Industry and firm effects of privatization in Malawian oligopolistic manufacturing

This study evaluates the impact of privatization on technical efficiency using panel data from privatized enterprises, state-owned enterprises and private enterprises competing in oligopolistic Malawian manufacturing industries in which privatization took place. The results of the technical efficiency model, based on the period 1970–1997, provide evidence that privatization increases the technical efficiency of all firms (industry effects). Further incentives for improvements in technical efficiency are due to more domestic competition, multinationality and structural adjustment.     

Commercial Insurance of Financial Disclosure: Auditors’ Independence, and Investors’ Protection

In this paper the authors propose, for preliminary consideration and discussion, a system of commercial insurance of financial disclosures (CIFD), under which users of financial information (owners and potential owners of business enterprises) and providers of financial information (managers of business enterprises) would be able to purchase insurance policies from private insurers (commercial insurance companies). These insurance policies would be designed to protect users of financial statements from specific, well-defined losses directly attributable to their use of financial disclosures that failed to conform to contractually defined standards. To reduce their own risks insurance companies will likely purchase from assurance experts (certified public accountants, financial analysts, and management consultants) services assuring adherence to standards. The paper discusses the dynamics of the decisions and negotiations within and among groups of investors, managers, insurers, assurors, and government regulators. The advantages of CIFD over current US regulation of financial disclosure are analyzed. Those advantages, which include increases in the independence of external auditors, improvements in the quality of their audits, and better protection for investors, are assessed. It is argued that CIFD may be capable of evolving into a very flexible system that would accommodate alternative regulatory structures.     

The ‘Wining and dining’ project — II. ‘Fidel-Gastro’ an expert system for gastronomy and terminal food-processing

Expert systems are being applied to the performance of tasks in a variety of domains. Some existing systems or prototypes interest hospitality management or related areas.To illustrate both applications that are already available, and perspective applications, a set of expert systems is introduced, developed under the direction of the author, in the domain of recreational activities and of alimentation. Three systems are then discussed, developed by different authors, and are applied to the domains of real estate, room rental and hospitality management.     

The ‘Wining and dining’ project — I. ‘The wine adviser’, a deductive database

This section of the paper describes The Wine Adviser, a deductive database on wine, that was developed in the framework of the WINING AND DINING Project in applied artificial intelligence. The Wine Adviser provides information on wines of interest to final customers and restaurant management.     

National Price Levels: Do Taxes Matter?

Utilizing a sample of 51 countries for which price leveldata for 1980 were available from stage IV of the ICP project,the paper examines the possible role of taxes in explaining thedeparture of national price levels from purchasing power parities.The results obtained in the paper suggest that the overall burdenof central government taxation, especially of indirect domestictaxes, raises the general price level. No such price effectsseem to be associated with the direct tax burden, supportingthe conventional view of their not being shifted forward. Theperhaps unexpected result, that import duties have no discernibleeffects on the price level, is consistent with earlier findings.Another unexpected result is that the burden of domestic indirecttaxation expresses itself in the prices of tradables, ratherthan of non-tradables. Furthermore, no evidence was found tosupport the view, that tax inflated prices are offset by reducedprices in the untaxed sector, as required for the price levelto be neutral with respect to taxation.     

Recording discrepancies in Nielsen Homescan data: Are they present and do they matter?

We report results from a validation study of the Nielsen Homescan consumer panel data. We use data from a large grocery retailer to match transactions that were recorded by the retailer (at the store) and by the Homescan panelist (at home). The matched data allow us to identify and document discrepancies between the two data sets in reported shopping trips, products, prices, and quantities. We find that the discrepancies are largest for the price variable, and show that they are due to two effects: the first seems like standard recording errors (by Nielsen or the panelists), while the second is likely due to the way Nielsen imputes prices. We present two simple applications to illustrate the impact of recording differences, and we use one of the applications to illustrate how the validation study can be used to adjust estimates obtained from Nielsen Homescan data. The results suggest that while recording discrepancies are clearly present and potentially impact results, corrections, like the one we employ, can be adopted by users of Homescan to investigate the robustness of their results to such potential recording differences.     

The Effect of CEO Risk Appetite on Firm Volatility: An Empirical Analysis of Financial Firms☆

This paper examines the effect of CEO risk appetite on the return volatility of a sample of large, listed financial firms over the period 2000–2008. After controlling for firm specific characteristics, the results give strong evidence that the CEO risk appetite has an important effect on firm volatility. The biographical measures for CEO risk appetite are significant explanatory variables of all measures of firm volatility employed in this study. The effect of CEO age is significant and positive for all four volatility measures, while CEO education and current job tenure are negative and significant for all four measures. Executive experience with other firm boards has a negative and significant effect on total and idiosyncratic volatility. Interestingly, CEO wealth is complementary to the other biographical variables with a positive effect on all but the default volatility measure. Our results carry implications for shareholders, financial regulators, governments, and managers.     

Do Political Connections Affect Firm Performance? Evidence from a Developing Country

We investigate how politicians serving on the boards of directors influence firm performance. The results show a negative relationship between political connections and firm performance. Specifically, politically connected firms underperform nonconnected firms directors by almost 17 percent and 15 percent based on return on assets and return on equity, respectively. By stratifying the sample duration into two periods based on the political environment, we find that this effect is more pronounced in autocratic as opposed to democratic regimes. Finally, our results also suggest that the performance of connected firms with more growth opportunities is not affected by political connections.