CEO compensation in EU telecom companies: Does the state design the right incentives?

This paper analyzes the structure of CEO pay in European fixed telecommunication companies, focusing on the impact of state ownership. Results show that, under the (partial or total) control of the state, the level of CEO compensation is lower and pay-performance sensitivity is higher than in privately-controlled firms. This finding suggests the state provides an incentive as well as a monitoring effect. However, when the state holds the majority of the shares, the pay level is significantly affected by the CEO power, suggesting that in these firms, CEOs are more likely to be entrenched with boards and succeed in raising their pay.     

Efficiency Determinants and Capacity Issues in Angolan Insurance Companies

This paper describes a variety of approaches used to assess the efficiency of a sample of major insurance companies in Angola between 2003 and 2012. Starting out with the bootstrapping technique, several data envelopment analysis (DEA) estimates were generated, allowing the use of confidence intervals and bias correction in central estimates to test for significant differences in efficiency levels and input‐decreasing/output‐increasing potentials. Previous studies have focused on the measurement and explanation of the factors affecting the performance rather than the prediction. The use of neural networks combined with DEA results as part of an attempt to produce a model for insurance companies’ performance with effective predictive ability is investigated. The findings indicate that older insurance companies with Portuguese origin tend to be more efficient. Results also suggest that opportunities for accommodating future demand appear to be scarce.     

Foreign Acquisitions,Domestic Multinationals,and R&D

Our aim in this paper is to evaluate the causal effect of foreign acquisition on research and development (R&D) intensity in targeted domestic firms. We are able to distinguish domestic multinational enterprises (MNEs) and non‐MNEs, which allows us to investigate the fear that the change in ownership of domestic MNEs to foreign MNEs leads to a reduction in R&D activity in the country. Overall, our results give no support to the fears that foreign acquisition of domestic firms leads to a relocation of R&D activity in Swedish MNEs. Rather, in this paper, we find robust evidence that foreign acquisitions lead to increasing R&D intensity in acquired domestic MNEs and non‐MNEs.     

The Bertrand Paradox,the Useless Auctioneer and the Launhardt Model

We revisit the Cournot–Bertrand debate in the light of Cournot, Edgeworth and Launhardt, tracing back to Launhardt the origin of price competition in duopoly models with constant returns to scale. Then, we discuss the formalisation of consumer utility function for differentiated products, first appearing in Launhardt and then in Bowley. This allows us to point out that assuming that firms know the demand function(s) is equivalent to assuming that they know the structure of consumer preferences. Therefore, we argue that there is no role for the auctioneer, either in Cournot or in Walras.     

Profit Leak? Pre‐Release File Sharing and the Music Industry

Using data from an exclusive file‐sharing Web site that allows users to share music files using the BitTorrent protocol, I exploit exogenous variation in the availability of sound recordings in file‐sharing networks to isolate the causal effect of file sharing of an album on its sales. Using within‐album variation in illegal downloads and sales, I find that the effect is essentially zero: The elasticity of sales with respect to illegal downloads is one‐tenth of one percentage point. However, the finding that file sharing is not harmful to individual artists is not inconsistent with the well‐documented fact that file sharing is harmful to the music industry (the fallacy of composition). More important, I find that file sharing benefits more established and popular artists who are signed to major labels, which is consistent with recent industry trends.     

Knowing your boundaries: Integration opportunities in international professional service firms

This study presents three different business models (continuous, repetitious, and unique) identified in international professional service firms that pursue a transnational strategy. These business models have varying opportunities for global integration. We extend the integration–responsiveness framework by offering a framework for analyzing how to balance global integration with local responsiveness when pursuing a transnational strategy. By identifying the content, structure, and governance transactions of the three business models, we can determine when to pursue headquarters-initiated global integration and when to choose strategies that ensure local responsiveness and subsidiary competitiveness in local markets.     

How risky is a random process?

The riskiness of random processes is compared by (a) employing a decision theoretic equivalence between processes and lotteries on path-spaces to identify the riskiness of the former with that of the latter, and (b) using the theory of comparative riskiness of lotteries over vector spaces to compare the riskiness of lotteries on a given path-space. We derive the equivalence used in step (a) and contribute a new criterion to the theory applied in step (b). The validity of the new criterion, which applies second order stochastic dominance to utility distributions, is established by showing its equivalence to the benchmark decision theoretic criterion when comparing the riskiness of lotteries over any vector space. We demonstrate the theory’s tractability via diverse economic applications.     

The determinants of price in 3G spectrum auctions

This article examined the empirical relationship between prices paid for national 3G wireless licenses when spectrums were sold by auction. The reduced-form modelling approach was based on the premise that auction design features can, and do, affect both final (revenue) and intermediate (viz., auction competitiveness and license assignment) auction outcomes. Importantly, the analysis recognizes, and explicitly allows for, the endogeneity of bidder entry and sample selection arising from an absence of bidding. Generally, these key features have only received attention in isolation. In particular, the study addressed the principal question of: which regulator chosen auction design variables determine prices paid in spectrum auctions? The analysis showed that flexible-package formats increased prices paid, and that higher reserve prices had a dampening effect. The article also showed that longer license terms and more competitive auctions (as measured by the bidders-to-licenses ratio) enhance prices paid.     

Bribery,corruption and bureaucratic hassle: Evidence from Myanmar

Corruption has been found to be the most severe obstacle to business operations, according to a recent survey of over 3000 firms in Myanmar. This paper sets out to understand the structure of corruption through an econometric analysis of this survey. It finds that firms with higher ‘ability to pay’ (proxied by sales revenue and employee growth) are more likely to pay bribes. While firms with lower ‘refusal power’ (i.e. those dependent on bureaucratic permissions to export and import) are more likely to find corruption to be an obstacle. A distinct but related question is whether bribes act as ‘efficiency grease’ by allowing firms to circumvent red tape. No evidence is found to support this hypothesis; in fact, firms that pay bribes report greater bureaucratic hassle compared to firms that do not. This result fits in more closely with the view that red tape could be used to extract bribes from firms.     

Scale effects of R&D as reflected in earnings and returns

Using returns to scale as a conceptual foundation, we explore how R&D-related earnings performance and earnings variability depend upon firm size. We find that the positive association between the level of future earnings and R&D intensity increases with firm size, and that the positive association between the volatility of future earnings and R&D intensity decreases with firm size, consistent with R&D productivity increasing with scale. We also show that R&D scale is associated with lower market returns, consistent with the idea that R&D investment risk declines with scale.