Essays on the Costs and Benefits of Large Shareholders in Corporate Governance (summary section only)

“Corporate governance deals with the ways in which suppliers of finance to firms assure themselves of getting a return on their investment” (Shleifer and Vishny (1997, p. 737). According to La Porta et al. (1999), research in corporate finance relevant for most countries should focus on the incentives and capabilities of controlling shareholders to treat themselves preferentially at the expense of minority shareholders. Accordingly, this thesis sets out to answer a number of research questions regarding the role of large shareholders in public firms that have received little attention in the literature so far. A common theme in the essays stems from the costs and benefits of individual large-block owners and the role of control contestability from the perspective of outside minority shareholders. The first essay empirically examines whether there are systematic performance differences between family controlled and nonfamily controlled firms in Western Europe. In contrast to the widely held view that family control penalizes firm value, the essay shows that publicly traded family firms have higher performance than comparable firms. In the second essay, we present both theoretical and empirical analysis on the effects of control contestability on firm valuation. Consistent with the theoretical model, the empirical results show that minority shareholders benefit from a more contestable control structure. The third essay explores the effects of individual large-block owners on top management turnover and board appointments in Finnish listed firms. The results indicate that firm performance is an important determinant for management and board restructurings. For certain types of turnover decisions the corporate governance structure influences the performance / turnover sensitivity. In the fourth essay, we investigate the relation between the governance structure and dividend policy in Finnish listed firms. We find evidence in support of the outcome agency model of dividends stating that lower agency conflicts should be associated with higher dividend payouts.

Adaptation in a Business Network Cooperation Context (summary section only)

In today’s business one can say that competition does not take place inside the network, but between networks. Change and dynamics are central issues in network studies, and a company, due its changing environment, can identify opportunities and threats and respond to them accordingly. These opportunities are vital, but also complex and demanding for the management. Earlier research has identified a shortcoming in explanations of how the micro-level interactions to macro-level patterns are connected. The IMP-group has been trying to fill this research gap with research on interactions within business networks. In this area of research lies the focus of research on relationships between organizations. Adaptation in cooperation is a central concept within business network research. Adaptation has been dealt with in previous literature, but the focus of the studies has mainly been outside this phenomenon, and it has mostly had a supporting role. Most literature has also described the buyers' point of view in studied supply networks, whereas much less attention has been paid to the suppliers' view on them. This study focuses on this research gap. The results of the study stress that adaptation should be included to a greater extent in the strategy work of companies. The adaptations should be carefully planned and, as far as possible, made consciously. Conscious, well-planned adaptations can be seen as investments into present and future relationships, and resources should be invested into something that does not increase the company’s dependence, but divides the power in the relationship between the companies. Adaptations should be planned so that they result in a more offensive way of responding to the demands that are placed upon the companies. In this way, the actions can be viewed and analyzed in accordance with whether the actions make the company weaker or stronger.

A Model for Creating Strategic Alliances. A Study of Inter-firm Cooperation in the North European ICT Sector

In this study, it is argued that the view on alliance creation presented in the current academic literature is limited, and that using a learning approach helps to explain the dynamic nature of alliance creation. The cases in this study suggest that a wealth of inefficiency elements can be found in alliance creation. These elements can further be divided into categories, which help explain the dynamics of alliance creation. The categories –combined with two models brought forward by the study– suggest that inefficiency can be avoided through learning during the creation process. Some elements are especially central to this argumentation. First, the elements related to the clarity and acceptance of the strategy of the company, the potential lack of an alliance strategy and the elements related to changes in the strategic context. Second, the elements related to the length of the alliance creation processes and the problems a long process entails. It is further suggested that the different inefficiency elements may create a situation, where the alliance creation process is –sequentially and successfully– followed to the end, but where the different inefficiencies create a situation where the results are not aligned with the strategic intent. The proposed solution is to monitor and assess the risk for inefficiency elements during the alliance creation process. The learning, which occurs during the alliance creation process as a result of the monitoring, can then lead to realignments in the process. This study proposes a model to mitigate the risk related to the inefficiencies. The model emphasizes creating an understanding of the other alliance partner’s business, creating a shared vision, using pilot cooperation and building trust within the process. An analytical approach to assessing the benefits of trust is also central in this view. The alliance creation approach suggested by this study, which emphasizes trust and pilot cooperation, is further critically reviewed against contracting as a way to create alliances.

Component Inventory Costs in an Assembly Problem with Uncertain Supplier Lead-Times

We present a generic study of inventory costs in a factory stockroom that supplies component parts to an assembly line. Specifically, we are concerned with the increase in component inventories due to uncertainty in supplier lead-times, and the fact that several different components must be present before assembly can begin. It is assumed that the suppliers of the various components are independent, that the suppliers' operations are in statistical equilibrium, and that the same amount of each type of component is demanded by the assembly line each time a new assembly cycle is scheduled to begin. We use, as a measure of inventory cost, the expected time for which an order of components must be held in the stockroom from the time it is delivered until the time it is consumed by the assembly line. Our work reveals the effects of supplier lead-time variability, the number of different types of components, and their desired service levels, on the inventory cost. In addition, under the assumptions that inventory holding costs and the cost of delaying assembly are linear in time, we study optimal ordering policies and present an interesting characterization that is independent of the supplier lead-time distributions.

