The Determinants of Mergers and Acquisitions in Banking

This paper investigates the determinants associated with the likelihood of a bank becoming involved in a merger or an acquisition. Using a multinomial logistic regression and a Cox regression with time-dependent covariates, we investigate the determinants of being a target or an acquirer from a sample of 777 deals involving EU acquirers and 312 global targets over the period of 1991 to 2006. Both the multinomial logistic and Cox regressions identify the same determinants associated with becoming acquirers or targets. A higher likelihood of becoming an acquirer exists for larger banks with a history of high growth, greater cost X-efficiency, and lower capitalization. In contrast, banks are more likely to be targets if they have lower free cash flows, are less efficient, are relatively illiquid, and are under-capitalized. But, the predictive power of the two regressions is different as the multinomial logistic regression outperforms the Cox regression when predicting the likelihood of becoming an acquirer.     

Modeling of the clinical and economic impact of a risk-sharing agreement supporting a treat-to-target strategy in the management of patients with rheumatoid arthritis in France

Objectives: To evaluate the cost-effectiveness of a Treat-to-Target strategy with certolizumab pegol in patients with rheumatoid arthritis in the context of a pay-for-performance agreement in which medication costs are refunded in case of discontinuation during the first 3 months of treatment.

Methods: The Treat-to-Target strategy consisted of a systematic switch to second-line tumor necrosis factor (TNF)α inhibitor in case of an unmet ACR50 response at 3 months compared to current routine clinical practice. A reference cohort treated first-line with certolizumab pegol according to current practice without systematic switching was considered as the comparator. A decision-tree model was constructed to estimate clinical outcome (health assessment questionnaire-disability index or HAQ-DI score), time spent in ACR50 response (ACR 50), and direct costs of treatment over a 2-year period. HAQ scores were derived from American College of Rheumatology 50 (ACR50) responses. All TNFα inhibitors were assumed to have equivalent efficacy and tolerability. Costs were estimated at 2013 French retail prices (date of the pay-for-performance agreement).

Results: The mean duration of an ACR50 response was 1.23 years in the Treat-to-Target strategy certolizumab pegol cohort vs 0.98 years in the reference cohort, resulting in a mean gain in HAQ at 24 months of 0.117. The Treat-to-Target strategy with a mix of TNFα inhibitors as second-line therapy was more expensive than the reference strategy in absolute terms, but this difference was entirely offset by the pay-for-performance agreement. The Treat-to-Target strategy was, thus, cost-neutral over a 2-year period after the payback of CZP cost for patients not achieving the target at 3 months.

Conclusions: In the context of a pay-for-performance agreement, the management of patients with rheumatoid arthritis using a Treat-to-Target strategy with certolizumab pegol in first line is dominant compared to standard use of this drug in the French setting in 2013.     

Analyzing firms' strategic investment decisions in a real options' framework

Within the context of investment under uncertainty, the real options literature has led to models that capture primarily the time to wait flexibility of monopolistic corporations' investment decision. In this paper, we propose an approach which relies on barrier options to model production and/or sales delocalization flexibility for multinational enterprises making decisions under exchange rate uncertainty. We then extend the model by introducing game theoretic considerations to show how the information set and the competitive structure of the market may lead firms to act strategically and exercise their delocalization options preemptively at an endogenously fixed exchange rate barrier.     

Optimal dynamic hedging in incomplete futures markets

This article derives optimal hedging demands for futures contracts from an investor who cannot freely trade his portfolio of primitive assets in the context of either a CARA or a logarithmic utility function. Existing futures contracts are not numerous enough to complete the market. In addition, in the case of CARA, the nonnegativity constraint on wealth is binding, and the optimal hedging demands are not identical to those that would be derived if the constraint were ignored. Fictitiously completing the market, we can characterize the optimal hedging demands for futures contracts. Closed-form solutions exist in the logarithmic case but not in the CARA case, since then a put (insurance) written on his wealth is implicitly bought by the investor. Although solutions are formally similar to those that obtain under complete markets, incompleteness leads in fact to second-best optima.     

