Institutions and firm ownership structure:evidence from Central and Eastern Europe

FDI plays a key role in development, particularly in resource-constrained transition economies of Central and Eastern Europe with relatively low savings rates. Gains from technology transfer play a critical role in motivating FDI, yet potential for it may be hampered by a large technology gap between the source and host country. While the extent of this gap has traditionally been attributed to education, skills and capital intensity, recent literature has also emphasized the possible role of institutional environment in this respect. Despite tremendous interest among policy-makers and academics to understand the factors attracting FDI (Bevan and Estrin, 2000; Globerman and Shapiro, 2003) our knowledge about the effects of institutions on the location choice and ownership structure of foreign firms remains limited. This paper attempts to fill this gap in the literature by examining the link between institutions and foreign ownership structures. To the best of our knowledge, Javorcik (2004) is the only papers, which use firm-level data to analyse the role of institutional quality on an outward investor’s entry mode in transition countries. Our paper extends Javorcik (2004) in a number of ways: (a) rather than a cross-section, we use panel data for the period 1997-2006; (b) rather than a binary variable, we use the percentage foreign ownership as continuous variable; (c) we consider multi-dimensional institutional variables, such as corruption, intellectual property rights protection and government stability. We also use factor analysis to generate a composite index of institutional quality and see how stronger institutional environment could affect foreign ownership; (d) we explore how the distance between institutional environment in source and host countries affect foreign ownership in a host country. The firm-level data used includes both domestic and foreign firms for the period 1997-2006 and is drawn from ORBIS, a commercially available dataset provided by Bureau van Dijk. In order to examine the link between institutions and foreign ownership structures, we estimate four log-linear ownership equations/specifications augmented by institutional and other control variables. We find evidence that the decision of a foreign firm to either locate its subsidiary or acquire an existing domestic firm depends not only on factor cost differences but also on differences in institutional environment between the host and source countries.

Bridging the gap? Corruption, knowledge and foreign ownership

We argue that in addition to host corruption per se, as accounted for by the existing literature, an explanation of inter-country variation in FDI needs to account for the distance between the host and home corruption, which we call relative corruption. We use a large matched home-host firm-level panel data-set for 1998-2006 from CEE transition countries. Year-specific selectivity corrected estimates suggest that, ceteris paribus, higher relative ‘grand’ corruption lowers foreign ownership as the returns to investment tends to be lower in more corrupt environment. However, after controlling for the selectivity bias, knowledge-intensive parent firms are found to hold controlling ownership, as the difficulty of successful joint venture looms large in more corrupt environment. Results are robust to alternative specifications.

How transition paths differ:enterprise performance in Russia and China

We use enterprise survey data to analyse and contrast the determinants of enterprise performance in China and Russia. We find that in China, enterprise growth and efficiency is associated with rapid increases in factor inputs, and with ownership to a lesser extent, but not greatly correlated with industry-specific or institutional factors. However, in Russia, enterprise growth is not associated with improvements in factor quantity (except for labor) or quality. The main determinants of company performance are instead demand and institutional factors at a regional level. The findings are robust across a variety of specifications.

Corporate governance, managers' independence, exporting, and performance of firms in transition economies

Using data on 157 large companies in Poland and Hungary, this paper employs Bayesian structural equation modeling to examine the relations among corporate governance, managers' independence from owners in terms of strategic decision making, exporting, and performance. Managers' independence is positively associated with firms' financial performance and exporting. In turn, the extent of managers' independence is negatively associated with ownership concentration, but positively associated with the percentage of foreign directors on the firm's board. We interpret these results as indicating that concentrated owners tend to constrain managerial autonomy at the cost of the firm's internationalization and performance, but board participation of foreign stakeholders enhances the firm's export orientation and performance by encouraging executives' decision-making autonomy.

