The Commercial Valuation of Danubius A Study of the Privatization Process in Hungary

As former East Bloc countries attempt to move from state-controlled to market economies they are privatizing their economic enterprises in large numbers. Privatization generally requires the valuation of erstwhile government-owned assets. This has definite accounting and financial reporting implications particularly if the business entity hopes to attract capital from abroad. Foreign investors are likely to insist on financial information in a form that meets internationally acceptable norms before they provide capital to these businesses. This article looks at the case of a Hungarian company that has privatized recently. It describes the process from the managers' initial decision to 'go public' to the final issuance of the shares. It highlights certain practices that, while unusual by Western standards, are important components of the privatization process in Hungary. The Hungarian experience is of particular interest to other former East Bloc countries since Hungary is several years ahead of them on the road to privatization. Lessons learned from the Hungarian experience could assist them better manage their privatization programs. It provides financial managers and academics useful insights into the innovative vehicles for going public that are being developed by countries that have traditionally been perceived as being backward in their accounting and finance practices.     

The optimal timing of initial public offerings in the course of privatization: Theory and an illustrative application

Privatization has been studied primarily from the standpoint of the post-privatization performance of state-owned firms (SOEs) or of various ways of valuing and privatizing them, but little attention has been paid to the timing of privatization. In this paper we use real options analysis to consider a situation where the government has the option to delay a planned privatization in the expectation that exogenous events may make the firm more valuable to outside investors in the future. In addition to considering the theoretical aspects of the problem, we apply our model to Taiwan's privatization program to add to the understanding of the role of option value in an actual privatization program. Our results suggest that the (mis)timing of privatization represents significant losses for the government and for investors.     

Disclosure Strategies and Cost of Capital

Theoretically, companies disclosing more voluntary information will benefit from a lower cost of capital, although empirical research provides inconclusive results. Our study aims to analyze the influence of the disclosure of forward‐looking information on the cost of capital, because this information is extremely useful for investors. Results show that only specific information on actions, programs, decisions, and/or quantitative financial information helps toward the reduction of cost of capital. This evidence has direct economic implications, because it enables regulators and managers to focus on those disclosure strategies that are effective in the reduction of cost of capital. Copyright © 2012 John Wiley & Sons, Ltd.     

Corporate Social Responsibility and Social Entrepreneurship

Milton Friedman argued that the social responsibility of firms is to maximize profits. This paper examines this argument for the economic environment envisioned by Friedman in which citizens can personally give to social causes and can invest in profit‐maximizing firms and firms that give a portion of their profits to social causes. Citizens obtain social satisfaction from corporate social giving, but corporate giving may not be a perfect substitute for personal giving. The paper presents a theory of corporate social responsibility (CSR) and shows that CSR is costly when it is an imperfect substitute. When investors anticipate the CSR, shareholders do not bear its cost. Instead, the entrepreneurs who form the CSR firms bear the cost. Shareholders bear the cost of CSR only when it is a surprise, and it is to such surprises that Friedman objects. A social entrepreneur is willing to form a CSR firm at a financial loss because either doing so expands the opportunity sets of citizens in consumption‐social giving space or there is an entrepreneurial warm glow from forming the firm. Firms can also undertake strategic CSR activities that increase profits, and a social entrepreneur carries strategic CSR beyond profit maximization and market value maximization. The paper also examines the implications of taxes and the effect of the market for control for the sustainability of CSR.     

Shareholder Heterogeneity and Conflicting Goals: Strategic Investments in the Japanese Electronics Industry

This article investigates the effects of the changing institutional environment on strategic orientations of Japanese electronics firms during the 1990s. We examine the effects of three different types of shareholders on strategic directions of their invested firms. The first one, foreign portfolio investors, characterizes the emerging influence that pressed for change in corporate strategies. The two domestic shareholders, corporate investors and financial institutions, represent the conventional forces for continuity. Between the two domestic forces, though, while corporate investors attempted to maintain status quo, financial institutions have shifted towards market‐oriented behaviour of investment. Specifically, we explore: (1) the influence of each type of shareholder on a firm's diversification strategy and capital commitment; and (2) the moderating effects of firm performance on the relationships between ownership structure and strategic choices. The results suggest that foreign investors prefer the focused product portfolio and conservative capital commitment. They also prefer the reduction of capital investment when the financial performance of their invested firms is poor. Domestic financial institutions are now similarly sensitive to the performance of their invested firms when those firms make strategic investments. By contrast, domestic corporate shareholders remain indifferent to performance, while they aim to maintain relational business ties with invested firms.     

