Patterns of corporate governance and technical efficiency in Italian manufacturing

The purpose of this paper is to analyse the relationship between the corporate governance system and technical efficiency in Italian manufacturing. We use a non-parametric frontier technique (DEA) to derive technical efficiency measures for a sample of Italian firms taken from nine manufacturing industries. These measures are then related to the characteristics of the corporate governance system. Two of these characteristics turn out to have a positive impact on technical efficiency: the percentage of the company shares owned by the largest shareholder and the fact that a firm belongs to a pyramidal group. Interestingly, a trade-off emerges between these influences, in the sense that one is stronger in industries where the other is weaker. Copyright © 2007 John Wiley & Sons, Ltd.

A methodology for the generation and evaluation of biorefinery process chains, in order to identify the most promising biorefineries for the EU

The topic of bioenergy, biofuels and bioproducts remains at the top of the current political and research agenda. Identification of the optimum processing routes for biomass, in terms of efficiency, cost, environment and socio-economics is vital as concern grows over the remaining fossil fuel resources, climate change and energy security. It is known that the only renewable way of producing conventional hydrocarbon fuels and organic chemicals is from biomass, but the problem remains of identifying the best product mix and the most efficient way of processing biomass to products. The aim is to move Europe towards a biobased economy and it is widely accepted that biorefineries are key to this development. A methodology was required for the generation and evaluation of biorefinery process chains for converting biomass into one or more valuable products that properly considers performance, cost, environment, socio-economics and other factors that influence the commercial viability of a process. In this thesis a methodology to achieve this objective is described. The completed methodology includes process chain generation, process modelling and subsequent analysis and comparison of results in order to evaluate alternative process routes. A modular structure was chosen to allow greater flexibility and allowing the user to generate a large number of different biorefinery configurations The significance of the approach is that the methodology is defined and is thus rigorous and consistent and may be readily re-examined if circumstances change. There was the requirement for consistency in structure and use, particularly for multiple analyses. It was important that analyses could be quickly and easily carried out to consider, for example, different scales, configurations and product portfolios and so that previous outcomes could be readily reconsidered. The result of the completed methodology is the identification of the most promising biorefinery chains from those considered as part of the European Biosynergy Project.

Opportunism, hold-up and the (contractual) theory of the firm

This paper considers the role of opportunism in three contractual theories of the firm: rent-seeking theory, property rights theory, and agency theory. In each case I examine whether it is possible to have a functioning contractual theory of the firm without recourse to opportunism. Without opportunism firms may still exist as a result of issues arising from (incomplete) contracting. Far from posing a problem for the theory of the firm, questioning the role of opportunism and the ubiquity of the hold-up problem helps us understand more about the purpose and functions of contracts which go beyond mere incentive alignment.

Military spending and economic growth in South Africa

This paper undertakes an empirical analysis of the economic effects of military spending on the South African economy. It estimates a neo-classical model common in the literature at the level of the macroeconomy and at the level of the manufacturing sector. An attempt is made to improve upon the model by allowing the data to determine the dynamic structure of the model through an ARDL procedure. No significant impact of military spending is found in aggregate, but there is a significant negative impact for the manufacturing sector. This suggests that the cuts in domestic military procurement that have occurred since 1989 could lead to improved economic performance in South Africa through their impact on the manufacturing sector.

The manufacture and utilisation of architectural terracotta and faience.

