Financial Markets and Real Ecinomy: Four Essays in International Trade

Financial markets play an important role in an economy performing various functions like mobilizing and pooling savings, producing information about investment opportunities, screening and monitoring investments, implementation of corporate governance, diversification and management of risk. These functions influence saving rates, investment decisions, technological innovation and, therefore, have important implications for welfare. In my PhD dissertation I examine the interplay of financial and product markets by looking at different channels through which financial markets may influence an economy.My dissertation consists of four chapters. The first chapter is a co-authored work with Martin Strieborny, a PhD student from the University of Lausanne. The second chapter is a co-authored work with Melise Jaud, a PhD student from the Paris School of Economics. The third chapter is co-authored with both Melise Jaud and Martin Strieborny. The last chapter of my PhD dissertation is a single author paper.Chapter 1 of my PhD thesis analyzes the effect of financial development on growth of contract intensive industries. These industries intensively use intermediate inputs that neither can be sold on organized exchange, nor are reference-priced (Levchenko, 2007; Nunn, 2007). A typical example of a contract intensive industry would be an industry where an upstream supplier has to make investments in order to customize a product for needs of a downstream buyer. After the investment is made and the product is adjusted, the buyer may refuse to meet a commitment and trigger ex post renegotiation. Since the product is customized to the buyer's needs, the supplier cannot sell the product to a different buyer at the original price. This is referred in the literature as the holdup problem. As a consequence, the individually rational suppliers will underinvest into relationship-specific assets, hurting the downstream firms with negative consequences for aggregate growth. The standard way to mitigate the hold up problem is to write a binding contract and to rely on the legal enforcement by the state. However, even the most effective contract enforcement might fail to protect the supplier in tough times when the buyer lacks a reliable source of external financing. This suggests the potential role of financial intermediaries, banks in particular, in mitigating the incomplete contract problem. First, financial products like letters of credit and letters of guarantee can substantially decrease a risk and transaction costs of parties. Second, a bank loan can serve as a signal about a buyer's true financial situation, an upstream firm will be more willing undertake relationship-specific investment knowing that the business partner is creditworthy and will abstain from myopic behavior (Fama, 1985; von Thadden, 1995). Therefore, a well-developed financial (especially banking) system should disproportionately benefit contract intensive industries.The empirical test confirms this hypothesis. Indeed, contract intensive industries seem to grow faster in countries with a well developed financial system. Furthermore, this effect comes from a more developed banking sector rather than from a deeper stock market. These results are reaffirmed examining the effect of US bank deregulation on the growth of contract intensive industries in different states. Beyond an overall pro-growth effect, the bank deregulation seems to disproportionately benefit the industries requiring relationship-specific investments from their suppliers.Chapter 2 of my PhD focuses on the role of the financial sector in promoting exports of developing countries. In particular, it investigates how credit constraints affect the ability of firms operating in agri-food sectors of developing countries to keep exporting to foreign markets.Trade in high-value agri-food products from developing countries has expanded enormously over the last two decades offering opportunities for development. However, trade in agri-food is governed by a growing array of standards. Sanitary and Phytosanitary standards (SPS) and technical regulations impose additional sunk, fixed and operating costs along the firms' export life. Such costs may be detrimental to firms' survival, "pricing out" producers that cannot comply. The existence of these costs suggests a potential role of credit constraints in shaping the duration of trade relationships on foreign markets. A well-developed financial system provides the funds to exporters necessary to adjust production processes in order to meet quality and quantity requirements in foreign markets and to maintain long-standing trade relationships. The products with higher needs for financing should benefit the most from a well functioning financial system. This differential effect calls for a difference-in-difference approach initially proposed by Rajan and Zingales (1998). As a proxy for demand for financing of agri-food products, the sanitary risk index developed by Jaud et al. (2009) is used. The empirical literature on standards and norms show high costs of compliance, both variable and fixed, for high-value food products (Garcia-Martinez and Poole, 2004; Maskus et al., 2005). The sanitary risk index reflects the propensity of products to fail health and safety controls on the European Union (EU) market. Given the high costs of compliance, the sanitary risk index captures the demand for external financing to comply with such regulations.The prediction is empirically tested examining the export