Hydropower Project Design Incorporating Submergence Costs

Submergence of land is a major impact of large hydropower projects. Such projects are often also dogged by siltation, delays in construction and heavy debt burdens-factors that are not considered in the project planning exercise. A simple constrained optimization model for the benefit~ost analysis of large hydropower projects that considers these features is proposed. The model is then applied to two sites in India. Using the potential productivity of an energy plantation on the submergible land is suggested as a reasonable approach to estimating the opportunity cost of submergence. Optimum project dimensions are calculated for various scenarios. Results indicate that the inclusion of submergence cost may lead to a substanual reduction in net present value and hence in project viability. Parameters such as project lifespan, con$truction time, discount rate and external debt burden are also of significance. The designs proposed by the planners are found to be uneconomic, whIle even the optimal design may not be viable for more typical scenarios. The concept of energy opportunity cost is useful for preliminary screening; some projects may require more detailed calculations. The optimization approach helps identify significant trade-offs between energy generation and land availability.

PERFECT Stroke : PERFormance, Effectiveness, and Costs of treatment episodes in Stroke

Stroke is a major cause of death and disability, incurs significant costs to healthcare systems, and inflicts severe burden to the whole society. Stroke care in Finland has been described in several population-based studies between 1967 and 1998, but not since. In the PERFECT Stroke study presented here, a system for monitoring the Performance, Effectiveness, and Costs of Treatment episodes in Stroke was developed in Finland. Existing nationwide administrative registries were linked at individual patient level with personal identification numbers to depict whole episodes of care, from acute stroke, through rehabilitation, until the patients went home, were admitted to permanent institutional care, or died. For comparisons in time and between providers, patient case-mix was adjusted for. The PERFECT Stroke database includes 104 899 first-ever stroke patients over the years 1999 to 2008, of whom 79% had ischemic stroke (IS), 14% intracerebral hemorrhage (ICH), and 7% subarachnoid hemorrhage (SAH). A 18% decrease in the age and sex adjusted incidence of stroke was observed over the study period, 1.8% improvement annually. All-cause 1-year case-fatality rate improved from 28.6% to 24.6%, or 0.5% annually. The expected median lifetime after stroke increased by 2 years for IS patients, to 7 years and 7 months, and by 1 year for ICH patients, to 4 years 5 months. No change could be seen in median SAH patient survival, >10 years. Stroke prevalence was 82 000, 1.5% of total population of Finland, in 2008. Modern stroke center care was shown to be associated with a decrease in both death and risk of institutional care of stroke patients. Number needed to treat to prevent these poor outcomes at one year from stroke was 32 (95% confidence intervals 26 to 42). Despite improvements over the study period, more than a third of Finnish stroke patients did not have access to stroke center care. The mean first-year healthcare cost of a stroke patient was ~20 000 , and among survivors ~10 000 annually thereafter. Only part of this cost was incurred by stroke, as the same patients cost ~5000 over the year prior to stroke. Total lifetime costs after first-ever stroke were ~85 000 . A total of 1.1 Billion , 7% of all healthcare expenditure, is used in the treatment of stroke patients annually. Despite a rapidly aging population, the number of new stroke patients is decreasing, and the patients are more likely to survive. This is explained in part by stroke center care, which is effective, and should be made available for all stroke patients. It is possible, in a suitable setting with high-quality administrative registries and a common identifier, to avoid the huge workload and associated costs of setting up a conventional stroke registry, and still acquire a fairly comprehensive dataset on stroke care and outcome.

The EU and Institutional Twinning in Morocco - An inquiry into the motives of cooperation through discourse ethics

This study examines Institutional Twinning in Morocco as a case of EU cooperation through the pragmatic, ethical and moral logics of reason in Jürgen Habermas’s discourse ethics. As a former accession tool, Twinning was introduced in 2004 for legal approximation in the context of the European Neighborhood Policy. Twinning is a unique instrument in development cooperation from a legal perspective. With its long historical and cultural ties to Europe, Morocco presents an interesting case study of this new form of cooperation. We will analyse motives behind the Twinning projects on illegal immigration, environment legislation and customs reform. As Twinning is a new policy instrument within the ENP context, there is relatively little preceding research, which, in itself, constitutes a reason to inquire into the subject. While introducing useful categories, the approaches discussing “normative power Europe” do not offer methodological tools precise enough to analyse the motives of the Twinning cooperation from a broad ethical standpoint. Helene Sjursen as well as Esther Barbé and Elisabeth Johansson-Nogués have elaborated on Jürgen Habermas’ discourse ethics in determining the extent of altruism in the ENP in general. Situating the analysis in the process-oriented framework of Critical Theory, discourse ethics provides the methodological framework for our research. The case studies reveal that the context in which they operate affects the pragmatic, ethical and moral aspirations of the actors. The utilitarian notion of profit maximization is quite pronounced both in terms of the number of Twinning projects in the economic sphere and the pragmatic logics of reason instrumental to security and trade-related issues. The historical background as well internal processes, however, contribute to defining areas of mutual interest to the actors as well as the motives Morocco and the EU sometimes described as the external projection of internal values. Through its different aspects, Twinning cooperation portrays the functioning of the pragmatic, ethical and moral logics of reason in international relations.