The revival of terracotta and faience in British architecture was widespread, dramatic in its results and, for two decades, the subject of intense debate. However the materials have been frequently denigrated and more generally disregarded by both architects and historians. This study sets out to record and explain the rise and fall of interest in terracotta and faience, the extent and nature of the industry and the range of architectural usage in the Victorian, Edwardian and inter-war periods. The first two chapters record the faltering use of terracotta as an 'artificial stone', until the material gained its own identity, largely through the appreciation of Italian architecture. In the mid-Victorian period, terracotta will be seen to have become symbolic of the philosophy of the Victoria and Albert Museum and its Art School in attempting to reform both architecture and the decorative arts. The adoption of terracotta was furthered as much by industrial as aesthetic factors; three chapters examine how the exploitation of coal-measure clays, developments in the processes of manufacture, the changing motivation of industrialists and differing economics of production served to promote and then to hinder expansion and adaptation. The practical values of economy, durability and fire-resistance and the aesthetic potential, seen in terms of colour and decorative and sculptural modelling, became inter-related in the work of the architects who made extensive use of architectural ceramics. A correlation emerges between the free Gothic style, exemplified by the designs of Alfred Waterhouse and the use of red terracotta supplied from Ruabon, and between the eclectic Renaissance style and a buff material produced by different manufacturers.These patterns were modified as a result of the adoption of faience for facing external walls as well as interiors, and because of the new architectural requirements and tastes of the twentieth century. The general timidity in exploiting the scope for polychromatic decoration and the increasing opposition to architectural ceramics is contrasted with the most successful schemes produced for cinemas, chain-stores and factories. In the last chapter, those undertaken by the Hathern Station Brick and Terracotta Company between 1896 and 1939 are used as a case study; they confirm that manufacturers, architects and clients were all committed to creating a modern and yet decorative architecture, appropriate for new building types and that would appeal to and be comprehensible to the public.

Variation in spoken discourse in and beyond the english foreign language classroom : a comparative study

This study is concerned with one of the most interesting and the least well-researched areas in contemporary research on classroom interaction: that of the discourse variability exhibited by participants. It investigates the way in which the language of native speakers (NSs) as well as that of non-native speakers (NNSs) may vary according to the circumstances under which it is produced. The study, therefore, attempts to characterise the performance of both NSs and NNSs (with particular emphasis placed on the latter) in various types of interaction in and beyond the EFL classroom. These are: Formal Interview (FI), Formal Classroom Interaction (FCI), Informal Classroom Interaction (ICI), Informal Classroom Discussion (ICD), and Informal Conversation (IC). The corpus of the study consisted of four NSs and fifteen NNSs. Both a video and a tape recording was made for each type of interaction, with the exception of the IC which was only audio-recorded so as not to inhibit the natural use of language. Each lasted for 35 minutes. The findings of the study mark clearly the distinction between the `artificiality' of classroom interaction and the `naturalness' or `authenticity' of non-classroom discourse. Amongst the most interesting findings are the following: Unlike both FCI and ICI, in the FI, ICD, and IC, the language of NNSs was characterised by: greater quantity of oral output, a wider range of errors, the use of natural discourse strategies such as holding the floor and self-correction, and a greater number of initiations in both ICD and IC. It is suggested that if `natural' or `authentic' discourse is to be promoted, the incorporation of FI, ICD, and IC into the EFL classroom activities is much needed. The study differs from most studies on classroom interaction in that it attempts to relate work in the EFL classroom to the `real' world as its prime objective.

Ownership structure and investment finance in transition economies:a survey of evidence from large firms in Hungary and Poland

Using survey data on 157 large private Hungarian and Polish companies this paper investigates links between ownership structures and CEOs’ expectations with regard to sources of finance for investment. The Bayesian estimation is used to deal with the small sample restrictions, while classical methods provide robustness checks. We found a hump-shaped relationship between ownership concentration and expectations of relying on public equity. The latter is most likely for firms where the largest investor owns between 25 percent and 49 percent of shares, just below the legal control threshold. More profitable firms rely on retained earnings for their investment finance, consistent with the ‘pecking order’ theory of financing. Finally, firms for which the largest shareholder is a domestic institutional investor are more likely to borrow from domestic banks.

The impact of privatisation and regulation on the water and sewerage industry in England and Wales:a translog cost function approach

After the ten Regional Water Authorities (RWAs) of England and Wales were privatized in November 1989, the successor Water and Sewerage Companies (WASCs) faced a new regulatory regime that was designed to promote economic efficiency while simultaneously improving drinking water and environmental quality. As legally mandated quality improvements necessitated a costly capital investment programme, the industry's economic regulator, the Office of Water Services (Ofwat), implemented a retail price index (RPI)+K pricing system, which was designed to compensate the WASCs for their capital investment programme while also encouraging gains in economic efficiency. In order to analyse jointly the impact of privatization, as well as the impact of increasingly stringent economic and environmental regulation on the WASCs' economic performance, this paper estimates a translog multiple output cost function model for the period 1985–1999. Given the significant costs associated with water quality improvements, the model is augmented to include the impact of drinking water quality and environmental quality on total costs. The model is then employed to determine the extent of scale and scope economies in the water and sewerage industry, as well as the impact of privatization and economic regulation on economic efficiency.

