Corporate Governance and Shareholder Value Maximization: An African Perspective

Abstract: This study looks at corporate governance and its impact on shareholder value maximization in Africa. Data from South Africa, Ghana, Kenya and Nigeria covering the period 1997–2001 were used and analysis done within the panel data framework. Results show that, though highly dispersed, both within and between firms, corporate boards in the selected countries are relatively not independent. The regression result shows that large board sizes enhance corporate performance and shareholder value maximization. Our study also shows that both sector and country‐specific effects have an impact on shareholder value maximization. While the mining sector is dominant in maximizing shareholder value, it also suffers from higher taxes and interest payments.     

Introduction to Articles on Black Women and Work

Black women are one of the hardest working groups in the country. However, hard work is not always properly rewarded. The existence of wage inequities based on race has been shown to exist (Darity The Journal of Human Resources XVII: 72–91 1982), and black women have not been exempt from its implications. In addition, African American women still experience higher unemployment levels than their white female counterparts. In papers examining black women in the nursing profession, their income and earnings volatility, and inequities in their employment, Richard McGregory, Bradley Hardy, and Linda Loubert provide an overview of where black women stand in the U.S. labor market with respect to work and earnings. While these pieces show that African American women have made significant inroads into the American labor market there is still further to go.     

Allocation of workers over jobs

Summary Labour market supply is assumed to depend on the maximization of worker welfare. Welfare is assumed partly to depend on the ‘tension’ between schooling required by the job and actual schooling. Hence in the allocation of workers over jobs a tendency can be expected to minimize tension. Strict minimization produces a matrixt obtained by Hitchcock's Northwest-corner rule. Recent material due to Rumberger allows an explanation of 69 to 85 per cent of frequency variance. The remaining error term can be explained by the assumption of independence of demand and supply.     

Job displacement and reemployment in North Carolina: The relative experience of the black worker

This article examines the unemployment experiences of workers in North Carolina involved in mass layoffs and plant closings, focusing on the differential impacts between black and white workers. The results of this research not only support earlier findings but also suggest that blacks are laid off in numbers disproportionate to their membership in the labor force. Several different explanations for this result are examined and attempts made to control for several of these factors, such as industry and occupational differences. However, even after controlling for such factors, evidence of differential treatment continues to persist. The authors wish to thank William Darity, Jr., for his helpful comments throughout the project and also to acknowledge the helpful suggestions of several anonymous referees.     

The methodology of profit maximization: An Austrian alternative

Conclusion While the MR=MC profit-maximizing model that is used almost religiously by the economics profession has been challenged over the years, it still remains the dominant model to explain firm behavior. However, its popularity does not mean that the model accurately describes what actually occurs in firm decision making. Given that modern mainstream neoclassical economists have failed (through omission or commission) to examine their models through the lens of time, they have lost that component that presents accuracy and enrichment to their arguments. This paper has incorporated challenges to the dominant neoclassical model that were fashioned by Rothbard and, to a much lesser extent, Baumol. In examining the work of both economists, we conclude that the Rothbard model is more complete, as it factors time into the model, where Baumol’s does not, which renders it fatally incomplete. Both authors, however, make a solid point that if one is to analyze the workings of the firm in the real world, other models such as revenue maximization must be taken into account if we are to assume that firms attempt to maximize profits. To be sure, there is much work to be done in the creation of alternative theories of the firm. Klein and others have attempted to build upon the work of Mises and Rothbard to construct a theory of the firm that can stand up to intellectual scrutiny and explain the various aspects of the decision making process within the firm. We attempt through this paper to add to this alternative theoretical construct.     

Household Choice of Drinking–Water Source in the Philippines

The present paper analyzes household choice of drinking–water source for 769 rural households in metropolitan Cebu, Philippines. The study aims to analyze the effects of input prices, tastes and household size on the choice probabilities. For the empirical analysis, a discrete–choice approach is employed, consistent with utility maximization. The findings indicate that the time cost is an important determinant of household choice of drinking–water source and, surprisingly, that taste, proxied by income, has ambiguous effects on household choice. The present study is contrasted to an earlier study in which inconsistency with utility maximization cannot be ruled out.     