Actuarial report 2011: Social security schemes administered by Kela 2010-2060

Projections concerning the long-term outlook of the social security schemes administered by the Social Insurance Institution of Finland (Kela) are made regularly by the Institution’s Actuarial Section. The report at hand was compiled with the help of an aggregate model devised by the Actuarial Section. In the model, various universal factors influencing benefit trends are consolidated and the interactions between individual benefits are taken into account. The demographic forecasts underlying the report have also been made by the Actuarial Section. Estimates of income and administrative costs have been made in cooperation with the Financial Planning Section.

In-Network Computation in Random Wireless Networks: A PAC Approach to Constant Refresh Rates with Lower Energy Costs

We propose a method to compute a probably approximately correct (PAC) normalized histogram of observations with a refresh rate of Theta(1) time units per histogram sample on a random geometric graph with noise-free links. The delay in computation is Theta(root n) time units. We further extend our approach to a network with noisy links. While the refresh rate remains Theta(1) time units per sample, the delay increases to Theta(root n log n). The number of transmissions in both cases is Theta(n) per histogram sample. The achieved Theta(1) refresh rate for PAC histogram computation is a significant improvement over the refresh rate of Theta(1/log n) for histogram computation in noiseless networks. We achieve this by operating in the supercritical thermodynamic regime where large pathways for communication build up, but the network may have more than one component. The largest component however will have an arbitrarily large fraction of nodes in order to enable approximate computation of the histogram to the desired level of accuracy. Operation in the supercritical thermodynamic regime also reduces energy consumption. A key step in the proof of our achievability result is the construction of a connected component having bounded degree and any desired fraction of nodes. This construction may also prove useful in other communication settings on the random geometric graph.

Costs and Benefits of a Shared Digital Long-Term Preservation System

This paper describes the cost-benefit analysis of digital long-term preservation (LTP) that was carried out in the context of the Finnish National Digital Library Project (NDL) in 2010. The analysis was based on the assumption that as many as 200 archives, libraries, and museums will share an LTP system. The term ‘system’ shall be understood as encompassing not only information technology, but also human resources, organizational structures, policies and funding mechanisms. The cost analysis shows that an LTP system will incur, over the first 12 years, cumulative costs of €42 million, i.e. an average of €3.5 million per annum. Human resources and investments in information technology are the major cost factors. After the initial stages, the analysis predicts annual costs of circa €4 million. The analysis compared scenarios with and without a shared LTP system. The results indicate that a shared system will have remarkable benefits. At the development and implementation stages, a shared system shows an advantage of €30 million against the alternative scenario consisting of five independent LTP solutions. During the later stages, the advantage is estimated at €10 million per annum. The cumulative cost benefit over the first 12 years would amount to circa €100 million.

Implications of the half-duplex constraint on relay-aided cooperation using rateless codes

The half-duplex constraint, which mandates that a cooperative relay cannot transmit and receive simultaneously, considerably simplifies the demands made on the hardware and signal processing capabilities of a relay. However, the very inability of a relay to transmit and receive simultaneously leads to a potential under-utilization of time and bandwidth resources available to the system. We analyze the impact of the half-duplex constraint on the throughput of a cooperative relay system that uses rateless codes to harness spatial diversity and efficiently transmit information from a source to a destination. We derive closed-form expressions for the throughput of the system, and show that as the number of relays increases, the throughput approaches that of a system that uses more sophisticated full-duplex nodes. Thus, half-duplex nodes are well suited for cooperation using rateless codes despite the simplicity of both the cooperation protocol and the relays.

Autonomous and non-autonomous traits mediate social cooperation in Dictyostelium discoideum

In the trishanku (triA(-)) mutant of the social amoeba Dictyostelium discoideum, aggregates are smaller than usual and the spore mass is located mid-way up the stalk, not at the apex. We have monitored aggregate territory size, spore allocation and fruiting body morphology in chimaeric groups of (quasi-wild-type) Ax2 and triA(-) cells. Developmental canalisation breaks down in chimaeras and leads to an increase in phenotypic variation. A minority of triA(-) cells causes largely Ax2 aggregation streams to break up; the effect is not due to the counting factor. Most chimaeric fruiting bodies resemble those of Ax2 or triA(-). Others are double-deckers with a single stalk and two spore masses, one each at the terminus and midway along the stalk. The relative number of spores belonging to the two genotypes depends both on the mixing ratio and on the fruiting body morphology. In double-deckers formed from 1:1 chimaeras, the upper spore mass has more Ax2 spores, and the lower spore mass more triA(-) spores, than expected. Thus, the traits under study depend partly on the cells' own genotype and partly on the phenotypes, and so genotypes, of other cells: they are both autonomous and non-autonomous. These findings strengthen the parallels between multicellular development and behaviour in social groups. Besides that, they reinforce the point that a trait can be associated with a genotype only in a specified context.