Corporate governance and compliance with International Financial Reporting Standards (IFRSs):evidence from two MENA stock exchanges

This study examines the influence of corporate governance structures on the levels of compliance with IFRSs disclosure requirements by companies listed on the stock exchanges of two leading MENA (Middle East and North Africa) countries, Egypt and Jordan. This study employs a cross-sectional analysis of a sample of non-financial companies listed on the two stock exchanges for the fiscal year 2007. Using an unweighted disclosure index, the study measures the levels of compliance by companies listed on the two stock exchanges investigated.Univariate and multivariate regression analyses are used to estimate the relationships proposed in the hypotheses. In addition, the study uses semi-structured interviews in order to supplement the interpretation of the findings of the quantitative analyses. An innovative theoretical foundation is deployed, in which compliance is interpretable through three lenses - institutional isomorphism theory, secrecy versus transparency (one of Gray’s accounting sub-cultural values), and financial economics theories. The study extends the financial reporting literature, cross-national comparative financial disclosure literature, and the emerging markets disclosure literature by carrying out one of the first comparative studies of the above mentioned stock exchanges. Results provide evidence of a lack of de facto compliance (i.e., actual compliance) with IFRSs disclosure requirements in the scrutinised MENA countries. The impact of corporate governance mechanisms for best practice on enhancing the extent of compliance with mandatory IFRSs is absent in the stock exchanges in question. The limited impact of corporate governance best practice is mainly attributed to the novelty of corporate governance in the region, a finding which lends support to the applicability of the proposed theoretical foundation to the MENA context. Finally, the study provides recommendations for improving de facto compliance with IFRSs disclosure requirements and corporate governance best practice in the MENA region and suggests areas for future research.

Degree of vertical integration and its buffering effects on political uncertainty

The focus of this study is on the governance decisions in a concurrent channels context, in the case of uncertainty. The study examines how a firm chooses to deploy its sales force in times of uncertainty, and the subsequent performance outcome of those deployment choices. The theoretical framework is based on multiple theories of governance, including transaction cost analysis (TCA), agency theory, and institutional economics. Three uncertainty variables are investigated in this study. The first two are demand and competitive uncertainty which are considered to be industry-level market uncertainty forms. The third uncertainty, political uncertainty, is chosen as it is an important dimension of institutional environments, capturing non-economic circumstances such as regulations and political systemic issues. The study employs longitudinal secondary data from a Thai hotel chain, comprising monthly observations from January 2007 – December 2012. This hotel chain has its operations in 4 countries, Thailand, the Philippines, United Arab Emirates – Dubai, and Egypt, all of which experienced substantial demand, competitive, and political uncertainty during the study period. This makes them ideal contexts for this study. Two econometric models, both deploying Newey-West estimations, are employed to test 13 hypotheses. The first model considers the relationship between uncertainty and governance. The second model is a version of Newey-West, using an Instrumental Variables (IV) estimator and a Two-Stage Least Squares model (2SLS), to test the direct effect of uncertainty on performance and the moderating effect of governance on the relationship between uncertainty and performance. The observed relationship between uncertainty and governance observed follows a core prediction of TCA; that vertical integration is the preferred choice of governance when uncertainty rises. As for the subsequent performance outcomes, the results corroborate that uncertainty has a negative effect on performance. Importantly, the findings show that becoming more vertically integrated cannot help moderate the effect of demand and competitive uncertainty, but can significantly moderate the effect of political uncertainty. These findings have significant theoretical and practical implications, and extend our knowledge of the impact on uncertainty significantly, as well as bringing an institutional perspective to TCA. Further, they offer managers novel insight into the nature of different types of uncertainty, their impact on performance, and how channel decisions can mitigate these impacts.

Financial constraints and technical efficiency:some empirical evidence for Italian producers' cooperatives

In this paper, we test the extent to which producers' cooperatives can experience an increase in technical efficiency following a tightening of financial constraints. This hypothesis is tested on a sample of Italian conventional and cooperative firms for the wine production and processing sector, using frontier analysis. The results support the hypothesis that increasing financial pressure can affect positively the cooperatives efficiency. Journal compilation © CIRIEC 2010.