survival of different agri-food products from firms operating in Ghana, Mali, Malawi, Senegal and Tanzania. The results suggest that agri-food products that require more financing to keep up with food safety regulation of the destination market, indeed sustain longer in foreign market, when they are exported from countries with better developed financial markets.Chapter 3 analyzes the link between financial markets and efficiency of resource allocation in an economy. Producing and exporting products inconsistent with a country's factor endowments constitutes a serious misallocation of funds, which undermines competitiveness of the economy and inhibits its long term growth. In this chapter, inefficient exporting patterns are analyzed through the lens of the agency theories from the corporate finance literature. Managers may pursue projects with negative net present values because their perquisites or even their job might depend on them. Exporting activities are particularly prone to this problem. Business related to foreign markets involves both high levels of additional spending and strong incentives for managers to overinvest. Rational managers might have incentives to push for exports that use country's scarce factors which is suboptimal from a social point of view. Export subsidies might further skew the incentives towards inefficient exporting. Management can divert the export subsidies into investments promoting inefficient exporting.Corporate finance literature stresses the disciplining role of outside debt in counteracting the internal pressures to divert such "free cash flow" into unprofitable investments. Managers can lose both their reputation and the control of "their" firm if the unpaid external debt triggers a bankruptcy procedure. The threat of possible failure to satisfy debt service payments pushes the managers toward an efficient use of available resources (Jensen, 1986; Stulz, 1990; Hart and Moore, 1995). The main sources of debt financing in the most countries are banks. The disciplining role of banks might be especially important in the countries suffering from insufficient judicial quality. Banks, in pursuing their rights, rely on comparatively simple legal interventions that can be implemented even by mediocre courts. In addition to their disciplining role, banks can promote efficient exporting patterns in a more direct way by relaxing credit constraints of producers, through screening, identifying and investing in the most profitable investment projects. Therefore, a well-developed domestic financial system, and particular banking system, would help to push a country's exports towards products congruent with its comparative advantage.This prediction is tested looking at the survival of different product categories exported to US market. Products are identified according to the Euclidian distance between their revealed factor intensity and the country's factor endowments. The results suggest that products suffering from a comparative disadvantage (labour-intensive products from capital-abundant countries) survive less on the competitive US market. This pattern is stronger if the exporting country has a well-developed banking system. Thus, a strong banking sector promotes exports consistent with a country comparative advantage.Chapter 4 of my PhD thesis further examines the role of financial markets in fostering efficient resource allocation in an economy. In particular, the allocative efficiency hypothesis is investigated in the context of equity market liberalization.Many empirical studies document a positive and significant effect of financial liberalization on growth (Levchenko et al. 2009; Quinn and Toyoda 2009; Bekaert et al., 2005). However, the decrease in the cost of capital and the associated growth in investment appears rather modest in comparison to the large GDP growth effect (Bekaert and Harvey, 2005; Henry, 2000, 2003). Therefore, financial liberalization may have a positive impact on growth through its effect on the allocation of funds across firms and sectors.Free access to international capital markets allows the largest and most profitable domestic firms to borrow funds in foreign markets (Rajan and Zingales, 2003). As domestic banks loose some of their best clients, they reoptimize their lending practices seeking new clients among small and younger industrial firms. These firms are likely to be more risky than large and established companies. Screening of customers becomes prevalent as the return to screening rises. Banks, ceteris paribus, tend to focus on firms operating in comparative-advantage sectors because they are better risks. Firms in comparative-disadvantage sectors finding it harder to finance their entry into or survival in export markets either exit or refrain from entering export markets. On aggregate, one should therefore expect to see less entry, more exit, and shorter survival on export markets in those sectors after financial liberalization.The paper investigates the effect of financial liberalization on a country's export pattern by comparing the dynamics of entry and exit of different products in a country export portfolio before and after financial liberalization.The results suggest that products that lie far from the country's comparative advantage set tend to disappear relatively faster from the country's export portfolio following the liberalization of financial markets. In other words, financial liberalization tends to rebalance the composition of a country's export portfolio towards the products that intensively use the economy's abundant factors.

