The relationship between private investors and small firms: an agency theory approach

Many small firms in Sweden are characterized by a lack of equity capital. For several years measures to increase the equity capital have been discussed. In this discussion the private investors' market has received virtually no attention. This study presents some preliminary results of the private investors in Sweden.

The research in small firms financing is characterized by a lack of theoretical framework. One basic assumption in the study is that agency theory can provide an essential framework to explain the interaction between the private investor and entrepreneur. Twenty-five hypotheses generated from agency theory are formulated and tested on 62 small unlisted firms in Sweden. Multiple regression analysis is used for the causal analyses.

The empirical results in the study show inter alia that the geographic distance and the private investor's knowledge about the portfolio firm's transformation process seem to be the most influential factors for determining the private investor's involvement in the portfolio firms. It is also interesting to notice that none of the variables, frequency of contacts and the private investor's operational work in the portfolio firm affect the performance of the firm. Contrary to conventional wisdom, private investors do not add value to their portfolio firms through their interaction with the entrepreneurs.

The theoretical conclusion is that agency theory does not provide any satisfactory framework to explain the private investor - entrepreneur relationship. Some of the basic assumptions in agency theory seem to be invalid. A model for the relationship between private investors and entrepreneurs is developed in which four interaction strategies are identified. The model gives implications on two levels: the portfolio level and the individual case level.     

An alternative approach to community-based ecotourism: a bottom-up locally initiated non-monetised project in Papua New Guinea

Community-based ecotourism (CBET) is presented as a tool for conservation and sustainable development by conservation practitioners and development agencies, but is reported to have achieved little. Several scholars argue that many problems stem from inadequate power relationships between external actors and local communities, leading to low community participation. This study opens a debate on governance and social enterprise in CBET by examining a bottom-up approach to community-based ecotourism based on a small-scale CBET initiative in an amenity-poor remote indigenous community in Papua New Guinea. This initiative is unique in the following aspects: it was initiated by a community member; external assistance was advisory only; no external financial assistance was given; and it has taken place in a non-monetised economy. Participant observation and in-depth interviews with local key informants were used to identify community-defined positive/negative impacts and community participation processes. Overall, there was substantial support for the project; it contributed to community welfare, generated economic benefit, had positive conservation outcomes and from the viewpoint of the community had no adverse cultural impacts. One of the keys for success was the development of a strong community agency that led to high community participation and individual rather than the community ownership.     

Better cross hedges with composite hedging? Hedging equity portfolios using financial and commodity futures

Unless a direct hedge is available, cross hedging must be used. In such circumstances portfolio theory implies that a composite hedge (the use of two or more hedging instruments to hedge a single spot position) will be beneficial. The study and use of composite hedging has been neglected; possibly because it requires the estimation of two or more hedge ratios. This paper demonstrates a statistically significant increase in out-of-sample effectiveness from the composite hedging of the Amex Oil Index using S&P500 and New York Mercantile Exchange crude oil futures. This conclusion is robust to the technique used to estimate the hedge ratios, and to allowance for transactions costs, dividends and the maturity of the futures contracts.     

Who should own it? An agency‐based explanation for multi‐outlet ownership and co‐location in plural form franchising

Plural forms exist when managers use two owners to perform one activity. Franchising is a plural form explained by agency theory, however, the theory is unable to explain two franchisor actions: 1) allowing franchisees to own multiple outlets and 2) co‐locating company‐owned and franchised outlets. We use research that describes a symbiosis between company‐owned and franchised outlets to extend agency theory and explain these actions. Our investigation of ownership patterns among 4,339 outlets of 16 plural form franchisors is consistent with our theory that multi‐outlet franchising is cost efficient and that co‐location occurs when franchisors fill market gaps left by franchisees. Copyright © 2011 John Wiley & Sons, Ltd.     

Treatment patterns,complications, and direct medical costs associated with ankylosing spondylitis in Chinese urban patients: a retrospective claims dataset analysis

Aim: To describe treatment pattern, complications, and direct medical costs associated with ankylosing spondylitis (AS) in Chinese urban patients.

Methods: The 2013 China Health Insurance Research Association (CHIRA) urban insurance claims database was used to identify patients with AS. The identified patients were stratified by AS treatments for the comparisons of well established AS-related complications and direct medical costs. Conventional regression analyses adjusted the collected patient baseline characteristics to confirm the impact of treatments on complications and direct medical costs.

