The Economics and Financing of Hospitals in Australia

The Australian hospital industry is described and it is noted that the term ‘hospital’ is applied to a wide range of institutions. The main problems and issues associated with hospitals are discussed, including the lack of adequate methods of measuring their ‘products’ and of allocating funds to them. The role of the medical staff in influencing the ‘demand’ for hospital beds and in resource allocation is emphasised as a major influence on hospital behaviour. In a study of the determinants of the costs of Victorian public hospitals it was found that the complexity of the case-mix as measured by diagnosis related groups (DRGs) was a major determinant of teaching hospital costs but not of those of other large hospitals. DRG-based funding and costing of hospitals is recommended as a strategy for achieving increased efficiency.     

Pathways to Success in M&A

For many if not most publicly traded companies, acquisition capabilities remain a critical component of sustainable longterm growth and profitability. And even as investors press companies to return excess capital through dividends and stock buybacks, the market continues to assign premium valuations to companies that earn above-average returns through a combination of internal investment and judicious acquisition spending.
This article begins by describing major challenges facing acquirers in the current business and regulatory environment. Then, after showing how M&A can be used to address strategic goals, the authors identify key elements in the M&A strategies of three highly successful companies: General Electric, Danaher, and Illinois Tool Works.     

Reform of European Merger Policy

The paper highlights the main drivers for merger policy reform in the European Union, including the consequences of the recent appeal court reverses. It discusses some of the substantive and procedural issues that the reform package should address, and outlines the reforms in progress. The author concludes that much of the reform package will be beneficial, but some important opportunities have been missed in this inevitably patchwork process.     

Why are there glitches in product development?

Managers and scholars emphasize the importance of inter‐departmental integration to successful product development and emphasize the importance of product development capabilities to firm performance. Interdepartmental integration can increase shared knowledge; this in turn can reduce the severity and incidence of seemingly unnecessary and costly mistakes leading to more efficient and effective product development. This paper examines the sources of shared knowledge problems across functional and product‐based groups. Using interviews, product development plans, and time‐sheet data, we look at the underlying factors behind two sources of knowledge sharing problems: (1) a serial product development process (i.e. little or no face‐to‐face communications) and (2) ineffective use of integrating mechanisms because of sticky knowledge. For each problem source, we find two key causal factors. We discuss the problems, their factors, and the implications for management and theory.     

Disentangling the Dividend Information in Splits: A Decomposition Using Conditional Event-Study Methods

While folklore in finance holds that split valuation effectsare due to dividend increases associated with splits, littleis known about magnitudes of dividend and nondividend componentsof split announcement effects. We find that splits and dividendsare indeed informational substitutes, a notion we characterizemore precisely, but a significant portion of split valuationeffects, 46% according to our estimates, cannot be attributedto dividend information in splits. Our techniques extend theliterature on conditional event-study methods and we illustratetheir practical value in testing hypotheses and analyzing datanot amenable to analysis by standard procedures.     

Economic Growth and Productivity Gains from Capital Inflow: A Rejoinder

Journal of Quantitative Economics -     

Option-Implied Risk Aversion Estimates

Using a utility function to adjust the risk‐neutral PDF embedded in cross sections of options, we obtain measures of the risk aversion implied in option prices. Using FTSE 100 and S&P 500 options, and both power and exponential‐utility functions, we estimate the representative agent's relative risk aversion (RRA) at different horizons. The estimated coefficients of RRA are all reasonable. The RRA estimates are remarkably consistent across utility functions and across markets for given horizons. The degree of RRA declines broadly with the forecast horizon and is lower during periods of high market volatility.