International Accounting Standards –normistoon siirtymisen vaikutukset suomalaisten pörssiyritysten taloushallintoon ja tilinpäätökseen

Tutkimuksen päätavoitteena oli selvittää, mitä vaikutuksia IAS-tilinpäätösstandardien käyttöön siirtyminen aiheuttaa suomalaisten pörssiyritysten tilinpäätöksissä ja taloushallinnossa. Tähän tavoitteeseen edettiin alatavoitteiden avulla. Näitä olivat tilinpäätösten kansainvälisen harmonisoinnin, Euroopan Unionin IAS-asetuksen ja itse IAS-tilinpäätöksen selvittäminen. Tutkimusaineisto koostuu kirjallisuudesta ja suomalaisille pörssiyrityksille tehdystä kyselystä. Tutkimuksen teoriaosassa käytetään käsiteanalyyttista ja empiirisessä osassa nomoteettista tutkimusotetta. Tutkielman mukaan tiedon lisääntyminen lisää myönteisyyttä IAS-standardistoa kohtaan. Henkilöstön koulutus onkin avainasemassa siirtymäprojektissa. Toinen merkittävä vaikutus on uuden laskentaohjeistuksen luontitarve. Merkittävin standardi vaikutuksiltaan on IAS 14 Segmenttiraportointi.

Towards actionable international comparisons of health system performance: expert revision of the OECD framework and quality indicators.

OBJECTIVE: To review and update the conceptual framework, indicator content and research priorities of the Organisation for Economic Cooperation and Development's (OECD) Health Care Quality Indicators (HCQI) project, after a decade of collaborative work. DESIGN: A structured assessment was carried out using a modified Delphi approach, followed by a consensus meeting, to assess the suite of HCQI for international comparisons, agree on revisions to the original framework and set priorities for research and development. SETTING: International group of countries participating to OECD projects. PARTICIPANTS: Members of the OECD HCQI expert group. RESULTS: A reference matrix, based on a revised performance framework, was used to map and assess all seventy HCQI routinely calculated by the OECD expert group. A total of 21 indicators were agreed to be excluded, due to the following concerns: (i) relevance, (ii) international comparability, particularly where heterogeneous coding practices might induce bias, (iii) feasibility, when the number of countries able to report was limited and the added value did not justify sustained effort and (iv) actionability, for indicators that were unlikely to improve on the basis of targeted policy interventions. CONCLUSIONS: The revised OECD framework for HCQI represents a new milestone of a long-standing international collaboration among a group of countries committed to building common ground for performance measurement. The expert group believes that the continuation of this work is paramount to provide decision makers with a validated toolbox to directly act on quality improvement strategies.

International comparison of the German evidence-based S3-guidelines on the diagnosis and multimodal treatment of early and locally advanced gastric cancer, including adenocarcinoma of the lower esophagus.

