Institution Building and Variation in the Formation of the Australian Wool Market

The relocation of the wool market from London to the major Australian port cities from the late nineteenth century required the formation of an institution to govern the auction business, namely the wool brokers' association. Regional variations, among Sydney, Melbourne, and Brisbane, occurred in the structure and effectiveness of the institution despite each regional association having been formed around the same time, for the same purpose, and with an overlap of participating firms. We draw on institution theory to guide our account and find that the impact of legacy factors and differences in market conditions explain the regional variations.     

THE RELOCATION OF THE INTERNATIONAL MARKET FOR AUSTRALIAN WOOL

The marketplace for Australian wool relocated from London to the Australian capital cities in the half-century after 1880. This represented a major institutional shift that underpinned the development of the Australian economy and made Australia the centre of the international wool market. We analyse the principal demand and supply changes underlying this market shift. Consolidation of worsted manufacturing, demand diversification, improved transport and communications, Australian dominance of international wool production and the growth of the small grazier, shifted the relative market efficiency in favour of Australian auctions.     

Hours and Wages in the Depression: British Engineering, 1926–1938

On their intensive margins, firms in the British engineering industry adjusted to the severe falls in demand during the 1930s Depression by cutting hours of work. This provided an important means of reducing labor input and marginal labor costs through movements from overtime to short-time schedules. Nominal basic wage rates dropped relatively modestly while their real wage equivalents continued to rise throughout the trough years of the recession. This paper provides detailed labor market and empirical analysis of the hours and wage adjustment processes. Quantitative work is based on cell data from a panel of 28 local labor markets for the period 1926–38.     

Voluntary Disclosure and Equity Offerings: Reducing Information Asymmetry or Hyping the Stock?*

We examine corporate disclosure activity around seasoned equity offerings and its relationship to stock prices. Beginning six months before the offering, our sample issuing firms dramatically increase their disclosure activity, particularly for the categories of disclosure over which firms have the most discretion. The increase is significant after controlling for the firm's current and future earnings performance and tends to be largest for firms with selling shareholders participating in the offering. However, there is no change in the frequency of forward‐looking statements prior to the equity offering, something that is expressly discouraged by the securities law. Firms that maintain a consistent level of disclosure experience price increases prior to the offering, and only minor price declines at the offering announcement relative to the control firms, suggesting that disclosure may have reduced the information asymmetry inherent in the offering. Firms that substantially increase their disclosure activity in the six months before the offering also experience price increases prior to the offering relative to the control firms, but suffer much larger price declines at the announcement of their intent to issue equity, suggesting that the disclosure increase may have been used to “hype the stock” and the market may have partially corrected for the earlier price increase. Firms that maintain a consistent disclosure level have no unusual return behavior relative to the control firms subsequent to the announcement, while the firms that “hyped” their stock continue to suffer negative returns, providing further evidence that the increased disclosure activity may have been hype, and suggesting that the hype may have been successful in lowering the firms' cost of equity capital.     

Profits,dividends and industry restructuring: the Swedish paper and pulp industry between 1945 and 1977

This paper explores the role of profit distribution in the restructuring of the Swedish paper and pulp (P&P) industry between 1945 and 1977. In addressing this issue, we will draw on the life-cycle theory and market imperfection arguments to examine whether the less profitable firms shared more of their profits as dividends, or remained on the market longer by reinvesting the majority of the profits. Our study shows that an increasing share of the profits was distributed to owners over time, and thus less profit was reinvested in industrial renewal. We find that the observed general upward trend in dividends can be attributed to the decline in profit and firm legacy, as firms in the Swedish P&P industry kept dividends up while reducing reinvestment as their profit margins decreased over time. Our study shows that the market imperfections related to capital taxation and investment funds increased rather than decreased dividends.     

Mites and merchants: the crisis of English wool and textile trade revisited,c. 1275–1330†

On the basis of 7,871 manorial accounts from 601 sheep-rearing demesnes and 187 tithe receipts from 15 parishes, this article addresses the origins, scale, and impact of the wool and textile production crisis in England, c. 1275–1350. The article argues that recurrent outbreaks of scab disease depressed sheep population and wool production levels until the early 1330s. The disease, coupled with warfare and taxation, also had a decisive role in depressing the volumes of wool exports. Despite this fact, wool merchants were still conducting business with major wool producers, who desperately needed access to the capital to replenish their flocks.     

Private Information Production,Public Disclosure,and the Cost of Capital: Theory and Implications*

Both private information production by market traders and public disclosure by firms contribute to dissemination of financial information in the capital market. However, the motives and economic consequences of the two are quite different. In general, private information production is intended by investors to increase their trading profit, which has the effect of widening the information gap between informed and uninformed investors and increasing the firm's cost of capital. On the other hand, public disclosure can be used to narrow this information gap and to lower the cost of capital. This paper provides a theoretical model to examine the economic incentives behind these two forms of information dissemination and their consequences on the cost of capital. By simultaneously considering the firm's and the information traders' decisions, the paper derives an equilibrium in which the amount of private information production, the level of public disclosure, and the cost of capital are all linked to specific characteristics of the firm, of information traders, and of the market. In contrast to conventional beliefs, the paper predicts that, across firms, the cost of capital can be either positively or negatively related to the firm's disclosure level, depending on the specific factors that cause the variation within a particular sample. Similarly, the extent to which investors follow a firm and the firm's disclosure level can be either positively or negatively related to each other. Implications for empirical research are discussed.     