The Employment Effects of Privatizing Public Utilities in OECD Countries

This article examines whether the privatization of network-based utilities in developed countries leads to a retrenchment of the workforce. The panel regressions reveal, first, privatization does indeed lead to a reduction in the number of employees in the sectors concerned. Second, it is not typically the new investors themselves who implement the reduction. The downsizing takes place while the state is still the unique shareholder. Third, even though left-wing parties also implement privatization or at least not hamper, the results show that the displacement of workers is lower when left-wing parties dominate the cabinet.     

A survey of enterprise reforms in China: The way forward

The strategic importance of the state-owned enterprise (SOE) sector to the Chinese economy cannot be underestimated, thus the success of SOE reform is a significant factor in China's future economic prosperity. The dilemma facing state authorities is to develop market-orientated corporations while at the same time coping with potentially high unemployment and a range of equity and social justice issues. This paper presents an analysis of the current issues in SOE reform in China, drawing on relevant empirical evidence, and proposes a strategic direction and a framework for reform that challenges the recently announced program of privatization of listed SOEs. The literature indicates that state ownership is generally negatively correlated to performance. Conversely, Legal Person ownership positively influences performance. Other forms of private ownership are generally positively correlated to performance, with institutional ownership showing significant promise. Consequently, the divesture of state ownership is recommended and could be accomplished over three or four tranches. The state could divest its ownership by auction to strategic investors, both domestic and foreign, and in the next tranche an auction to the broad populace through units in mutual funds. The final proposed tranche being a distribution to nationwide pension funds to support retirement schemes, which should be made nationwide. Finally, listed firms should also issue shares as rights issues to offer present shareholders protection from dilution.     

Strategic participation and the median voter result

In a seminal paper on electoral equilibrium under majority rule, Ledyard (1984) demonstrates that strategic participation by voters results in an electoral equilibrium at the proposal that maximizes the utility of a randomly selected voter. Palfrey and Rosenthal (1985) limit the usefulness of this result by showing that strategic participation rates are miniscule in large electorates, and that the incentive to participate vanishes completely as the electorate grows without bound. The most reasonable modification of Ledyard’s approach that circumvents these criticisms is to allow for a negative cost of voting. We show that when voters can have even an arbitrarily small negative cost of voting, there is an electorate sufficiently large so that any proposal is defeated or tied by the median proposal. This observation raises questions about the existence of electoral equilibrium under strategic participation, and is relevant to the efficiency of elections.     

Institutional investors' attention to environmental information,trading strategies,and market impacts: Evidence from China

Using a large proprietary database of intraday high‐frequency trading, we investigate the trading strategies of institutional investors in dealing with the negative environmental event disclosure of listed companies and their impact on markets, aiming to reveal the mechanism of the lack of “green efficiency” in China's capital market from the perspective of institutional investors. The results show that institutional investors react to negative environmental events prior to the announcements, indicating premature information leakage in the market; in addition, their trading behaviors mitigate the immediate effect of negative environmental event announcements on stock price. After the event is disclosed, institutional investors engage in short‐term selling and long‐term buy and hold. This trading strategy undermines the irrational selling of individual investors in the event of disclosure, short‐term decline in stock price, and long‐term reversal of market overreaction. In a China context, institutional investors generally take environmental information into consideration. However, they fail to recognize the long‐term value effect of negative environmental events and instead cater to trading strategies towards market volatility.     