BACKGROUND: Clinical guidelines are essential in implementing and maintaining nationwide stage-specific diagnostic and therapeutic standards. In 2011, the first German expert consensus guideline defined the evidence for diagnosis and treatment of early and locally advanced esophagogastric cancers. Here, we compare this guideline with other national guidelines as well as current literature. METHODS: The German S3-guideline used an approved development process with de novo literature research, international guideline adaptation, or good clinical practice. Other recent evidence-based national guidelines and current references were compared with German recommendations. RESULTS: In the German S3 and other Western guidelines, adenocarcinomas of the esophagogastric junction (AEG) are classified according to formerly defined AEG I-III subgroups due to the high surgical impact. To stage local disease, computed tomography of the chest and abdomen and endosonography are reinforced. In contrast, laparoscopy is optional for staging. Mucosal cancers (T1a) should be endoscopically resected "en-bloc" to allow complete histological evaluation of lateral and basal margins. For locally advanced cancers of the stomach or esophagogastric junction (≥T3N+), preferred treatment is preoperative and postoperative chemotherapy. Preoperative radiochemotherapy is an evidence-based alternative for large AEG type I-II tumors (≥T3N+). Additionally, some experts recommend treating T2 tumors with a similar approach, mainly because pretherapeutic staging is often considered to be unreliable. CONCLUSIONS: The German S3 guideline represents an up-to-date European position with regard to diagnosis, staging, and treatment recommendations for patients with locally advanced esophagogastric cancer. Effects of perioperative chemotherapy versus chemoradiotherapy are still to be investigated for adenocarcinoma of the cardia and the lower esophagus.

Best Practices of International Double Master's Degree Programmes: Comparative Study on Finnish and Russian Universities

The purpose of this report is to disseminate the best practices of double degree programmes’ organization, implementation and development between Russian and European universities. The findings reveal good developments in the field of double degree cooperation between Russian and European universities and a high motivation from both parties. The report depicts different models of building a joint curriculum and organizing academic mobility. Foreign language skills improvement for students and university staff, involvement of international companies, and joint strategy and actions in marketing and quality assurance are some redevelopments points recommended in the report.

Pienen yhtiön tilinpäätösvarmennus

Tämän pro gradu -tutkielman tavoitteena oli tutkia, onko tilinpäätöksen yleisluonteinen tarkastus riittävä varmennusmuoto pienten yritysten tilinpäätöksille hallinnollisesti raskaan tilintarkastuksen sijaan. Tilinpäätöksen varmennusmuotoina tutkimuksessa käsitellään kansainvälisten ISA-standardien mukaisesti suoritettua kohtuullisen varmuuden tuottavaa tilintarkastusta sekä ISRE 2400 -standardin mukaisesti suoritettua rajoitetun varmuuden tuottavaa yleisluonteista tarkastusta. Tutkimusmuotona käytettiin laadullista tutkimusmenetelmää. Tutkimuksen empiirisenä aineistona käytettiin Euroopan komission ja IAASB:n konsultaatiopapereihin lähetettyjä kommenttikirjeitä. Tutkimustulosten perusteella havaittiin, että ISA-tilintarkastusstandardeja ei koeta hallinnollisesti raskaiksi pienille yrityksille ja ISA-standardien lakisääteistä sovel-tamista kannatetaan. Alemman varmuustason yleisluonteinen tarkastus koettiin kuitenkin mahdolliseksi vaihtoehdoksi tilintarkastukselle erityisesti pienten yritysten tilinpäätösten varmentamisessa.

Conceptions of Quality and Approaches to Quality Assurance in Ontario’s Universities

Many international, political, and economic influences led to increased demands for development of new quality assurance systems for universities. Like many policies and processes that aim to assure quality, Ontario’s Quality Assurance Framework (QAF) did not define quality. This study sought to explore conceptions of quality and approaches to quality assurance used within Ontario’s universities. A document analysis of the QAF’s rationale and structure suggested that quality was conceived primarily as fitness for purpose, while suggested indicators represented an exceptional conception of quality. Ontario universities perpetuated such confusion by adopting the framework without customizing it to their institutional conceptions of quality. Drawing upon phenomenographic traditions, a qualitative investigation was conducted to better understand various conceptions of quality held by university administrators and to appreciate ways in which they implemented the QAF. Three main approaches to quality assurance were identified: (a) Defending Quality, characterized by conceptions of quality as exceptional, which focuses on administrative accountability and uses a hands-off strategy to defend traditional notions of quality inputs and resources; (b) Demonstrating Quality, characterized by conceptions of quality as fitness for purpose and value for money, which focuses on accountability to students and uses centralized engaged strategies to demonstrate how programs meet current priorities and intended outcomes; and (c) Enhancing Quality, characterized by conceptions of quality as transformation, which focuses on reflection and learning experience and uses engaged strategies to find new ways of improving learning and teaching. The development of a campus culture that values the institution’s function in student learning and quality teaching would benefit from Enhancing Quality approaches to quality assurance. This would require holistic consideration of the beliefs held by members of the institution, a clear articulation of the institution’s conceptions of quality, and a critical analysis of how these conceptions align with institutional practices and policies.