The effect of exchange rates on firm exports and the role of FDI

This paper studies how exchange rate movements affect the export market entry and intensity decision of firms and the export behaviour of multinationals in the UK. Using data on British manufacturing firms we find that exchange rate movements have little effect on firm export participation but have a significant impact on export shares. Multinationals have at their disposal a greater array of instruments to deal with exchange rates changes, although their use may vary according to the motives behind FDI. We also find important differences according to the country of origin of multinational firms. Multinationals firms originating from outside of the EU are less affected by changes in the exchange rate compared to those inside, who appear similarly affected as domestic firms.     

Absorptive Capacity,International Business Knowledge Transfer,and Local Adaptation: Establishing Discount Department Stores in Australia

This article examines the ways that Australia's largest retail firms accessed and adapted external knowledge flows, largely from the USA, to develop discount department store chains from the late‐1960s onwards. In doing so, it extends work on retail internationalisation by focusing on the importation, rather than the exportation of business models. The three firms – Coles, Myer and Woolworths – exhibited differing degrees of absorptive capacity in identifying and commercialising knowledge flows. This was reflected in fluctuating levels of success, the scope of store networks and relative positioning in the Australian market. Further, the role played by informal associations between managers in non‐competing firms in different markets during the development of discount department stores in Australia advances the case for socialising analyses of business knowledge transfer more broadly.     

Geography and firm exports: new evidence on the nature of sunk costs

This paper presents an examination of the trading patterns of individual firms, looking at their coverage of export markets and movements into and out of destinations. This analysis is made possible by access to a new survey data set of Irish firms, which includes detailed information on firm characteristics and on the destinations of their exports over a 2-year period. In line with Eaton et al. (Am Econ Rev 94:150–154, 2004), we find that a large number of firms serve only the domestic market and many exporting firms export to a single foreign market. Although there is little movement of firms into and out of exporting, firms’ involvement in individual export markets is much more dynamic. Over one-third of firms change their market coverage, usually by entering or exiting one additional market. This is consistent with an interpretation where the bulk of any sunk cost encountered in exporting is incurred during the initial entry to the export market. Subsequent entry to additional markets may be made easier by prior export experience, which could help reduce the sunk cost of extending market coverage.     

Creeping Tiger, Soaring Dragon： India, China and Competition in Information Technologies

Although conventional international economic wisdom holds China's hardware and India's software industries to be equipotential, little attempt has been made to compare their information industries in an overarching dynamic framework. Using a schema that links intellectual to financial value creation, it is found that China has systematically moved ahead in creating a self‐supporting industrial and innovation ecosystem. Hardware enjoys higher barriers to entry, which the Chinese companies are increasingly reinforcing with intellectual property investments. In addition to being better integrated with the global economy, they are also buttressed by the huge domestic market. The overdependence of Indian firms on selling low‐value services to a few countries and insulation from domestic demand make them vulnerable to emerging competition and international economic ill‐winds. The two countries provide a study in contrast on the effects of divergent industrial strategies.     

Short selling and stock prices with regime switching in the absence of market makers: The case of Japan

This paper investigates the relation between short selling and stock price at an aggregated market level. In order to study the differential impact of market microstructure on short selling, the data from Japanese stock markets are used. Both traditional regression and Markov switching models are used to compare Japanese results to those of U.S. and to admit non-stationary relation between short selling and stock price, respectively. Particularly, relatively long period (1978–2002) of analysis including bullish and bearish periods gives a good testable bed for studying the effect of short selling on stock price according to market condition. The empirical findings reveal that percentage change of short interests has a statistically significant positive relation with stock returns. It gives regulators policy implication that short selling is not a destabilizing activity, but an acceptable form of trading even in the absence of market makers. And short selling information cannot be used as an indicator for predicting future stock markets.     

Salesmen and the transformation of selling in Britain and the US in the nineteenth and early twentieth centuries1

Was a ‘transformation of selling’ in the US between the 1880s and 1930 exceptional? Archives of three leading British consumer goods companies reveal that a comparable transformation in selling methods was effected through the changing role for salesmen. Unlike the explanation offered for the transformation in the US, developments in Britain cannot be explained by a structural model in which the dynamics are mass production, size, corporate structure, and strategy. Consumer theory based on product characteristics and consumer behaviour provides a superior explanation. The history of marketing by the British companies also justifies a challenge to the production‐driven interpretation of business development and corporate growth.     