当前中资银行海外扩张的动因分析

在经济全球化、金融一体化趋势下,中资银行经过股份制改造、引入战略投资者、上市的"三部曲"后,国际化的渴望不断增强,逐步加速了海外扩张的步伐。文章以近年中资银行海外扩张数据为依据,指出了中资银行海外扩张的特点,从多方面分析了当前中资银行海外扩张的动因。     

Examining the behavior of renewable‐energy fund investors

Mutual fund investors could contribute to sustainable development by encouraging fund managers to channel their savings into the funding of sustainable energy projects adopted by firms. This study examines whether renewable‐energy investors take into account financial and/or nonfinancial factors when making the decision to invest in a specific fund, comparing their investment behavior with that of black‐energy and conventional investors. To this end, we have gathered information about 4,368 mutual funds (76 renewable‐energy funds, 109 black‐energy funds, and 4,183 conventional mutual funds) from January 2007 to December 2017. For this sample, we adopt a panel‐data approach with Petersen's standard errors clustered by fund and year. Our results indicate that renewable‐energy fund investors are less sensitive to past financial performance than are black‐energy and conventional fund investors, indicating that the former derive their utility from nonfinancial attributes whereas black‐energy investors derive their utility from a conditional multiattribute and conventional fund investors derive their utility from financial attributes.     

The ‘reach’ of employee participation in decision‐making: exploring the Aristotelian roots of workplace democracy

This article examines the ‘reach’, or the distribution, of employee participation in decision‐making (PDM) within organisations. It makes a unique contribution to the wider employee voice literature by asking what types of employees have a ‘say’ in strategic decision‐making and, in similar vein, what types of employees are denied participation, and why. In order to answer this under‐investigated research question, the article presents an Aristotelian analysis of the concept of citizenship in the ‘best regime’. In the light of this analysis, the article concludes that some groups of employees are excluded from PDM on the basis of a perceived lack of ‘excellence’.     

Influence of institutional investors' participation on flipping activity of Malaysian IPOs

This paper examines the influence of institutional investors’ participation on flipping activity of Malaysian IPOs. Measured as the percentage of trading volume on the first trading day against the total number of shares offered, flipping is the quickest way to gain huge profits from IPOs. However, excessive flipping activity has significant potential to create artificial downward pressure on the price of IPOs. One way to reduce such an adverse effect is by strategically allocating a larger proportion of new shares to institutional investors. This is because institutional investors are normally assumed to be long-term investors. As such, they are less likely to flip their allocated IPOs in the immediate aftermarket. The long-term investment argument is consistent with institutional investors’ preference for a steady income stream in the form of dividends. Drawing upon this argument, the greater participation of institutional investors during an IPO is expected to be an effective strategy to control aggressive flipping activity. The Malaysian IPO market offers an excellent opportunity to examine this hypothesis because data regarding the allocation of new shares to institutional investors can be traced conveniently through a type of IPO referred to as “private placement”. Based upon an examination of 248 IPOs listed on Bursa Malaysia between January 2000 and December 2012, this study finds a negative relationship between institutional investors’ participation and flipping activity. This result lends strong support to the argument concerning the effectiveness of institutional investors’ participation in controlling flipping activity in the Malaysian IPO market.     

Dynamics of clustered opinions in complex networks

A simple model for simulating tug of war game as varying the player number in a team is discussed to identify the slow pace of fast change. This model shows that a large number of information sources leads slow change for the system. Also, we introduce an opinion diffusion model including the effect of a high degree of clustering. This model shows that the de facto standard and lock-in effect, well-known phenomena in economics and business management, can be explained by the network clusters.     

Environmental R&D and privatization in a mixed duopoly market

The study examines strategic environmental research and development (ER&D) under environmental tax in a mixed duopoly and further analyzes the impact of privatization on it. We show that the environmental tax may not necessarily promote the private (or public) firm's ER&D, and the relative ER&D performance between firms depends on the public firm's environmental attitudes and the tax rate. When the public firm cares much for environment, it can be used as an instrument to correct the private firm's underinvestment (or overinvestment) in ER&D. Moreover, privatization can (cannot) raise both firms' ER&D simultaneously if the tax rate is high (low).     

Corporate engagement in processes for planetary sustainability: understanding corporate capacity in the non‐renewable resource extractive sector,Australia

In recent years corporations have come under increasing pressure from governments, consumers, investors, competitors, business partners and communities to balance their pursuit of economic gain with environmental and social concerns. Non‐renewable resource extractive corporations in particular, due to their profile, visibility and activities, have come under mounting pressure to embed the concept of ecological sustainability into strategic decision‐making processes and operations. In this regard, there is a growing base of evidence that describes efforts, successes and failures in the sector to meet mounting societal expectations. However, to date there has been limited explanatory research into corporate capacity to engage in processes for ecological sustainability. This paper presents an emergent explanation of the internal factors mediating corporate engagement in ecological sustainability in non‐renewable resource extractive corporations in Australia. It identifies the five factors of leadership, resources, structures, culture and understanding and conceptualizes these internal factors as capacity for engagement. While all of the factors are seen as interdependent and essential, leadership is identified as the most critical. Copyright © 2005 John Wiley & Sons, Ltd and ERP Environment.     