Corporate governance, managers' independence, exporting and performance of firms in transition economies

Using data on 157 large companies in Poland and Hungary this paper employs Bayesian structural equation modeling to examine interrelationships between corporate governance, managers' independence from owners in terms of strategic decision-making, exporting and performance. It is found that managers' independence is positively associated with firms' financial performance and exporting. In turn, the extent of managers' independence is contingent on the firm's corporate governance parameters: it is negatively associated with ownership concentration, but positively associated with the percentage of foreign directors on the firm's board. We interpret these results as an indication that (i) risk averse, concentrated owners tend to constrain managerial autonomy at the cost of the firm's internationalization and performance, (ii) board participation of foreign stakeholders, on the other hand, enhances the firm's export orientation and performance by encouraging executives' decision-making autonomy.

Ownership concentration:'Private benefits of control' and debt financing

Building on the ‘law and economics’ literature, this paper analyses corporate governance implications of debt financing in an environment where a dominant owner is able to extract ex ante ‘private benefits of control’. Ownership concentration may result in lower efficiency, measured as a ratio of a firm’s debt to investment, and this effect depends on the identity of the largest shareholder. Moreover, entrenched dominant shareholder(s) may be colluding with fixed-claim holders in extracting ‘control premium’. One of possible outcomes is a ‘crowding out’ of entrepreneurial firms from the debt market, and this is supported by evidence from the transition economies.

State control and corporate governance in transition economies:25 years on from 1989

Research Question/Issue - Which forms of state control over corporations have emerged in countries that made a transition from centrally-planned to marked-based economies and what are their implications for corporate governance? We assess the literature on variation and evolution of state control in transition economies, focusing on corporate governance of state-controlled firms. We highlight emerging trends and identify future research avenues. Research Findings/Insights - Based on our analysis of more than 100 articles in leading management, finance, and economics journals since 1989, we demonstrate how research on state control evolved from a polarized approach of public–private equity ownership comparison to studying a variety of constellations of state capitalism. Theoretical/Academic Implications - We identify theoretical perspectives that help us better understand benefits and costs associated with various forms of state control over firms. We encourage future studies to examine how context-specific factors determine the effect of state control on corporate governance. Practitioner/Policy Implications - Investors and policymakers should consider under which conditions investing in state-affiliated firms generates superior returns.

A gazdasági teljesítmények vállalkozási mérettől függő jellemzői Magyarországon = Changing ownership and business structures in the Hungarian economy

A mögöttünk hagyott két évtizedben – tetszik, vagy sem – a magyar gazdaság 1992. évi mélypontról történő kilábalásában, majd új növekedési pályára állásában meghatározó szerepe volt a hazai forrásokat kiegészítő külföldi befektetéseknek. Ennek természetesen ára volt: a tevékenységi struktúra (termékszerkezet) módosulása, a tulajdonosi összetétel radikális átalakulása, a külgazdasági kapcsolatok irányultságának változása, a lakosság önfoglalkoztatási célú vállalkozásainak szaporodása, a gazdaságfejlesztés irányának és ütemének cikk-cakkos mozgása, az állami szerepkör fokozatos leépülése. Írásunk célja annak áttekintése, hogy a nemzetközi tőkeáramlás tendenciáinak módosulását követően – a Magyarországra érkező külföldi tőkebefektetések jelentős csökkenéséből fakadóan – a kizárólagos és többségi hazai tulajdonú szereplők (kiemelten a hazai közép- és kisvállalkozások) milyen mértékben lehetnek alkalmasak a kieső teljesítmények pótlására, illetve a gazdasági válság lecsengését követően milyen ütemű növekedést képesek biztosítani a magyar gazdaság számára. A válaszok nagy valószínűséggel az Új Széchenyi Terv szempontjából sem közömbösek. Az írást a szerkesztőség vitairatnak szánja és szívesen ad teret a témával kapcsolatos vélemények kifejtésének. / === / The economic performance during the transition period was characterized by the alternations of fulfilled hopes and unrealized expectations. The economic restructuring and changes in market relations took place during the first decade, while new – mostly foreign – investment groups entered the new market. As a result the economy was stabilized and was put on a new growth path. But after the millennium the foreign investment based economy development strategy was no more adequate. The new engine for the growth should have been the domestic small and medium enterprise sector (SME), but despite the subsidies this sector was not strengthened enough to take this role.

