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Money secrets: How does trade secret legal protection affect firm market value? Evidence from the uniform trade secret act

Research summary : We investigate the impact of trade secret legal protection on firm market value in the context of acquisitions. On one hand, market value may increase because trade secret assets become better protected from rivals. On the other hand, market value may decrease because trade secret protection reduces information about the target and its competitors available to potential buyers, increasing uncertainty about its value. Buyers will discount their offers in expectation of being compensated for riskier deals. Using a sample of private equity investments in the United States, we find that trade secret protection has a positive effect in industries with high mobility of knowledge workers, but a negative effect in industries with (1) high resource–value uncertainty and (2) high poor‐investment risk. Managerial summary : We argue that an increase in trade secret legal protection might not unequivocally benefit firm owners when selling their business. A stronger trade secret protection increases the market value of firms in industries with high workers' mobility, but it decreases the market value of firms in industries with uncertain resource value and/or high risk of poor‐acquisition investments. Based on the contingent effect of trade secret protection, companies may want to adjust their strategic decisions, including where to locate or relocate, based in part on whether they will derive benefits or suffer losses when trade secrets are better protected. Finally, our study should help policymakers understand more fully the economic impact of government policies associated with trade secrets. Copyright © 2016 John Wiley & Sons, Ltd.     

Ownership structure,risk and performance in the European banking industry

We compare the performance and risk of a sample of 181 large banks from 15 European countries over the 1999–2004 period and evaluate the impact of alternative ownership models, together with the degree of ownership concentration, on their profitability, cost efficiency and risk. Three main results emerge. First, after controlling for bank characteristics, country and time effects, mutual banks and government-owned banks exhibit a lower profitability than privately owned banks, in spite of their lower costs. Second, public sector banks have poorer loan quality and higher insolvency risk than other types of banks while mutual banks have better loan quality and lower asset risk than both private and public sector banks. Finally, while ownership concentration does not significantly affect a bank’s profitability, a higher ownership concentration is associated with better loan quality, lower asset risk and lower insolvency risk. These differences, along with differences in asset composition and funding mix, indicate a different financial intermediation model for the different ownership forms.     

Quantiles, expectiles and splines

A time-varying quantile can be fitted by formulating a time series model for the corresponding population quantile and iteratively applying a suitably modified state space signal extraction algorithm. It is shown that such quantiles satisfy the defining property of fixed quantiles in having the appropriate number of observations above and below. Like quantiles, time-varying expectiles can be estimated by a state space signal extraction algorithm and they satisfy properties that generalize the moment conditions associated with fixed expectiles. Because the state space form can handle irregularly spaced observations, the proposed algorithms can be adapted to provide a viable means of computing spline-based non-parametric quantile and expectile regressions.     

Rethinking the import-productivity nexus for Italian manufacturing

We provide evidence on the firm level productivity effects of imports of intermediates. By exploiting a large panel of Italian manufacturing firms, we are able to separately explore the role of importing from high and low income countries. Importing does not permanently affect the firm productivity growth. This finding holds both when we test for the import entry by means of Propensity Score Matching techniques and when we analyse the import intensity within a dynamic panel data model framework. On the contrary, we confirm the existence of self-selection into importing. Also, our evidence supports the learning-by-exporting effects in Italian manufacturing and we prove that this result is robust to the control of firm import activity.     

Mega-events as drivers of community participation in developing countries: The case of Shanghai World Expo

Within a wide body of literature it has been argued and demonstrated that community participation in tourism development is advantageous in terms of the sustainability and effectiveness of the development policies adopted. However, over time, doubts have been raised about whether community participation should take place in developing countries. There are major concerns regarding the immaturity and the incompliance of the political and social conditions of developing countries in relation to the requirements necessary for an effective participatory planning. In this paper, we argue that mega-events, due to their wide scope and the key role that large groups of stakeholders play in their success, may represent a driver for community participation in developing countries. In order to explore our idea, we will analyse tourism development and the planning of a mega-event within the Yangtze River Delta area, driven by the organisation and preparation of the Shanghai World Expo. According to our evidence, some initial elements of participative decision-making have indeed developed around the organisation of this mega-event, even though China has historically been considered refractory towards community participation. Finally, we discuss the findings in the light of existing knowledge to elicit significant questions about community participation in tourism development within developing countries and to address further research on this topic.     

Tourism competitiveness of Italian municipalities

Quality & Quantity - The purpose of the paper is the study of tourism competitiveness and its determinants for the almost 8000 Italian municipalities. The partial least squares method...     

Which Factors Affect Bond Underwriting Fees? The Role of Banking Relationships

The question of which factors are relevant in determining bond underwriting fees is empirically investigated by analysing 2,202 bond issues completed by European firms during the 1993 – 2003 period. Four major results emerge from the analysis. First, the introduction of the single currency in 1999 has generated an increase in competition among banks, and, as a result, a reduction in underwriting fees. Second, a strong relationship with the issuer's main bank reduces the level of underwriting fees. Third, new issuers are charged with lower underwriter fees relative to firms that have completed issues without building any strong relationship with a bank. Fourth, higher reputation banks charge lower underwriting fees. The implications of these findings are also discussed.     

Firm Opacity Lies in the Eye of the Beholder

We classify and test empirical measures of firm opacity and document theoretical and empirical inconsistencies across these proxies by testing the relative opacity of banks versus non‐banks. We evaluate the effectiveness of these proxies by observing the effect of two cleanly identified shocks to firm‐specific information: credit rating initiation and inclusion in the S&P 500 index. Using a difference‐in‐difference approach, we compare firms that are newly rated and firms that are included in the S&P 500 index with a propensity matched sample of “unchanged” firms. We find that only the number of analysts and Amihud's illiquidity ratio provide consistent patterns across different estimation specifications and different econometric settings. These two proxies show that banks are more opaque than non‐banks. Based on our tests, we recommend that these proxies be used as the primary measures of firm opacity.