A kockázat megjelenése a származtatott pénzügyi termékekben (The risk appearing in financial derivatives)

A pénzügyi kockázatok szerepe, modellezése, kezelése az utóbbi évtizedekben vált egyre hangsúlyosabbá az elméletben és a gyakorlatban egyaránt. A 2007-ben kezdődő pénzügyi válság egyik kiváltó oka a kockázatok nem megfelelő felmérése volt. A válság egyik tanulsága, hogy bár a matematika és a fizika hozzájárulása rendkívül mély módszertani apparátust biztosított a kockázatok számszerűsítésére, ezen eredmények pénzügyi alkalmazása csak akkor sikeres, ha pontosan értjük a modellek feltételeit és korlátait. Jelen cikk a pénzügyi derivatívák értékelésének alapelveit, valamint a származtatott ügyletekben megjelenő kockázatokat tekinti át, illetve bemutatja azokat a bizonytalansági tényezőket, amelyek megkérdőjelezik az értékelés objektivitását. / === / The modeling and management of financial risks became one of the most important topics of the last decade both in theory and fi nancial practice. The mismanagement of fi nancial risks can be mentioned among the reasons contributing to the eruption of the recent crisis. In order to use successfully the methodology of mathematics and physics in pricing of derivatives, we have to consider the assumptions and limits of the models. This paper introduces the main concepts – no arbitrage pricing and risk neutral valuation – in derivatives’ pricing, then presents and quantifies the risk of some derivative products. I am arguing that the assumptions of the Black–Scholes and Merton model are injured at several points, so the pricing can not be perfectly cleared from all the risk preferences. All those risks, deriving from the difference of the reality and the model are priced in the volatility parameter in the practice.

Tőkeallokáció nem likvid portfóliók esetén (Risk capital allocation in case of illiquid portfolios)

A kockázat jó mérése és elosztása elengedhetetlen a bankok, biztosítók, befektetési alapok és egyéb pénzügyi vállalkozások belső tőkeallokációjához vagy teljesítményértékeléséhez. A cikkben bemutatjuk, hogy a koherens kockázati mértékek axiómáit nem likvid portfóliók esetén is el lehet várni. Így mérve a kockázatot, ismertetünk a kockázatelosztásra vonatkozó két kooperatív játékelméleti cikket. Az első optimista, eszerint mindig létezik stabil, az alegységek minden koalíciója által elfogadható, általános módszer a kockázat (tőke) elosztására. A második cikk pesszimista, mert azt mondja ki, hogy ha a stabilitás mellett igazságosak is szeretnénk lenni, akkor egy lehetetlenségi tételbe ütközünk. / === / Measuring and allocating risk properly are crucial for performance evaluation and internal capital allocation of portfolios held by banks, insurance companies, investment funds and other entities subject to fi nancial risk. We argue that the axioms of coherent measures of risk are valid for illiquid portfolios as well. Then, we present the results of two papers on allocating risk measured by a coherent measure of risk. Assume a bank has some divisions. According to the fi rst paper there is always a stable allocation of risk capital, which is not blocked by any coalition of the divisions, that is there is a core compatible allocation rule (we present some examples for risk allocation rules). The second paper considers two more natural requirements, Equal Treatment Property and Strong Monotonicity. Equal Treatment Property makes sure that similar divisions are treated symmetrically, that is if two divisions make the same marginal risk contribution to all the coalition of divisions not containing them, then the rule should allocate them the very same risk capital. Strong Monotonicity requires that if the risk environment changes in such a way that the marginal contribution of a division is not decreasing, then its allocated risk capital should not decrease either. However, if risk is evaluated by any coherent measure of risk, then there is no risk allocation rule satisfying Core Compatibility, Equal Treatment Property and Strong Monotonicity, we encounter an impossibility result.