Voluntary Disclosure of Information in a Setting in which Endowment of Information has Productive Value

Abstract:  This paper introduces a model capturing managers' disclosure policies in settings in which disclosure is rewarded by the financial market because disclosure implies that managers are endowed with information and endowment of information may potentially improve the firm's productive efficiency. It provides sufficient condition for a threshold disclosure equilibrium to obtain and compares disclosure policies in a setting in which endowment of information improves the firm's productive efficiency with disclosure policies in a setting in which endowment of information has no impact on the firm's productive efficiency. Managers' disclosure policies are shown to depend crucially on whether the endowment of information is exogenous or endogenous. When the endowment of information is exogenous, an increase in the usefulness of information in improving the firm's productive efficiency leads to a decrease in the disclosure threshold and hence an increase in the amount of information disclosed. In contrast, when the endowment of information is endogenous, an increase in the usefulness of information in improving the firm's productive efficiency has no effect on the disclosure threshold but leads to a decrease in the probability with which information is acquired and hence a decrease in the amount of information disclosed. As, in the threshold disclosure equilibrium, the net present value of information acquisition arising from any increase in production efficiency is negative, an increase in the usefulness of information in improving the firm's productive efficiency thus reduces the inefficiency caused by information acquisition.     

Understanding Agro-Holdings in Russia: A Commonsian Analysis

Agro-holdings in Russia are large-scale vertically integrated farms within the food processing industry which emerged in the economic, political, and social context inherited from the Soviet era and the post-Soviet market transition. Several economic researchers consider agro-holdings either as a transitory phenomenon or as a major innovation that enables economies of scale and scope. However, their sustainability does not support the idea of a transitory organizational form. Meanwhile, important aspects of their activity, as with the financing of social infrastructures and the partnership with public institutions, cannot be explained by the aim of productive efficiency. I argue that applying John R. Commons’ concepts of strategic transactions, going concerns, and futurity offers an insight enabling the understanding of agro-holdings in Russia as the result of actors’ capacity to form new working rules and compromises, reflected in going concerns that incorporate both the productive and distributive dimensions of their activity.     

Demand-side issues of the service economy

This paper examines the relevance of the demand-side approach to the development of a service economy. Its starts by addressing some concerns about the possibility of creating a growth regime based on services. Discussion has mainly focused on the increasing share of services in consumer spending; but equally important is the fact that most products--goods and services alike--integrate a significant service-to-the-client dimension. The paper considers the costs incurred by strategies that aim to create value for the client and that require the existence of a purchasing power likely to validate them.     

The “Treasury View”: An (un-)expected return?

Abstract

By examining the rhetorical use of an old piece of economic theory by some contemporary economists, this paper intends to report on “how today's economists conduct a public policy debate”. This paper is neither a scholarly history of the interwar debate nor a sophisticated critique of current economic policy. It is an attempt to link the policy and theoretical arguments of two similar debates separated by nearly 80 years. The second part of the paper demonstrates that the (un-)expected return of the Treasury View is a case study illustrating two very different modelling strategies.     

Interval bidding in a distribution elicitation format

Interval bidding allows people to report a range of values for a non-market good. Herein, we allow people to choose their distribution over this range endogenously. We consider a multiplicative error model explaining the willingness to pay (WTP) which is estimated using a feasible generalized least squares estimator. We apply our framework to a representative sample of the French population who were asked about the valuation of a bear conservation programme. We find that most participants prefer stating their WTP as a range rather than a point, but the shape of the distribution greatly varies across people. Our results support the use of the interval bidding with endogenous distribution approach in valuation studies.     

Did the Uruguay Round Agreement on Agriculture Affect Trade Flows? An Empirical Investigation for Meat Commodities

The Uruguay Round Agreement on Agriculture (URAA) was designed to reduce trade barriers and temper domestic and export policies that affect trade flows in agricultural commodities. This paper employs a dynamic framework to estimate the effects of the URAA on trade flows, as measured by export volumes, of three meat commodities. The model controls for several important factors, including regional trade agreements, and finds that the URAA had mixed effects on meat exports. Several complicating factors and policy responses, including increasing use of non-negotiated trade barriers, smaller export subsidies and domestic support, and limited effectiveness of market access provisions, explain the mixed empirical results.