Using tools to help cost estimating and pricing: examination of costing model's and cost breakdown's workability and their capability to cooperative work

Tämä diplomityö käsittelee työkaluja, jotka on suunniteltu kustannusten ennakointiin ja hinnan asetantaan. Aluksi on käyty läpi perinteisen ja toimintoperusteisen kustannuslaskennan perusteita. Näiden menetelmien välisiä eroja on tarkasteltu ja toimintoperusteisen kustannuslaskennan paremmin sopivuus nykypäivän yrityksille on perusteltu. Toisena käsitellään hinnoittelu. Hinnan merkitys, hinnoittelumenetelmät ja päätös lopullisesta hinnasta on käyty läpi. Hinnoittelun jälkeen esitellään kustannusjärjestelmät ja kustannusten arviointi. Nämä asiat todistavat, että tarkat kustannusarviot ovat elintärkeitä yritykselle. Tuotteen kustannusarviointi, hinnan asetanta ja tarjoaminen ovat erittäin merkityksellisiä asioita ottaen huomioon koko projektin elinkaaren ja tulevat tuotot. Nykyään on yleistä käyttää työkaluja kustannusarvioinnissa ja joskus myös hinnoittelussa. Työkalujen luotettavuus on tiedettävä, ennenkuin työkalut otetaan käyttöön. Myös työkalujen käyttäjät täytyy perehdyttää hyvin. Muuten yritys todennäköisesti kohtaa odottamattomia ja epämiellyttäviä yllätyksiä.

Determinants of credit default swap spread: evidence from european credit derivatives market

Tämän tutkielman tavoitteena on selvittää, mitkä tekijät vaikuttavat yrityksen ja valtion velkakirjojen väliseen tuottoeroon. Strukturaalisten luottoriskin hinnoittelumallien mukaan luottoriskiin vaikuttavia tekijöitä ovat yrityksen velkaantumisaste, volatiliteetti ja riskitön korkokanta. Tavoitteena on erityisesti tutkia, kuinka hyvin nämä teoreettiset tekijät selittävät tuottoeroja ja onko olemassa muita tärkeitä selittäviä tekijöitä. Luottoriskinvaihtosopimusten noteerauksia käytetään tuottoerojen määrittämiseen. Selittävät tekijät koostuvat sekä yrityskohtaisista että markkinalaajuisista muuttujista. Luottoriskinvaihtosopimusten ja yrityskohtaisten muuttujien data on kerätty yhteensä 50 yritykselle Euroalueen maista. Aineisto koostuu kuukausittaisista havainnoista aikaväliltä 01.01.2003-31.12.2006. Empiiriset tulokset osoittavat, että strukturaalisten mallien mukaiset tekijät selittävät vain pienen osan tuottoeron muutoksista yli ajan. Toisaalta nämä teoreettiset tekijät selittävät huomattavasti paremmin tuottoeron vaihtelua yli poikkileikkauksen. Muut kuin teoreettiset tekijät pystyvät selittämään suuren osan tuottoeron vaihtelusta. Erityisen tärkeäksi tuottoeron selittäväksi tekijäksi osoittautui yleinen riskipreemio velkakirjamarkkinoilla. Tulokset osoittavat, että luottoriskin hinnoittelumalleja on kehitettävä edelleenniin, että ne ottaisivat huomioon yrityskohtaisten tekijöiden lisäksi myös markkinalaajuisia tekijöitä.

The development of credit management

The objective of the examination was to create development suggestions to intensify the credit management in the subject enterprise. The target of the theory part was to add understanding concerning the credit management and to define the process of credit management. The target of the empirical part was to get to know the present conditions of the credit management in the subject enterprise as well as to establish the problems in the process. The research methodology is constructive, but there are also characteristics of action research.The target of constructive methodology is to create a solutionmodel for the relevant research problem. The methods used in the empirical part were participating observation, literary material and interviews. Within the results of the research a number of development suggestions for the credit management were presented. It is possible to achieve considerable returns while shortening the chain of cash payments. In the suggestions the importance of cooperation between different functions as well as training were emphasized.