A geometriai Brown-mozgás feltevésének elfogadhatósága a reálopciók értékelésében (The acceptability of the assumption of geometric brownian motion in the valuation of real options)

A reálopciók a döntési rugalmasság megtestesítőiként jelen vannak a vállalatvezetők mindennapjaiban, és cégtől függően jelentős értéket képviselhetnek. Értékelésük a hagyományos diszkontált pénzáramlás módszerekkel csak korlátozottan lehetséges, ezért alternatívaként felmerül a pénzügyi opcióárazás módszertana, amelynek hagyományos változatai az alaptermék alakulásáról geometriai Brown-mozgást feltételeznek. A cikk ezt a feltevést veszi górcső alá a reálopciókra történő alkalmazás szempontjából, és megmutatja, hogy habár önkényesnek tűnhet, valójában nem pusztán egy matematikai szempontból kényelmes megoldás, hanem pénzügyileg is elfogadható feltétel. _______ Real options represent the fl exibility of decision-making, and are thus part of the everyday work of corporate executives, often having great value. Valuing them with the use of traditional Discounted Cash Flow models has limited relevance, therefore arises the alternative methodology of fi nancial option pricing, the traditional versions of which assume that the price of the underlying asset follows Geometric Brownian Motion. The paper examines this assumption from the aspect of real option valuation and shows that although it might seem arbitrary, it is not only a mathematically convenient choice, but also a fi nancially acceptable one.

A bizonyosságfüggvények elméletének alkalmazása a pénzügyi kimutatások ellenőrzésében (The application of the theory of belief functions in the audit of financial statements)

A könyvvizsgálati kockázat a téves auditjelentés kiadásának kockázata olyan esetekben, amikor a beszámoló lényeges hibás állítást tartalmaz. Ez a kockázat indirekt módon a hitelintézetek és pénzügyi vállalkozások működésében is megjelenik azokban az esetekben, amikor a lényeges hibás állítást a finanszírozott vállalkozás auditált beszámolója tartalmazza, amelynek az alapján finanszírozási döntést hoznak, vagy a finanszírozás folytatásáról a beszámolóban szereplő, hibás információkból számított hitelkovenánsok alapján döntenek. A könyvvizsgálat kockázatában a vizsgált gazdálkodó üzleti kockázatai tükröződnek vissza, ezért a kockázat felmérése és az ellenőrzés ennek alapján való megtervezése, majd végrehajtása kulcsfontosságú. Jelen tanulmány – kapcsolódva a Hitelintézeti Szemle 2011. évi 4. számához – szintén a kockázat és bizonytalanság témakörét tárgyalja, pontosabban ennek egy gyakorlati vetületét: a bizonyosságfüggvények (belief functions) alkalmazását a könyvvizsgálatban; mindezt a teljesség és a tankönyvszerű rendszerfelépítés igénye nélkül. A módszer ugyanis hazánkban szinte ismeretlen, nemzetközi viszonylatban viszont empirikus kutatásban is rámutattak már az alkalmazás lehetséges előnyeire a hagyományos valószínűségelméleten alapuló számszerű kockázatbecslésekkel szemben. Eszerint a bizonyosságfüggvények jobban reprezentálják a könyvvizsgálóknak a kockázatról alkotott képét, mint a valószínűségek, mert – szemben a hagyományos modellel – nem két, hanem három állapotot kezelnek: a pozitív bizonyíték létezését, a negatív bizonyíték létezését és a bizonyíték hiányának esetét. _______ Audit risk is the risk that the auditor expresses an inappropriate audit opinion when the fi nancial statements are materially misstated. This kind of risk indirectly appears in the fi nancial statements of fi nancial institutions, when the material misstatement is in the fi nanced entity’s statements that serve as a basis for lending decisions or when the decision is made based upon credit covenants calculated from misstated information. The risks of the audit process refl ect the business risks of the auditee, so the assessment of risks, and further the planning and performance of the audit based on it is of key importance. The current study – connecting to No 4 2011 of Hitelintézeti Szemle – also discusses the topic of risk and uncertainty, or to be more precise a practical implementation of the aforementioned: the application of belief functions in the fi eld of external audit. All this without the aim of achieving completeness or textbook-like scrutiny in building up the theory. While the formalism is virtually unknown in Hungary, on the international scene empirical studies pointed out the possible advantages of the application of the method in contrast to risk assessments based on the traditional theory of probability. Accordingly, belief functions provide a better representation of auditors’ perception of risk, as in contrast to the traditional model, belief functions deal with three rather than two states: the existence of supportive evidence, that of negative evidence and the lack of evidence.