The UK Professional Standards Framework: applying it to support for international students

This is a part of a collection of materials developed by the HEAcademy Subject Centre for Languages, linguistics and area studies. The materials provide reflective activities designed to engage teachers with some of the key issues in working with international students and practical ideas for ways in which these can be addressed. They will be of particular interest to new staff or anyone new to working with international students.

The UK Professional Standards Framework: applying it to support for international students

This is a part of a collection of materials developed by the HEAcademy Subject Centre for Languages, linguistics and area studies. The materials provide reflective activities designed to engage teachers with some of the key issues in working with international students and practical ideas for ways in which these can be addressed. They will be of particular interest to new staff or anyone new to working with international students.

Linking the UK Professional Standards Framework to reflective practice and action research

This is a part of a collection of materials developed by the HEAcademy Subject Centre for Languages, linguistics and area studies. The materials provide reflective activities designed to engage teachers with some of the key issues in working with international students and practical ideas for ways in which these can be addressed. They will be of particular interest to new staff or anyone new to working with international students.

The UK Professional Standards Framework: applying it to support for international students

This is a part of a collection of materials developed by the HEAcademy Subject Centre for Languages, linguistics and area studies. The materials provide reflective activities designed to engage teachers with some of the key issues in working with international students and practical ideas for ways in which these can be addressed. They will be of particular interest to new staff or anyone new to working with international students.

The UK Professional Standards Framework: applying it to support for international students

This is a part of a collection of materials developed by the HEAcademy Subject Centre for Languages, linguistics and area studies. The materials provide reflective activities designed to engage teachers with some of the key issues in working with international students and practical ideas for ways in which these can be addressed. They will be of particular interest to new staff or anyone new to working with international students.

The UK Professional Standards Framework for teaching and supporting learning in higher education

This is a part of a collection of materials developed by the HEAcademy Subject Centre for Languages, linguistics and area studies. The materials provide reflective activities designed to engage teachers with some of the key issues in working with international students and practical ideas for ways in which these can be addressed. They will be of particular interest to new staff or anyone new to working with international students.

The role of food standards in international trade: evidence from Brazilian beef exports to the EU market

The study reviews the literature on global chain governance and food standards to allow for an assessment of Brazilian beef exports to the European Union. The empirical approach employed is based on company case studies. The results suggest that the Brazilian beef chain has little choice but to adapt to market changes as standards evolve. Costs of compliance for meeting international food standards reduce Brazil's comparative advantage. At the same time, changes in the nature of demand have created the need for a more integrated supply chain in order to enhance confidence in Brazil's beef production and processing abroad.

International financial reporting standards (IFRS) as a change agent in Ukraine

This paper aims to examine the perception of key actors regarding the costs and benefits that result from adopting International Financial Reporting Standards (IFRS) in Ukraine. Authors showed that IFRS implementation impacts on internal reporting quality, the relationship with customers, creditors and shareholders, the access to international markets and external financing. They also indicated that financial managers have serious concerns about implementation costs related to the introduction of IFRS. These costs relate to training, instruction on IFRS adoption and translation of current IFRS, changes in software systems, double purpose accounting and deadlines for IFRS adoption and consulting services.