Determinants of credit default swap spread, the effect of the financial crisis in the us markets

The purpose of this study is to define what determinants affect the Credit spread. There are two theoretical frameworks to study this: structural models and reduced form models. Structural models indicate that the main determinants are company leverage, volatility and risk-free interest rate, and other market and firm-specific variables. The purpose is to determine which of these theoretical determinants can explain the CDS spread and also how these theoretical determinants are affected by the financial crisis in 2007. The data is collected from 30 companies in the US Markets, mainly S&P Large Cap. The sample time-frame is 31.1.2004 – 31.12.2009. Empirical studies indicate that structural models can explain the CDS spreads well. Also, there were significant differences between bear and bull markets. The main determinants explaining CDS spreads were leverage and volatility. The other determinants were significant, depending on the sample period. However, these other variables did not explain the spread consistently.

Financier’s credit risk: A Performance-Based Classification Model

The purpose of this study is to view credit risk from the financier’s point of view in a theoretical framework. Results and aspects of the previous studies regarding measuring credit risk with accounting based scoring models are also examined. The theoretical framework and previous studies are then used to support the empirical analysis which aims to develop a credit risk measure for a bank’s internal use or a risk management tool for a company to indicate its credit risk to the financier. The study covers a sample of Finnish companies from 12 different industries and four different company categories and employs their accounting information from 2004 to 2008. The empirical analysis consists of six stage methodology process which uses measures of profitability, liquidity, capital structure and cash flow to determine financier’s credit risk, define five significant risk classes and produce risk classification model. The study is confidential until 15.10.2012.

Characteristics of credit risk assessment methods of major Nordic banks in allocating capital when extending credits to large corporations

Credit risk assessment is an integral part of banking. Credit risk means that the return will not materialise in case the customer fails to fulfil its obligations. Thus a key component of banking is setting acceptance criteria for granting loans. Theoretical part of the study focuses on key components of credit assessment methods of Banks in the literature when extending credits to large corporations. Main component is Basel II Accord, which sets regulatory requirement for credit risk assessment methods of banks. Empirical part comprises, as primary source, analysis of major Nordic banks’ annual reports and risk management reports. As secondary source complimentary interviews were carried out with senior credit risk assessment personnel. The findings indicate that all major Nordic banks are using combination of quantitative and qualitative information in credit risk assessment model when extending credits to large corporations. The relative input of qualitative information depends on the selected approach to the credit rating, i.e. point-in-time or through-the-cycle.

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.

Sovereign Credit Rating Announcements and Equity Market Response: Evidence from the European Markets

This thesis examines the equity market reactions on credit rating announcements. The study covers 12 European countries during the period of 2000-2012. By using an event study methodology and daily collected stock market returns, the impact of the sovereign credit rating announcements to national stock indices is examined. The thesis finds evidence for the rating downgrades having a statistically significant negative effect on the stock markets. This finding is in line with earlier literature (see Brooks, 2004). The paper also discusses whether the changes in the sovereign credit ratings are contagious, anticipated by the market, and persistent. There is some evidence found for the contagion effects in case of downgrades, but not for upgrades. Markets seem to anticipate rating upgrades, but not downgrades. In addition, market´s reaction towards rating announcements seems not to be persistent.

Determinants of credit risk in secured loans – Evidence from the auto loan industry

The purpose of this study is to examine attributes which have explanation power to the probability of default or serious overdue in secured auto loans. Another goal is to find out differences between defaulted loans and loans which have had payment difficulties but survived without defaulting. 19 independent variables used in this study reflect information available at the time of credit decision. These variables were tested with logistic regression and backward elimination procedure. The data includes 8931 auto loans from a Finnish finance company. 1118 of the contracts were taken by company customers and 7813 by private customers. 130 of the loans defaulted and 584 had serious payment problems but did not default. The maturities of those loans were from one month to 60 months and they have ended during year 2011. The LTV (loan-to-value) variable was ranked as the most significant explainer because of its strong positive relationship with probability of payment difficulties. Another important explainer in this study was the credit rating variable which got a negative relationship with payment problems. Also maturity and car age performed well having both a positive relationship with the probability of payment problems. When compared default and serious overdue situations, the most significant differences were found in the roles of LTV, Maturity and Gender variables.