Dynamic Portfolio Adjustment and Capital Controls: A Euler Equation Approach

We present a multiasset dynamic portfolio balance model that is based on the maximization of an intertemporal utility function in consumption when investors operate under uncertainty, quadratic adjustment costs, and capital market regulations. We estimate the model's structural parameters on quarterly portfolio data of the German private sector. Asset demand is insensitive to return changes, although the coefficients are significant. Adjustment costs are low but highly significant, giving rise to moderate lags of adjustment. Still, existing capital controls and adjustment costs cannot explain the currently observed “home bias” in the portfolio. Overall, our results imply a strong rejection of the portfolio model.     

Het duopoliemodel van van der weel

Summary In a recent article in this journal (1970, pp. 458–490) Van der Weel has developed a duopoly model founded on the thesis that the reaction functions of the duopolists can be derived from the profit maximization hypothesis and that, therefore, the set of equilibrium prices is determined endogeneously. The authors argue that this conception is not justified and that both the static and dynamic versions of the model are based on a reaction pattern in the sense of Launhardt.     

领导任职期限设置的经济解释--激励与效率损失的权衡

领导任职期限制度能激励个人在管理技能培养上进行投入,这有利于增加社会总剩余;然而,任职期限制度在提供激励的同时,也造成了潜在效率的损失。领导任职期限的设置是这二者之间权衡的结果。本文通过一个两阶段博弈的分析框架,利用动态的局部均衡权衡模型,从个人收益最大化和社会总剩余最大化的相互作用中,推导出了社会最优的领导任职期限。在我们的动态的局部均衡权衡模型中,个人投入水平是任职期限制度的内生产物。     

A labor force competition model of racial discrimination in the labor market

Conclusion This paper has developed a model of discrimination based on the standard maximization hypotheses. This model assumes an imperfectly competitive labor market. In particular, net differences in the benefits of jobs are not competed away, and labor market coalitions of workers exist. As we have indicated, the model is able to explain the major phenomena associated with labor market discrimination.     

Proxy variable estimation of productivity and efficiency

We model productivity and inefficiency jointly, instead of modeling and estimating either only productivity or only inefficiency with many variable and quasi-fixed inputs. In the first model, we use a multi-step procedure. We use the proxy variable method based on the first-order condition (FOC) of expected profit maximization with respect to the single variable input to take care of the endogeneity problem arising from both productivity and inefficiency. To separate mean inefficiency from mean productivity we assume them nonparametric functions of different sets of exogenous variables. In the second model, we consider a novel system consisting of the production function and the FOCs of expected profit maximization for the multiple variable inputs. Distributional assumptions are made on all the random errors associated with the production function, the FOCs, productivity, and inefficiency functions in the second model. We use the Colombian food manufacturing data as an application of our model.     

Formally modeling a gender-segregated economy: A reply to Campbell and Warner

Campbell and Warner contend that there are two major problems with my presentation of a formal structure for analysis of a gender-segregated low-income economy in an earlier issue of this journal. Their first argument that there is no explicit treatment of women negotiating their wage is unimportant. Their second argument is correct; my construction of the male's decision-making process is underspecified, precluding an internal maximization solution. Two options for formalization are advanced that make an internal maximization solution feasible.     

碳排放权初始分配方式设定的探究

环境效益的实现与碳排放权交易的顺利展开,首要解决的一个问题是初始排放权分配方式的合理设定。通过设定一个基于总量控制的＂祖父式＂分配模型,运用一般均衡分析方法,找出在开放与封闭交易体系中同时满足社会和企业利益最大化的最优均衡条件,得出结论,在开放和封闭体系中,使用企业历史产出作为参照因子永远不是最优的,使用企业历史排放量作为因子只在封闭经济中一些限制条件较强的情况下可达到最优,而使用与企业产出、排放无关的外生因子在开放与封闭体系中均可达到社会最优均衡。     

PROFIT MAXIMIZATION: ECONOMICS' ZOMBIE CONCEPT

In the March 1969 issue of this journal Professor Rädel asked the question “Profit Maximization—Can It Be Justified?”¹ The professor would appear to answer his question in the affirmative although with some reservations. The statement “would appear” is necessary because Rädel's argument does not lead to any clear, unique, answer. Since the author believes that profit maximization cannot be justified a note on Rädel's article is in order. Not being able to provide an alternative theory the author will merely attempt to demonstrate that Rädel's arguments are not valid. This seems to be potentially fruitful as Rädel considers many of the more important justifications for profit maximization.     

