Private equity secondaries: Opening the liquidity tap

Private equity is an illiquid asset class. The extended holding period for private equity—averaging four to five years—attracts investors, as fund managers are able to avoid the volatility that negatively affects the public equities. However, the secondary market has emerged as a tool that enables limited partners in private equity funds to manage a private equity portfolio flexibly despite its intrinsic illiquidity. This article discusses in great detail the scope of secondary transactions, discussing how the subsegment has evolved over time from the straightforward purchase of limited partnership interest to the more elaborate transactions involving structural creativity and complex problem solving for sellers. It is concluded that the growth in secondaries brings liquidity to the asset class and thus makes private equity a more compelling investment proposition. As such, the secondary market will continue to be a key driver for growth of the private equity industry. © 2009 Wiley Periodicals, Inc.     

Hedging labor income risk

We use a detailed panel data set of Swedish households to investigate the relation between their labor income risk and financial investment decisions. In particular, we relate changes in wage volatility to changes in the portfolio holdings for households that switched industries between 1999 and 2002. We find that households do adjust their portfolio holdings when switching jobs, which is consistent with the idea that households hedge their human capital risk in the stock market. The results are statistically and economically significant. A household going from an industry with low wage volatility to one with high volatility ceteris paribus decreases its portfolio share of risky assets by up to 35%, or $15,575.     

Archetypes of governance for science and technology labs

While policy-makers understand the vast benefits of publicly funded and not-for-profit research, governance practitioners have the difficult task of defining processes that can best foster high performance for science and technology (S&T) labs not primarily driven by profits. This qualitative study develops a new taxonomy based on two dimensions, the nature of the funding relationship between the parent organisation and the S&T lab and the degree of interdependence between the lab's research units. We discuss the dynamics uncovered for each of the four archetypes with illustrative cases and argue that high-performance governance of S&T labs requires an internal coherence linking the processes of planning, funding and performance evaluation.     

The community participation process in ecotourism development: a case study of the community of Sogoog,Bayan-Ulgii,Mongolia

Theories on community participation in ecotourism development advocate obtaining maximum levels of both community control and benefit to achieve sustainable tourism. This paper explores issues in community-based ecotourism development in a small, remote community in western Mongolia. It assesses the community's desire to develop ecotourism, their understanding of the issues involved and the feasibility of the process in a poor herding community, where 63% are herdsmen, frequently absent with their herds. Using responses from 100 participants together with interviews with key stakeholders, it describes and analyzes the difficulties in establishing community participation and ecotourism implementation. Findings revealed that long-term viable community-based ecotourism development in remote areas requires close collaboration and sustained support from trusted community leaders and from knowledgeable and committed outside stakeholders. Approaches need to be carefully tailored to local circumstances, not “one size fits all”. Key areas of concern were environmental and cultural, including fears that their tradition of hospitality might be compromised, perceptions of the local NGO's benefits to the community and local, often naïve, expectations of ecotourism development. Despite fears, over 90% of those interviewed were willing to participate in an ecotourism project in this high-risk, unforgiving economic and climatic setting.     

The Institution,the Economy and the Market: Karl Polanyi's Institutional Thought for Economists

This paper aims to clarify the logical structure of Karl Polanyi's concept of institution, especially with regard to his most important contribution to political economy—the conception of self-regulating markets as institutions. Although Polanyi did not provide a well-developed concept of institution, this article argues that such a concept exists in his work. Moreover, there is in Polanyi's work a sophisticated institutionalist account of the self-regulating market that has been largely overlooked as Polanyi does not present it explicitly. Analyzing the economy as an institutionalized process, as Polanyi does, reveals that the market is neither a natural nor a spontaneous phenomenon—a conclusion that runs counter to conventional economic thinking. Polanyi's approach enables us to view capitalism (the ‘market society’ in Polanyi's language) through a highly specific cultural fact: the fiction of the self-regulating market. This institutional perspective needs to be reassessed beyond new-institutionalist theoretical constructions.     

Punishment should fit the crime: an assessment of the French reform of minimum mandatory penalties

We study the effects of minimum mandatory sentences when judges are at least minimally averse to error and/or follow some “penalty should fit the crime” heuristic. We apply our analysis to the 2007 reform of the French Penal Code. We show that the introduction of minimum mandatory sentences in this context may backfire inducing more crime in the long run. Judges may prefer to acquit a criminal than convicting him to a sentence reputed too high.     

China’s Antitrust Policy: Recent Developments and Decision Patterns

Abstract:

In this paper, we review recent antitrust policy developments in China. First, we use a sample of all merger cases reviewed by the Ministry of Commerce (MOFCOM) from August 2008 to September 2012 to provide an econometric analysis of merger review patterns. We find that MOFCOM tends to impose restrictions on mergers involving large corporations and does not distinguish between horizontal mergers and vertical and conglomerate mergers. In addition, European firms and U.S. firms face higher chances of restrictions than do firms from other countries. Finally, we provide a qualitative analysis of the investigations against price agreements.