Foreign Equity Ownership and Information Asymmetry: Evidence from Japan

Using a large sample of Japanese firms, we investigate whether the level of foreign ownership in a firm is inversely related to information asymmetry between firm (managers) and market (outside investors). Since information asymmetry is not directly observable and, thus, is difficult to measure empirically, our analysis focuses on the link between foreign shareholding and a measurable consequence of information asymmetry; that is, the timing and magnitude of intertemporal return‐earnings associations. The empirical results support our hypothesis, and subsequent tests based on residual foreign ownership show that the relation between foreign ownership and information asymmetry is robust to the addition of various control variables such as market capitalization and cross‐corporate holdings. We also show that foreign investors tend to avoid stocks with high cross‐corporate holdings. Overall, our results suggest that foreign (institutional) investors are likely to be efficient processors of public information and are attracted to Japanese firms with low information asymmetry.     

Privatization,Financialization and State Restructuring in Eastern Germany: The case of Am südpark

Using a mix of survey data, results from a study on local planning politics and fieldwork, this article discusses the interplay of planning and welfare policies with global financial markets in the ‘making’ of social segregation in Halle‐Neustadt, a borough in the German city of Halle (Saale). Here, different developments come together. First, Halle‐Neustadt has experienced two waves of privatization, leading to a complete change of ownership structures, marked by the rise of financial investors. Second, welfare cuts have put increasing pressure on welfare recipients to live in the cheapest housing available. This has led to the emergence of a ‘Hartz IV business model’ based on low, but state‐subsidized, rents. Third, new planning policies have led to a massive drop in house prices, thus facilitating the use of ‘leverage’ strategies for financial investors. We expand on an already developed debate, providing new insights about relations between planning, state restructuring and financialization in a German context. We demonstrate that a broad array of changes in national regulatory settings, policy change in different sectors and local particularities can all be crucial in enabling financialization. We conclude that research should place greater emphasis on the state in providing explanations and take differences in context more seriously.     

Impacts of Privatization of Customary Land Rights in Zambia: A Comparative Study of Rural and Peri‐urban Locations

In its quest for development, Zambia is pursuing a land policy that facilitates privatization of customary land. This article investigates the effects of privatization in terms of how it shapes people's behaviour and perception of private tenure and related tenure dynamics. Findings have shown that the appetite to privatize land is growing stronger in peri‐urban areas as land becomes more scarce. Furthermore, privatization of land appears to be a threat to traditional political structures as allegiance and loyalty towards chiefs diminish and tension and struggles over land in peri‐urban areas increase. Similarly, privatization of land erodes people's faith in the role that cultural and ancestral beliefs play in traditional land management. Also, people in rural areas tend to favour private tenure more if ‘privatization of customary land’ means allocation of land to outsiders. If, by contrast, the phrase is taken to mean communities registering their own land, peri‐urban communities tend to have a stronger desire to register land. Furthermore, rural communities were found to be less informed about land policy and seemed less keen to be involved in land policy processes when compared to peri‐urban residents. However, rural people may have no reason to inform themselves about land policy until they realise that the policy is likely to affect them.     

The Evolution Trajectories of Voucher Funds: Towards Western-type Institutional Investors? The Case of the Czech Republic and Bulgaria

The implementation of similar mass privatization programs in the Czech Republic and Bulgaria led to the emergence of hybrid voucher funds. The contradictions stemming from this hybrid nature gave rise to the evolution of the funds' nature and of their place in the national ownership structure. The dynamics of this evolution is apprehended through a comparative study of the portfolios of a sample of funds between 1998 and 2000. We show how the interaction between the strategies of economic actors have shaped two transformation paths of the initial funds: holding companies on one hand and more ordinary collective investment vehicles on the other, the Czech and Bulgarian evolutions being divergent. We also discuss to what a degree these mutations bring these funds closer to Western-type institutional investors, showing that there is some convergence, but also the emergence of original forms.