still in emerging phases in their life cycles, and energy support schemes are crucial in the market diffusion. The study contributes to earlier findings in the literature and industry by confirming that adequate energy policies and energy infrastructure are fundamental in the commercialization of novel renewable energy technologies. Firm-specific issues, including business relationships and new business models, and market-related issues will have a more significant role in the market penetration in the future, when the technologies mature and become competitive without political support schemes.

The accumulation of financial and social capital as a means to achieve a sustained competitive advantage for consumer co-operatives

By so far, scholars have discussed how the characteristics of consumer co-operatives (cooperative principles, values and the dual role of members as the users and owners) can potentially give them a competitive advantage over investor-owned firms (IOFs). In addition, concern for the community (as partly derived from locality and regionality) has been seen as a potential source of success for consumer co-operatives. On the other hand, the geographicbound purpose of consumer co-operation causes that consumer co-operative can be regarded as a challenging company form to manage. This is because, according to the purpose of consumer co-operation, co-operatives are obligated to 1) provide the owners with services and goods that are needed and do so at more affordable prices than their competitors do and/or 2) to operate in areas in which competitors do not want to operate (for example, because of the low profitability in certain area of business or region). Thus, consumer co-operatives have to operate very efficiently in order to execute this geographic-bound corporate purpose (e.g. they cannot withdraw from the competition during the declining stages of business). However, this efficiency cannot be achieved by any means; as the acceptance from the important regional stakeholders is the basic operational precondition and lifeline in the long run. Thereby, the central question for the survival and success of consumer co-operatives is; how should the consumer co-operatives execute its corporate purpose so it can be the best alternative to its members in the long run? This question has remained unanswered and lack empirical evidence in the previous studies on the strategic management of consumer cooperation. In more detail, scholars have not yet empirically investigated the question: How can consumer co-operatives use financial and social capital to achieve a sustained competitive advantage? It is this research gap that this doctoral dissertation aims to fulfil. This doctoral dissertation aims to answer the above questions by combining and utilizing interview data from S Group co-operatives and the central organizations in S Group´s network (overall, 33 interviews were gathered), archival material and 56 published media articles/reports. The study is based on a qualitative case study approach that is aimed at theory development, not theory verification (as the theory is considered as nascent in this field of study). Firstly, the findings of this study indicate that consumer co-operatives accumulate financial capital; 1) by making profit (to invest and grow) and 2) by utilizing a network-based organizational structure (local supply chain economies). As a result of financial capital accumulation, consumer co-operatives are able to achieve efficiency gains but also remain local. In addition, a strong financial capital base increases consumer co-operatives´ independence, competitiveness and their ability to participate in regional development (which is in accordance with their geographically bound corporate purpose). Secondly, consumer cooperatives accumulate social capital through informal networking (with important regional stakeholders), corporate social responsibility (CSR) behaviour and CSR reporting, pursuing common good, and interacting and identity sharing. As a result of social capital accumulation, consumer co-operatives are able to obtain the resources for managing; 1) institutional dependencies and 2) customer relations. By accumulating both social and financial capital through the above presented actions, consumer co-operatives are able to achieve sustained competitive advantage. Finally, this thesis provides useful ideas and new knowledge for cooperative managers concerning why and how consumer co-operatives should accumulate financial and social capital (to achieve sustained competitive advantage), while aligning with their corporate purpose.

Managing innovation in oil and gas companies: A proposed framework for the management of innovation at Ecopetrol S.A.

