Banking efficiency and stock market performance: an analysis of listed Indonesian banks

The main purpose of this paper is to examine the monthly profit-based technical efficiency and productivity of listed Indonesian banks and their market performance. We examined the banks through the prism of two modelling techniques, efficiency and super-efficiency, over the period January 2003 to end-July 2007. Within this research strategy we employed Tone??s (2001) non-parametric, Slacks-Based Model (SBM) and Tone??s (2002) super-efficiency SBM to estimate the bank efficiencies. They were then combined with recent bootstrapping techniques, namely the non-parametric truncated regression analysis suggested by Simar and Wilson (2007), to identify the determinants of the efficiency scores. With respect to the latter, in the case of the SBM efficiency scores, the Simar and Wilson methodology was adapted to two truncations, whereas in the super-efficiency framework the original technique was utilised. The first part of the analysis reveals that listed banks?? average efficiencies varied widely over the sample period, from a low of 34% to a high of 97%, with only one bank having a score in excess of unity under the super-efficiency framework. The two most efficient banks were domestically owned. With respect to the truncated regression analysis, we found that the banks?? efficiency scores were positively correlated with share prices and return on equity in all models, and with the log of total assets in the super-efficiency analysis. Moreover, it was found that the JCI index of the Indonesian Stock Exchange is positively related to bank efficiency in all models. Another interesting finding is that the coefficient for the share of foreign ownership is negative and statistically significant in the super-efficiency modelling. This suggests that Indonesian banks with foreign ownership tend to be less efficient than their domestic counterparts. Finally, Malmquist productivity results suggest that, over the study??s horizon, the sample banks displayed volatile productivity patterns in their profit-generating operations.     

A nonparametric test for path dependence in discrete panel data

This paper proposes a test for path dependence in discrete panel data based on a characterization of stochastic processes that are mixtures of Markov chains. This test is applied to European Community Household Panel data on employment histories. The data allow to reject the null of no path dependence in all subsamples considered.     

Assessing the stochastic stability of public debt: the case of Austria

This paper characterizes the long-run distribution of Austrian public debt using a Markov chain model of the debt-GDP ratio and several key macroeconomic variables. We apply Bayesian techniques to estimate the transition probabilities of the model which allows to incorporate information from other countries. Based on the model, we argue that the historical record of Austrian fiscal policy is consistent with a stable long-run distribution of the debt-GDP ratio with an expected value close to the 60% threshold of the Maastricht treaty. Our results suggests that the strong increase in the debt-GDP ratio in the aftermath of the recent financial crisis should be seen as a transitory tail event rather than as a sign of long-run unsustainability. However, we also show that the existence of a stable long-run distribution depends on a continuing tendency of fiscal policy to “lean against debt” by reducing the primary deficit in face of rising debt. Finally we assess how exogenous shocks to the primary deficit and real GDP growth affect the model-implied distribution.     

Kinderfreibeträge in der gesetzlichen Rentenversicherung

The future of the German pay as you go public pension system is dependent on families with children. In contrast to German tax law, there are no child allowances in the social insurance system. As a result, workers with and without children pay the same pension insurance contributions. This article analyses the introduction of a child allowance into the public pension system in Germany. We quantify the fiscal, distributional and behavioural effects of such a reform.     

Risk capital allocation for RORAC optimization

This paper considers the financial optimization problem of a firm with several sub-businesses striving for its optimal RORAC. An insightful example shows that the implementation of classical gradient capital allocation can be suboptimal if division managers are allowed to venture into all business whose marginal RORAC exceeds the firm’s RORAC. The marginal RORAC requirements are refined by adding a risk correction term that takes into account the interdependencies of the risks of different lines of business. It is shown that under certain stationarity conditions this approach can guarantee that the optimal RORAC will eventually be achieved.     

A Long‐Run Performance Perspective on the Technology Bubble

The events surrounding the stock price peak of March 2000 are commonly interpreted as the bursting of a technology or Internet bubble, with some researchers pointing out that the pattern could also arise in fundamental models. We inform the debate by studying the long‐run performance of Internet and technology stocks from March 2000 onward. Using calendar‐time regressions, we do not find conclusive evidence of negative abnormal returns. The results are consistent with a new interpretation of the events; namely, the price drop of the early 2000s was not warranted in light of future cash flows and risk.     

Value Orientation in Process Management

There is no doubt that at least since the 1990s process orientation has evolved into one of the central paradigms of organizational design. Since then, all process management subtasks have matured. Process management decisions, however, lack economic foundation. They are usually based on qualitative or technical criteria or on plausibility considerations that do not necessarily comply with typical objectives in a market economy. Consequently, design alternatives are hardly comparable and an integrated valuation of a company’s assets is impossible. The status quo is astonishing for several reasons: First, process management decisions usually imply investment projects with different risk/return positions and capital tie-up. Second, the need for designing processes according to their contribution to corporate objectives has been explicated repeatedly. Third, the paradigm of value-based management is an accepted theoretical framework from economic research that enables to consistently valuate the risk/return effects of decisions across functional areas, hierarchy levels, and asset classes. This suggests the hypothesis that process management in general as well as the goal orientation of process management decisions in particular have evolved almost independently of value-based management. In the paper at hand, this hypothesis is confirmed based on a sample of process management publications. We therefore explicate the research gap as regards value orientation in process management. In order to bridge the gap between value-based management and process-oriented organizational design, we transfer economically well-founded objective functions to process management decisions.