Intraday behavior of market depth in a competitive dealer market: A note

This study is the first to examine the intraday behavior of quoted depth in a competitive dealer market. In sharp contrast to previous research that focuses on specialist markets, quoted depth is lowest at the open of trading, plateaus around the middle of the day, and then dramatically increases in the final hours of trading, peaking at the close. This peak in quoted depth coincides with a narrowing in bid‐ask spreads, and is contrary to intraday patterns documented for specialist markets. The authors conclude that the increase in depth and narrowing of bid‐ask spreads at the close is driven by dealers rebalancing inventories to achieve target inventory levels in a competitive market. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:294–307, 2008     

Determinants of state equity ownership,and its effect on value/performance: China's privatized firms

Evidence on the relationship between state ownership and performance in China's privatized firms is convex, concave and linear. Hence, the nature of this relationship is not resolved. This study examines this relationship for a larger, more recent sample of 4315 firm year observations of privatized Chinese firms during 1996–2003. Results support the hypothesis of a convex relationship between state ownership and performance showing benefits from strong privatization and state control. Not only is ownership structure found to affect performance, but also ownership concentration and balance of power jointly affect performance. Chinese firms with mixed control show significantly poorer performance than state or private controlled firms affirming the problem of ambiguity of ownership control, property rights, agency issues, profits and welfare objectives. New determinants of state ownership in China's firms are strategic importance, legal ownership, profitability, and market performance. Privatization benefits because there is a causal relation between ownership and performance.     

The Relationship between Fair Value,Market Value,and Efficient Markets*

This paper proposes that an assumption of reasonable market efficiency is at the essence of the relevance of fair value for financial reporting purposes. The paper's examination of this proposal begins with a review of recent academic literature on market efficiency, and on evidence of inefficiencies and their implications for the ability of the efficient market hypothesis to explain what market prices represent. It concludes that there is wide acceptance in this literature that a reasonable level of efficiency can generally be presumed to exist in active, well‐regulated capital markets. The paper examines the essential attributes of a reasonably efficient market for fair value measurement purposes, and some basic implications for its reliable estimation. This is done in comparison with the provisions of the fair value measurement standard of the Financial Accounting Standards Board (FASB) (Statement of Financial Accounting Standards [SFAS] No. 157). It is concluded that the concept of reasonable market efficiency could provide a sound conceptual framework for defining fair value that is founded in real, observable market prices. It is demonstrated that, in contrast, SFAS No. 157 does not provide a clear, unequivocal concept of fair value, and that it permits estimates of fair value that have no demonstrable basis in real, observable market prices. Nevertheless, it appears that arguments typically put forward by the International Accounting Standards Board and the FASB for the relevance of fair value for financial reporting purposes do imply a presumption of reasonably efficient markets.     

LEARNING TO WALK BEFORE WE CAN PRICE: THE COSTS AND BENEFITS OF ROAD PRICING POLICIES

The introduction of widespread road pricing is being considered in the UK and abroad as a means to allocate scarce road space. By looking at the economic costs and benefits of both national and local road pricing schemes, this paper seeks to examine how widely charging should be implemented.     

What determines early exercise of employee stock options in Australia?

Employee stock options (ESOs) are a popular way of remunerating employees. We analyse factors at the firm and option level affecting the employee's decision to exercise ESOs before they mature. Exercises over the period 1998–2004 are analysed and the key factor influencing early exercise is found to be dividends. Exercises frequently occur well before maturity, but in most cases little time value is sacrificed. Our findings have implications for the ‘fair’ valuation of ESOs in companies’ financial statements, as required by the relevant Australian accounting standard, AASB 2.     

Between a cap and a higher price: Modelling the price of dairy quotas under price ceiling legislation

This paper considers various policy alternatives to price ceiling legislation in the market for production quotas in the dairy farming sector in Quebec. I develop a model of farmers’ demand for quotas and estimate a structural parameter that is required for the counterfactual experiments. Using my econometric results and the modelled equilibrium price, I estimate the price of dairy quotas over the period 1993–2011. The counterfactual experiments indicate that the price of quotas could be reduced to the ceiling price through a 4.16% expansion of the aggregate supply of quotas, or through moderate trade liberalization of Canadian dairy products.     

The Born-Global Phenomenon: A Comparative Case Study Research

This qualitative, case-based research investigates the most relevant traits shown by several new, export-involved born-global firms and their entrepreneurs-managers versus other more traditional and also recently-established exporting SMEs in a specific geographic region inside Spain. More concretely, we aim to shed light on the type of factors and specific conditions underlying the emergence and further expansion of born-global exporters, as compared to other counterparts, which do not share their rapid internationalising character from inception. From our cross-comparison of four firm cases investigated in this setting against a number of factors generally associated with the born-global or gradual internationalisation paths, our results indicate that both constitute two consistent and distinctive patterns of international development. Another relevant finding in this research is that born globals seem indeed to be more entrepreneurial regarding their export entry behaviour into foreign markets than gradual exporters. Relevant academic, managerial, and policy-making implications are also outlined from these results.     

Liquidity and the marginal value of information

We revisit Kyle’s (Econometrica 53:1315–1335, 1985) model of price formation in the presence of private information. We begin by using Back’s (Rev Financ Stud 5(3):387–409, 1992) approach, demonstrating that if standard assumptions are imposed, the model has a unique equilibrium solution and that the insider’s trading strategy has a martingale property. That in turn implies that the insider’s strategies are linear in total order flow. We also show that for arbitrary prior distributions, the insider’s trading strategy is uniquely determined by a Doob $h$ -transform that expresses the insider’s informational advantage. This allows us to reformulate the model so that Kyle’s liquidity parameter $\lambda $ is characterized by a Lagrange multiplier that is the marginal value or shadow price of information. Based on these findings, we can then interpret liquidity as the marginal value of information.     

Firm growth and innovation

In recent years, there has been an increase in empirical and theoretical work that addresses the role of innovation as one of the main sources of firm growth. The purpose of this special issue is to strengthen the role played by innovation as a determinant of firm growth. Despite the emergence of a vast empirical literature on whether innovative firms grow more quickly in terms of sales and employees, a number of crucial questions and answers remain. While a large number of applied papers observe a positive link between innovation and firm growth, the complexity of R&D activities, together with the diversity of innovation strategies and the multiplicity of growth modes, requires a multidimensional approach to examine the contribution of innovations on firm growth. To shed light on the link between firm’ growth and innovation sources, we organized a meeting of leading scholars of firm’ growth and innovation. The papers of this special issue were presented at the workshop on ‘Firm growth and innovation’ held on 28 and 29 June, 2012, in Tarragona, Spain. The papers that compose this special issue deal in depth with innovation activity, firm growth and the interaction between firm growth and innovation.