The film business in the United States and Britain during the 1930s1

The film business in the United States and Britain during the 1930s. Film was a most important product in the lives of the people during the 1930s. This article sets out to analyse the underlying economic arrangements of the film industries of the United States and Britain during the decade for producing and diffusing this commodity type to the population at large. It finds a highly competitive industry that was built around showing films that audiences wanted to see, irrespective of the extent of vertical integration. It also examines the nature of the relationship between the two industries and finds an asymmetry between the popularity of British films in the American market and that of American films in the British market. The explanation offered is that the efforts of British firms in the American market were not sufficiently sustained to make a significant impact on American audiences.     

Earnings Management in Response to the Introduction of the Australian Gold Tax*

Earnings from gold mining in Australia remained tax‐exempt for almost seven decades until January 1, 1991. In the early 1980s, rapid economic prosperity induced by escalated gold prices brought the Australian gold‐mining industry under intense political scrutiny. Using a variant of the modified Jones model, this paper provides evidence of significant downward earnings management by Australian gold‐mining firms, which is consistent with their attempts to mitigate political costs during the period from June 1985 to May 1988. In contrast, test of earnings management over a similar period in a control sample of Canadian gold‐mining firms produced insignificant results. Further, empirical results are robust to several sensitivity tests performed. During the period from June 1988 to December 1990, the Australian firms were found to have engaged in economic earnings management. This is consistent with the sample firms' incentive of maximizing economic earnings immediately prior to the introduction of income tax on gold mining. The findings of this study help to understand the impact of earnings management on the efficient resource allocation in an economy. They also contribute toward understanding the linkage between regulation of accounting for special purposes and general‐purpose financial reporting.     

Labour Market Flexibility,Wages and Incomes in Sub‐Saharan Africa in the 1990s

Abstract: This paper provides an overview of how African labour markets have performed in the 1990s. It is argued that the failure of African labour markets to create good paying jobs has resulted in excess labour supply in the form of either open unemployment or a growing self‐employment sector. One explanation for this outcome is a lack of labour market ‘flexibility’ keeping formal sector wages above their equilibrium level and restricting job creation. We identify three attributes of labour market flexibility. First, whether real wages decline over time; secondly, the tendency for wages to adjust in the face of unemployment; and thirdly, the extent of wage differentials between sectors and/or firms of various size. Recent research shows that real wages in Africa during the 1990s may have been more downwardly flexible than previously thought and have been surprisingly responsive to unemployment rates, yet large wage differentials between formal and informal sector firms remain. This third sense of the term ‘inflexibility’ can explain a common factor across diverse African economies — the high income divide between those working in large firms and those not. Those working in the thriving self‐employment sector in Ghana have something in common with the unemployed in South Africa — both have very low income opportunities relative to those in large firms.     

Market power,uncertainty, and the level of trade

We consider a set of home firms, each of which has a stochastic requirement for a particular input. High-cost home firms can produce the input themselves. Low-cost foreign firms produce the input to sell it to home firms through an international market. Efficiency requires the input to be produced by foreign firms and traded in the market. Yet, home firms will always engage in inefficient home production. By producing some of its own input needs, a home firm cuts down on aggregate input demand, thus depressing prices in the market.     

The Market Gardens of Dark Dragon Ridge,New South Wales,Australia, 1876–1930

Long neglected within Eurocentric histories of Australian agriculture, a clearer view of Chinese market gardening in Australia has been emerging over recent decades. As a contribution to this ongoing work, this paper explores Chinese market gardens in Wollongong (known as Dark Dragon Ridge in Chinese), 70 km south of Sydney, between 1876 and 1930. Using a microhistorical framework with an emphasis on business and labour, and guided chiefly by gardeners' own accounts of their activities, I offer new insights into Chinese market gardening. This approach can, I conclude, markedly enhance understanding of this aspect of Australia's past.     

Were British cotton entrepreneurs technologically backward? Firm-level evidence on the adoption of ring spinning

I study the slow adoption of ring spinning in Great Britain's cotton industry at the end of the 19th century, which has been used as evidence of British entrepreneurs' declining efficiency and conservatism (Musson, 1959; Aldcroft, 1964; Lazonick, 1981, 1981b). To this purpose I use firm-level data from all of Lancashire's cotton firms over several years. The data are from Worrall's The Cotton Spinners and Manufacturers' Directory for the years 1885, 1886–1887, 1890, 1894, 1902, and 1910.First, I show that the vertical organization of the industry, with its firms specializing in spinning or weaving, did not act as an impediment to the adoption of the ring spinning technology, as was argued by Lazonick. In particular, I show the following: i) non-integrated firms were the first to adopt rings in Great Britain; ii) the large majority of firms that adopted rings were incumbents; iii) vertically integrated firms that were spinning only either twist or weft yarn were still in existence in 1910; and iv) only a negligible number of firms changed their organizational structure upon adopting ring spinning. I also show that a large fraction of firms installed very small numbers of ring spindles upon the adoption of ring spinning, suggesting that firms were slowly adopting ring spindles to replace old mule spindles rather than transitioning over to ring spinning at a single point in time.Then, I show that the rate at which vertically integrated firms adopted rings suddenly accelerated after 1902. I interpret this as evidence that British entrepreneurs were fully aware of the technological complementarities between rings and automatic looms. These complementarities could only be fully exploited by vertically integrated firms.