Public and private sector cooperative opportunities in the Finnish healthcare internationalization : views from the public sector’s perspective

Traditionally mostly publicly provided Finnish healthcare services are confronted today by the evident challenge of rising healthcare costs as the expenditure on health and social case has exceeded Finland’s national GDP growth significantly since the new millennium. While the opening of the traditional barriers through the EU’s new patient directive resulting in increasing international competition and the free flow of patients within the EU present opportunities for the Finnish healthcare services industry there are also several challenges for the existing healthcare system as proposed by the Ministry of Employment and the Economy in 2011. Due to the structure and nature of the current Finnish healthcare service system the greatest potential for internationalization is seen from a joint cooperation of the public and private sectors in an internationalization network for Finnish healthcare services. As its formation has recently also taken as a strategic initiative to be completed by the Ministry of Employment and the Economy and no earlier research exists on how this is seen in practice by the network actors, the purpose of this study is to examine the proposed solution of forming an internationalization network between the public and private sector actors in Finland in practice from the viewpoint of public sector actors. The research relied heavily on the reports by the Finnish Ministries in understanding the current situation of the Finnish healthcare services internationalization and its potential. Suitable theories were also used to build a more comprehensive view of the matter. The study applied a qualitative research approach on the explorative research problem. The data collection was achieved through expert interviews in two of the largest Finnish public healthcare service providers; the Turku and Helsinki Central University Hospitals. Expert interviews were considered as the most suitable method for data collection in order to create an in-depth understanding of the topic within the limitations of this thesis. In turn, two different public healthcare service providers were chosen to give a broader view of the field instead of focusing on a specific unit and also to allow a possible comparison between the two different organizations. The latter however was shown not to be suitable for the purposes of this study as the opinions of the respondents varied largely also within their own organizations. The conclusion is that while the actors agree on the evident internationalization of Finnish healthcare services, there are several large-scale structural challenges effectively preventing such activities while at the same time the opportunities within Finland vary, as there are several niches but no real large-scale advantages in the highly competitive industry. Interest towards cooperation between the sectors are seen especially in exploiting the advantages offered by the private sector in commercialization and marketization, yet however no clear views exist on how these activities should be governed or structured in the short-term as a larger reform of the entire Finnish healthcare service sector is needed in the long-term.

Raise All Ships: Cooperative Repository Strategies in a Boot-Strap Culture

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

Cooperative strategy in emerging markets - analysis of interfirm r&d cooperation and performance in Russian manufacturing companies

Emerging markets have come to play a significant role in the world, not only due to their strong economic growth but because they have been able to foster an increasing number of innovative high technology oriented firms. However, as the markets continue to change and develop, there remain many companies in emerging markets that struggle with their competitiveness and innovativeness. To improve competitive capabilities, many scholars have come to favor interfirm cooperation, which is perceived to help companies access new knowledge and complementary resources and, by so doing, enables them to catch up quickly with Western competitors. Regardless of numerous attempts by strategic management scholars, the research field remains very fragmented and lacks understanding on how and when interfirm cooperation contributes to firm performance and competiveness in emerging markets. Furthermore, the reasons why interfirm R&D sometimes succeeds but fails at other times frequently remain unidentified. This thesis combines the extant literature on competitive and cooperative strategy, dynamic capabilities, and R&D cooperation while studying interfirm R&D relationships in and between Russian manufacturing companies. Employing primary survey data, the thesis presents numerous novel findings regarding the effect of R&D cooperation and different types of R&D partner on firms’ exploration and exploitation performance. Utilizing a competitive strategy framework enables these effects to be explained in more detail, and especially why interfirm cooperation, regardless of its potential, has had a modest effect on the general competitiveness of emerging market firms. This thesis contributes especially to the strategic management literature and presents a more holistic perspective on the usefulness of cooperative strategy in emerging markets. It provides a framework through which it is possible to assess the potential impacts of different R&D cooperation partners and to clarify the causal relationships between cooperation, performance, and long term competitiveness.