Actually, the term innovation seems to be one of the most used in any kind of business practices. However, in order to get value from it, companies need to define a systematic and structured way to manage innovation. This process can be difficult and very risky since it is associated with the development of firm´s capabilities which involves human and technical challenges according to the context of a firm. Additionally, it seems not to exist a magic formula to manage innovation and what may work in a company may not work in another, even though in the same type of industry. In this sense, the purpose of this research is to identify how the oil and gas companies can manage innovation and what are the main elements, their interrelations and structure, required for managing innovation effectively in this critical sector for the world economy. The study follows a holistic single case study in a National Oil Company (NOC) of a developing country to explore how innovation performs in the industry, what are the main elements regarding innovation management and their interactions according to the nature of the industry. Contributory literature and qualitative data from the case study company (with the use of non-standardized interviews) is collected and analyzed. The research confirms the relevance and importance of the definition and implementation of an innovation framework in order to ensure the generation of value and organize as well as guide the efforts in innovation done by a firm. In this way based on the theoretical background, research´s findings, and in the company´s innovation environment and conditions, a framework for managing innovation at the case study company is suggested. This study is one of the few, if not only one, that has reviewed the way as oil and gas companies manage innovation and its practical implementation in a company from a developing country. Both researchers and practitioners will get a photograph of understanding innovation management in the oil and gas industry and its growing necessity in the business world. Some issues have been highlighted, so that future study can be focused in those directions. In fact, even though research on innovation management has significantly grown, there are still many issues that need to be addressed to get insight about managing innovation in various contexts and industries. Studies are mostly performed in the context of large firms and in developed countries, so then research in the context of developing countries is still almost an untouched area, especially in the oil and gas industry. Finally, from the research it seems crucial to explore the effect of some innovation-related variables such as: open innovation in third world economies and in state-own companies; the impact of mergers and acquisitions in innovation performance in oil and gas companies; value measurement in the first stages of the innovation process; and, development of innovation capabilities in companies from developing nations.

State of logistics and transport in the Baltic Sea region in 2025

The world’s pace of change is accelerating and new innovations, inventions and technologies come about every day. Change is unavoidable. It is difficult to keep up and even more difficult to prepare for the future. Even though it is not possible to know exactly what will happen in the future, by studying futures people can better anticipate what might lie ahead. By making decisions and realizing the consequences of their choices today, people and governments are able to actively decide how they will act in the future. Both opportunities and pitfalls lie ahead, which encourages actors to make more farsighted decisions. The Baltic Sea region is an interesting area for futures studies. It comprises 11 nations and more than 100 million inhabitants and entails countries with advanced, high-income economies, like Finland, Germany and Denmark, and developing economies, like Russia, Latvia and Lithuania. The western, eastern, northern and southern parts of the region are separated by the Baltic Sea, which at the same time represents a barrier and a facility for trade and travel between the countries belonging to the region The purpose of this study was to uncover the most probable future of transport and logistics in the Baltic Sea region in 2025 by using the Delphi method. Altogether 109 responses were collected in two separate instances from experts in all the Baltic Sea region countries, 56 of whom were defined as academic respondents and 53 of whom business respondents. Only minor differences in the opinions of academic and business experts were discovered, and the larger differences lie between eastern and western response groups. The Baltic Sea region is a very heterogeneous region and the division is clearest between East and West, which differ in political, economic, social, technological and environmental aspects. The probable future of the Baltic Sea region presented in this study is coherent with previous studies on the same subject. The future of the Baltic Sea region in terms of logistics and transport looks quite bright according to the experts who participated in the study. Trade volumes will grow and the importance of logistics and transport to the competitiveness of the region will increase. Respondents from eastern countries seemed to be more optimistic about the future in general. Most differences between opinions could be explained by the gap in technological and infrastructural development between the East and West. As eastern countries are less-developed in some parts of their economies, it is easier for them to improve the technical condition of infrastructure by merely catching up with the western countries.

Data Flows and Engaging Visualisations for Your Repositories

Poster at Open Repositories 2014, Helsinki, Finland, June 9-13, 2014

The Russian National Innovation System - an International Perspective

Russia inherited a large research and development (R&D) sector from the Soviet times, and has retained a substantial R&D sector today, compared with other emerging economies. However, Russia is falling behind in all indicators measuring innovative output in comparison with most developed countries. Russia’s innovation performance is disappointing, despite the available stock of human capital and overall investment in R&D. The communist legacy still influences the main actors of the innovation system. The federal state is still the most important funding source for R&D. Private companies are not investing in innovative activities, preferring to “import” innovations embedded in foreign technologies. Universities are outsiders in the innovation system, only a few universities carry out research activities. Nowadays, Russia is a resource-depended country. The economy depends on energy and metals for growth. The Russian economy faces the challenge of diversification and should embrace innovation, and shift to a knowledge economy to remain competitive in the long run. Therefore, Russia has to tackle the challenge of developing an efficient innovation system with its huge potential in science expertise and engineering know-how.