Financial Development, Economic Growth and Adaptive Efficiency： A Comparison between China and Pakistan

The strong economic growth in China is difficult to reconcile with its inefficient financial system. The puzzle of China＇s financial development and growth can be explained through a dynamic criterion of adaptive efficiency, rather than through allocative efficiency. Using the framework of an autoregressive distributed lag model, the present paper tests the hypothesis that the GDP growth rate is dependent on financial development along with other variables in China and Pakistan. The hypothesis cannot be rejected in both cases. However, the results show that economic growth has a negative relationship with credit to the private sector in China. We conclude that financial development is a source of China＇s high growth rate and that the banking system is still under an evolutionary process, involving the pursuit of social objectives instead of the sole objective of profit maximization. Our results provide some implications for other developing countries like Pakistan.     

Historical Amnesia: The Humphrey-Hawkins Act, Full Employment and Employment as a Right*

Economist William A. Darity has proposed a federal job guarantee with decent wages for all job seekers, an idea with deep, but largely forgotten, roots in US history.The article briefly explores some New Deal job-creation efforts and President Franklin Roosevelt??s proposal for an Economic Bill of Rights. It then focuses on two major attempts to secure full employment through legislation. The Full Employment Bill of 1945 was defeated; the compromise, the Employment Act of 1946 did not have full employment as its goal. After years of struggle, a much-weakened Humphrey-Hawkins Full Employment and Balanced Growth Act of 1978 passed, but then was violated and virtually ignored. Full employment shifts power from capital to labor, so major opposition can be expected from efforts to obtain it. Proponents need more power and a strong movement, including at the grassroots level, pushing for jobs for all--not just jobs for me or my group. Publicizing the benefits of past job programs and reintroducing the idea of a decent-paying job as a right are suggested, as well as making decent jobs for all the center of economic policy. This requires a fundamental break with neoliberalism and reallocating political power away from big business and Wall Street toward middle and working-class people and the working- and non-working poor.     

Choice of flexible production technologies under strategic delegation

This paper analyzes a managerial delegation model in which firms can choose between a flexible production technology which allows them to produce two different products and a dedicated production technology which limits production to only one product. We analyze whether the incentives to adopt the flexible technology are smaller or greater in a managerial delegation model than under strict profit maximization. We obtain that the asymmetric equilibrium in which only one firm adopts the flexible technology can be sustained under strategic delegation but not under strict profit maximization when products are substitutes. We extend the analysis to consider welfare implications.     

Notes and Communications

This paper presents a simple, explicit formula for setting the optimal VAT exemption threshold that depends on only six parameters: (1) the administrative and compliance costs, (2) the VAT rate, (3) the value-added coefficient, (4) the elasticity of substitution in consumption, (5) the value of government expenditure financed by the VAT revenue, and (6) the VAT/GDP ratio. The formula is derived from an articulated model of utility and profit maximization, and is shown to be capable of yielding reasonable results based on plausible parameter values.     

Political fragmentation,competition, and investment decisions: the medieval grinding industry in Ponthieu,France, 1150–1250

This article explores the effects of political structure on rulers' monopolistic gains and investment decisions in the context of the medieval milling industry in northern France, 1150–1250. Using Salop's spatial model, this article aims to show that political fragmentation increased investment in watermill construction because it reduced the capacity of rulers to limit competition from neighbouring mills. The calculations demonstrate that competition significantly reduced rulers' income from watermills and that the construction of more than 50 per cent of these mills cannot be economically ‘justified’ unless rulers' profit maximization over joint production is considered, and revenues from additional labour allocated to wheat production is included.     

Deregulation, Integration, and Market Structure in European Banking

This paper analyzes the impact of deregulation and market integration policies on the structure of European banking markets. It argues that whether European integration will lead to large increases in EU-wide concentration will depend on the extent to which competition in banking is based on endogenous sunk costs or, alternatively, on variable costs and exogenous sunk costs. The paper also highlights the role of own funds as a source of endogenous increasing returns. Finally, it proposes an empirical test of the dominant form of competition. This procedure is applied to data for 11 EU countries during the period 1981–1995. J. Japan. Int. Econ., Dec. 1999, 13(4), pp. 372–396. IESE (International Graduate School of Management), University of Navarra, Av. Pearson 21, 08034 Barcelona, Spain. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: G20, G21.