Results: Of the identified 1299 patients with AS, 18.0% received non-steroidal anti-inflammatory drugs (NSAID), 11.2% received immunosuppressant, 48.2% received NSAID plus immunosuppressant, 4.6% received biologic agents, and 17.9% received medications without indication for AS. Biologic group was associated with the lowest proportion of AS-related complications (8.3%) that was confirmed by multiple logistic regression analysis (odds ratio = 0.200, p?=?.017). The biologic group was also associated with highest direct medical costs (median: RMB?=?14,539) that were confirmed by the multiple generalized linear model (coefficient = 1.644, p?Conclusions: Biologics were not commonly used for AS in Chinese patients likely due to their high cost. Future studies are needed to confirm the potential long-term clinical benefits associated biologic treatment for AS.     

Costs of haematological adverse events in chronic myeloid leukaemia patients: a retrospective cost analysis of the treatment of anaemia,neutropenia and thrombocytopenia in patients with chronic myeloid leukaemia

Abstract

Objective: The study aim was to assess costs of haematological adverse events (AE) related to pharmacologic treatment of chronic myeloid leukaemia (CML) patients.

Methods: This was a retrospective cohort study using patient records of adults (n=91) with chronic-phase CML treated at a single university medical centre in the Netherlands. Occurrence of grade III/IV haematological AEs, defined according to CTC-NCI guidelines criteria, was derived from the laboratory registration. Mean age at time of diagnosis was 48 years; 56% male. A healthcare perspective was adopted. Cost estimates are presented in 2006 euros.

Results: Average cost of an episode of anaemia was €1,572, of thrombocytopenia €2,955, and of neutropenia €1,152. The mean cost of febrile neutropenia amounted to €2,462.

Conclusions: Treatment costs of AEs varied considerably. However, apart from the cost of anaemia, the results presented seem to be in line with information from the international literature. The key limitations of the study concern the relatively small cohort of patients at a single centre, the retrospective design and the various treatment regimens of CML during the follow-up.     

Flexibility at the Margin and Labor Market Volatility in OECD Countries*

We study the business‐cycle behavior of segmented labor markets with flexibility at the margin (e.g., just affecting fixed‐term contracts). We present a matching model with temporary and permanent jobs (i) where there is a gap in the firing costs associated with these types of jobs and (ii) where there are restrictions in the creation and duration of fixed‐term contracts. We show that a labor market with ``flexibility at the margin'' increases the unemployment volatility with respect to one that is fully regulated. This analysis yields new insights into the interpretation of the recent volatility changes witnessed in the OECD area.     

Estimating switching costs after introducing Fixed-Mobile Convergence in Japan

In this study, based on a conjoint-type survey analysis, the switching cost of several Japanese telecom services are empirically examined simultaneously, contingent on each carrier’s bundling strategies. The results suggest the following conclusions. The hierarchy of switching costs is mobile phone service, fixed phone service, ISP (Internet Service Provider), and broadband access service, in descending order. Even if the government prohibits the formerly state-owned monopoly NTT from forming alliances with other carriers, the legacy NTT group would still command more than half of the market share under FMC if each carrier adopts a pure bundling strategy. If mixed bundling emerges as the primary strategy in the FMC market, the resulting type of competition from the introduction of FMC does not stimulate competitive pricing.     

A Graphical Approach to the Standard Principal-Agent Model

An obstacle to the teaching of principal-agent theory is the technical complexity and intractability of the general model. Even in academic studies strong assumptions are often imposed so as to derive an analytical solution. The author describes a graphical approach to the standard principal-agent model. Characterizing equilibrium in the contract space defined by the incentive parameter and insurance component of pay under a linear contract, this approach provides a simple and intuitive method for analyzing the principal-agent problem, which can be easily understood by students of economics with basic knowledge of algebra and differentiation. The approach has shown to be convenient and rich for comparative statics analyses.     

What role for cooperation in conservation tenders? Paying farmer groups in the High Andes

This paper sheds light on the potential of group-level tenders to enhance conservation where it depends on cooperation of small-scale farmers. We analyze data from two pilot payment for ecosystem service (PES) schemes focused on the conservation of agricultural biodiversity in the Bolivian and Peruvian Andes. Contracts were assigned to farming groups who could choose between different types of in-kind payments with varying degrees of divisibility between group members. Our main results indicate that: (1) stronger general patterns of collective action are positively related to the level of cooperation in group-bid making; (2) where collective action is robust, collective payments seem to provide stronger conservation incentives than individual payments; (3) collective payments could mitigate some potential rent-seeking behavior; (4) selecting bid offers based on both a ‘cooperation’ criterion and conservation land area offered does not overly compromise the cost-effectiveness of PES; and (5) group-level contracts may create strong incentives for contract compliance. Hence, combining farmer group-level contracts with collective in-kind payments can enhance the cost-effectiveness of conservation tenders, while generating co-benefits in terms of increased interaction and social capital among group members.