Measurement of Dynamic Efficiency in Production: An Application of Data Envelopment Analysis to Japanese Electric Utilities

The purpose of this paper is to measure productive efficiencies when a firm employs quasi-fixed inputs that cannot be instantaneously adjusted to their optimal levels. To this end, data envelopment analysis (DEA) is extended to a dynamic framework so that investment behavior can be modelled with the efficient production frontier. Based on the work of Nemoto and Goto (1999), we show how the efficiencies of quasi-fixed inputs and their adjustment processes are evaluated. An application to Japanese electric utilities over the 1981–1995 period delivers empirically plausible results and proves the usefulness of the procedure.     

Budget balances in OECD countries: what makes them change?

Fiscal balances have deteriorated quickly in recent years, bringing back to the foreground the question what factors explain such sharp changes. This paper takes a broad perspective at the issue regarding countries included, the range of potential explanatory variables, and the time-span covered. The empirical analysis shows that changes in budget balances are affected by debt growth, macroeconomic developments and political factors. In particular, we find that the run-up to EMU induced additional consolidation in Europe and that budget balances deteriorate markedly in election years. Asset prices also affect budgets, but the impact remains limited in normal times.      

IS THE COST OF DEBT CAPITAL HIGHER FOR YOUNGER FIRMS?

Not much is known about the returns to aging (maturing) in the market for small business finance. Using a large panel of closely held micro firms, we document that the cost of debt capital is higher for young firms. The main finding of this paper is that this negative qualitative relation is also obtained when cross‐sectional variation in unobservable creditworthiness of small businesses and within‐firm (i.e., inter‐temporal) variation in their observable creditworthiness are held constant. We control for the former by firm‐specific fixed effects and for the latter by a commercial credit score. We also provide an estimate of the quantitative magnitude of the aging effect, on which both economic theory and earlier empirical research are silent. We find that when a small business ages one year, its cost of debt capital decreases by 1–2 basis points. The effect is neither negligible nor alarmingly large.     

More educated,more mobile? Evidence from post-secondary education reform

More educated, more mobile? Evidence from post-secondary education reform. Spatial Economic Analysis. This paper examines the causal impact of the level of education on within-country migration. To account for biases resulting from selection into post-secondary education, it uses a large-scale reform within the higher education system that gradually transformed former vocational colleges into polytechnics in Finland in the 1990s. This reform created quasi-exogenous variation in the supply of higher education over time and across regions. The results based on multinomial treatment effects models and population register data show that, overall, polytechnic graduates have a significantly higher probability of migrating than vocational college graduates, although the estimates vary, for example, by gender, field of study and region.     

Time-varying global and local sources of market and currency risks in Russian stock market

In this paper we study international asset pricing models and the pricing of global and local market risks as well as currency risk in the Russian stock market from an international investors' point of view using weekly data from 1999 to 2009. In our empirical specification, we utilize the multivariate GARCH-M framework of De Santis and Gérard (1998). We find currency risk to be priced in the Russian market. The price of currency risk is found to be time-varying and affected for example by the price of oil. Moreover, our results suggest that the Russian market is partially segmented and the local market risk is priced in the market. Our model implies in-sample risk premium for the Russian equity market that is, on average, almost ten times higher than that of the US and that the Russian risk premium is on average caused mostly by the local and currency risk components.     

World capital markets and Finnish stock returns

The paper explores issues related to time-varying global equity market integration from a Finnish perspective. Finland is an interesting market since profound economic changes and financial deregulation have taken place since the mid-1980s. Using Finnish firm size ranked portfolios and a conditional four-factor asset pricing model, several restrictions on asset behaviour are examined. It is found that a proxy for changing market integration — lagged foreign equity ownership — has a significant impact on the relative importance of local and global risk factors. Significant differences are found between the pricing of shares that were freely-available to all (unrestricted shares) and domestic investors only (restricted shares). Results also suggest that major capital market reforms profoundly affect the degree of market integration, but local risk factors do not become redundant.     

When Do Employees Leave Their Job for Entrepreneurship?*

Existing firms are argued to be an important source of new entrepreneurs. Yet, relatively little is known about the characteristics of firms that breed new entrepreneurs. We use a large linked employee–employer dataset to trace and characterize the types of firms which generate new entrepreneurs in Finland. We find that such transitions are rare and that smaller firms spawn new entrepreneurs more frequently than larger firms. We also find that firms' R&D intensity and, to a lesser extent, their productivity are negatively related to the probability that employees transit into entrepreneurship. These results are robust to controlling for a number of employee and employer attributes.     

Corporate ownership and managerial short-termism: Results from a Finnish study of management perceptions

Increased media exposure to layoffs and corporate quarterly financial reporting have created arguable a common perception—especially favored by the media itself—that the companies have been forced to improve their financial performance from quarter to quarter. Academically, the relevant question is whether companies themselves feel that they are exposed to short-term pressure to perform even if it means that they have to compromise company's long-term future. This paper studies this issue using results from a survey conducted among the 500 largest companies in Finland. The results indicate that companies in general feel moderate short-term pressure, with reasonable dispersion across firms. There seems to be a link between the degree of pressure felt, and the firm's ownership structure, i.e. we find some support for the existence of potentially short-term versus long-term owners. We also find significant ownership related differences, in line with expectations, in how such short-term pressure is reflected in actual decision variables such as the investment criteria used.     

A relationship value perspective of social capital in networks of software SMEs

Utilizing theories on social capital, business networks, social networks and relationship value, we explore the aspects that provide specific value in relationships with different actors in the software industry. The motive for the study is the assumption that some relationships are regarded as more important than others, and companies strive to focus on fewer relationships with greater outcomes. The study is guided by the premise that social capital is a foundation for relationship value, and its identified elements differ among relationships. We take the perspective of software companies and classify their relationships with business partners into three distinctive types according to their function in the value creation process. The findings of our empirical analysis, based on a qualitative case study of eight software SMEs indicate that the aspects of social capital, like the sources of relationship value, vary systematically by the types of relationships. Thus, we are able to provide some theoretical and managerial implications on the management of small- and medium-sized companies.     

Sources of Capital Market Segmentation: Empirical Evidence from Finland

Because Finland has experienced profound economic changes and financial deregulation since the mid‐1980s, we use it as a laboratory to explore issues related to time‐varying global equity market integration. Using a Finnish perspective, we construct two different portfolios of Finnish firms and a conditional one‐factor international asset pricing model. We examine whether the segmentation varies over time and across assets. We use time‐series variables for changing market integration (lagged foreign equity ownership, difference between Finnish and German short‐term interest rates, and a portfolio‐specific liquidity measure) and crosssectional variables (size and book‐to‐market ratios and industry sector) to show variation in integration.