Corporate governance in european transition economies: Emerging models

The purpose of this paper is to contribute to the debate on corporate governance models in European transition economies. The paper consists of four parts. After a historic overview of the evolution of corporate governance, the introduction presents various understandings of the corporate governance function and describes current issues in corporate governance. Part two deals with governance systems in the (mainly domestically) privatized former state-owned companies in Central European transition countries, with the main types of company ownership structures, relationships between governing and management functions, and deficiencies in existing governance systems. Part three is dedicated to the analysis of factors that determine the efficiency of the relationship between the corporate governance and management functions in Central European transition economies. It deals with the issue of why the German (continental European) governance model is usually the preferred choice and why the chosen models underperform. In the conclusion the author offers his suggestions on how the Central European transition countries should improve their corporate governance in the future.

The Cratylia Mollis Seed Lectin Induces Membrane Permeability Transition In Isolated Rat Liver Mitochondria And A Cyclosporine A-insensitive Permeability Transition In Trypanosoma Cruzi Mitochondria.

Previous results provided evidence that Cratylia mollis seed lectin (Cramoll 1,4) promotes Trypanosoma cruzi epimastigotes death by necrosis via a mechanism involving plasma membrane permeabilization to Ca(2+) and mitochondrial dysfunction due to matrix Ca(2+) overload. In order to investigate the mechanism of Ca(2+) -induced mitochondrial impairment, experiments were performed analyzing the effects of this lectin on T. cruzi mitochondrial fraction and in isolated rat liver mitochondria (RLM), as a control. Confocal microscopy of T. cruzi whole cell revealed that Cramoll 1,4 binding to the plasma membrane glycoconjugates is followed by its internalization and binding to the mitochondrion. Electrical membrane potential (∆Ψm ) of T. cruzi mitochondrial fraction suspended in a reaction medium containing 10 μM Ca(2+) was significantly decreased by 50 μg/ml Cramoll 1,4 via a mechanism insensitive to cyclosporine A (CsA, membrane permeability transition (MPT) inhibitor), but sensitive to catalase or 125 mM glucose. In RLM suspended in a medium containing 10 μM Ca(2+) this lectin, at 50 μg/ml, induced increase in the rate of hydrogen peroxide release, mitochondrial swelling, and ∆Ψm disruption. All these mitochondrial alterations were sensitive to CsA, catalase, and EGTA. These results indicate that Cramoll 1, 4 leads to inner mitochondrial membrane permeabilization through Ca(2+) dependent mechanisms in both mitochondria. The sensitivity to CsA in RLM characterizes this lectin as a MPT inducer and the lack of CsA effect identifies a CsA-insensitive MPT in T. cruzi mitochondria.

Oxidative Stress And Susceptibility To Mitochondrial Permeability Transition Precedes The Onset Of Diabetes In Autoimmune Non-obese Diabetic Mice.

Beta cell destruction in type 1 diabetes (TID) is associated with cellular oxidative stress and mitochondrial pathway of cell death. The aim of this study was to determine whether oxidative stress and mitochondrial dysfunction are present in T1D model (non-obese diabetic mouse, NOD) and if they are related to the stages of disease development. NOD mice were studied at three stages: non-diabetic, pre-diabetic, and diabetic and compared with age-matched Balb/c mice. Mitochondria respiration rates measured at phosphorylating and resting states in liver and soleus biopsies and in isolated liver mitochondria were similar in NOD and Balb/c mice at the three disease stages. However, NOD liver mitochondria were more susceptible to calcium-induced mitochondrial permeability transition as determined by cyclosporine-A-sensitive swelling and by decreased calcium retention capacity in all three stages of diabetes development. Mitochondria H2O2 production rate was higher in non-diabetic, but unaltered in pre-diabetic and diabetic NOD mice. The global cell reactive oxygen species (ROS), but not specific mitochondria ROS production, was significantly increased in NOD lymphomononuclear and stem cells in all disease stages. In addition, marked elevated rates of 2',7'-dichlorodihydrofluorescein (H2DCF) oxidation were observed in pancreatic islets from non-diabetic NOD mice. Using matrix-assisted laser desorption/ionization (MALDI) mass spectrometry (MS) and lipidomic approach, we identified oxidized lipid markers in NOD liver mitochondria for each disease stage, most of them being derivatives of diacylglycerols and phospholipids. These results suggest that the cellular oxidative stress precedes the establishment of diabetes and may be the cause of mitochondrial dysfunction that is involved in beta cell death.

Transition From Glass To Digital Slide Microscopy In The Teaching Of Oral Pathology In A Brazilian Dental School.

Several medical and dental schools have described their experience in the transition from conventional to digital microscopy in the teaching of general pathology and histology disciplines; however, this transitional process has scarcely been reported in the teaching of oral pathology. Therefore, the objective of the current study is to report the transition from conventional glass slide to virtual microscopy in oral pathology teaching, a unique experience in Latin America. An Aperio ScanScope® scanner was used to digitalize histological slides used in practical lectures of oral pathology. The challenges and benefits observed by the group of Professors from the Piracicaba Dental School (Brazil) are described and a questionnaire to evaluate the students' compliance to this new methodology was applied. An improvement in the classes was described by the Professors who mainly dealt with questions related to pathological changes instead of technical problems; also, a higher interaction with the students was described. The simplicity of the software used and the high quality of the virtual slides, requiring a smaller time to identify microscopic structures, were considered important for a better teaching process. Virtual microscopy used to teach oral pathology represents a useful educational methodology, with an excellent compliance of the dental students.

Key Participants Of The Tumor Microenvironment Of The Prostate: An Approach Of The Structural Dynamic Of Cellular Elements And Extracellular Matrix Components During Epithelial-stromal Transition.

Cancer is a multistep process that begins with the transformation of normal epithelial cells and continues with tumor growth, stromal invasion and metastasis. The remodeling of the peritumoral environment is decisive for the onset of tumor invasiveness. This event is dependent on epithelial-stromal interactions, degradation of extracellular matrix components and reorganization of fibrillar components. Our research group has studied in a new proposed rodent model the participation of cellular and molecular components in the prostate microenvironment that contributes to cancer progression. Our group adopted the gerbil Meriones unguiculatus as an alternative experimental model for prostate cancer study. This model has presented significant responses to hormonal treatments and to development of spontaneous and induced neoplasias. The data obtained indicate reorganization of type I collagen fibers and reticular fibers, synthesis of new components such as tenascin and proteoglycans, degradation of basement membrane components and elastic fibers and increased expression of metalloproteinases. Fibroblasts that border the region, apparently participate in the stromal reaction. The roles of each of these events, as well as some signaling molecules, participants of neoplastic progression and factors that promote genetic reprogramming during epithelial-stromal transition are also discussed.

Analyzing the n→π* Electronic Transition of Formaldehyde in Water. A Sequential Monte Carlo/Time-Dependent Density Functional Theory

The n→π* absorption transition of formaldehyde in water is analyzed using combined and sequential classical Monte Carlo (MC) simulations and quantum mechanics (QM) calculations. MC simulations generate the liquid solute-solvent structures for subsequent QM calculations. Using time-dependent density functional theory in a localized set of gaussian basis functions (TD-DFT/6-311++G(d,p)) calculations are made on statistically relevant configurations to obtain the average solvatochromic shift. All results presented here use the electrostatic embedding of the solvent. The statistically converged average result obtained of 2300 cm-1 is compared to previous theoretical results available. Analysis is made of the effective dipole moment of the hydrogen-bonded shell and how it could be held responsible for the polarization of the solvent molecules in the outer solvation shells.

Transition to complete synchronization in phase-coupled oscillators with nearest neighbor coupling

We investigate synchronization in a Kuramoto-like model with nearest neighbor coupling. Upon analyzing the behavior of individual oscillators at the onset of complete synchronization, we show that the time interval between bursts in the time dependence of the frequencies of the oscillators exhibits universal scaling and blows up at the critical coupling strength. We also bring out a key mechanism that leads to phase locking. Finally, we deduce forms for the phases and frequencies at the onset of complete synchronization.