On the Equivalence between the APV and the wacc Approach in a Growing Leveraged Firm

While in a steady state framework the choice between the wacc approach ( Modigliani‐Miller, 1963 ) and the adjusted present value (APV) approach ( Myers, 1974 ) is irrelevant since the two approaches provide the same result, however, in a growing firm context the wacc equation seems to be inconsistent with the APV result. In this paper we propose a simple model to evaluate the tax savings in a growing firm in order to show under which assumptions the two approaches lead to the same results. We demonstrate that the use of the wacc model in a steady‐growth scenario gives rise to some unusual assumptions with regard to the discount rates to be used in calculating tax shields. We show that the widely used wacc formula, if used, as it is in most cases, in a growth context, implies that a) debt tax shield related to already existing debt are discounted using k_d; b) debt tax shield related to new debt, due to company's growth, are discounted, according to a mixed procedure, using both k_u and k_d. We discuss the inconsistency of such a discounting procedure and the preferred features of the APV approach.     

Constrained inefficiency in GEI: A geometric argument

In this paper we use global analysis to study the welfare properties of general equilibrium economies with incomplete markets (GEI). Our main result is to show that constrained Pareto optimal equilibria are contained in a submanifold of the equilibrium set. This result is explicitly derived for economies with real assets and fixed aggregate resources, of which real numéraire assets are a special case. As a by product of our analysis, we propose an original global parametrization of the equilibrium set that generalizes to incomplete markets the classical one, first, proposed by Lange [Lange, O., 1942. The foundations of welfare economics. Econometrica 10, 215–228].     

Assessing the impact of crime on the economic performance: the case of central america

Crime is obviously a menace to economic growth and progress, but to acutely understand the enormity of its impact on economic performance for effective policy action, requires a credible means of measurement. Given the crime notoriety of the most of Central America and the struggling state of their economies, this article attempts to discern from econometric evaluation and analyses, the calculable economic impact of crime on the region’s economic progress. From analyses of results, we find the model to be credible and useful following its provision of a much more accurate degree to which crime affects economic performance in Central America, which we find critical to guide policy measures.     

Institutions and Foreign Subsidiary Growth in Transition Economies: The Role of Intangible Assets and Capabilities

Although transition economies experience significant institutional transformations that vary in their degree and pace, scholarly knowledge of what distinguishes more successful foreign subsidiaries from less successful ones in such environments is limited and inconsistent. We enhance the understanding of this subject by examining how variations in the institutional development of transition economies influence the usefulness of a subsidiary's intangible assets and capabilities and, in turn, their effectiveness in enhancing its growth. Prior research assumes that foreign subsidiaries that operate in any given environment are always better off when they possess strong intangible assets and capabilities. Our analysis of more than 33,000 observations in 14 transition economies challenges this view and enables us to explain why some subsidiaries grow more quickly in less‐developed institutional environments, whereas others more quickly in countries with institutions that are more developed. More specifically, we show that although a subsidiary's intangible assets enhance its growth in transition economies with stronger institutions, these effects are particularly weak or insignificant in transition countries with less developed institutional environments. Conversely, a completely different pattern emerges for subsidiary capabilities, with their marginal effects on subsidiary growth being significantly higher in countries that are institutionally less developed than in transition countries with more developed institutions.     

Size,time-varying beta,and conditional heteroscedasticity in UK stock returns

The purpose of this study is to examine the relationship between firm size and time-varying betas of UK stocks. We extend the Schwert and Seguin (1990)(Journal of Finance 45, 1120–1155) methodology by explicitly modeling conditional heteroscedasticity in the market model residual returns. Our results show that the time-varying coefficient is not statistically significant for both small and large firm stock indexes. We also find that accounting for GARCH effects in the Schwert-Seguin market model yields beta estimates that are markedly differently from those when conditional heteroscedasticity is ignored. Event studies that ignore conditional heteroscedasticity may bias the abnormal returns of small and large firms, thereby leading to a different conclusion regarding the significance of an information event.     

Converging scientific fields and new technological paradigms as main drivers of the division of scientific labour in drug discovery process: the effects on strategic management of the R&D corporate change

The thesis of this study is that the convergence of genetics, genomics and proteomics spurs new technological paradigms in medicine, which are generating a R&D corporate change: division of scientific labour of the drug discovery process by strategic alliances among firms in order to reinforce the integrative capabilities in different biomedical research fields and collective and cumulative learning between in-house R&D and external sources of innovation. This study shows, by key a case study of pharmaceutical companies, as scientific and technological paradigms in medicine are main drivers of industrial and R&D corporate change to enhance and accelerate the discovery process of ground-breaking drugs for more and more personalised healthcare.     

The influence of retailing-mix levers on private label market share: The case of the Italian FMCG market

An in-depth analysis of the impact of retailing-mix levers on private label market share in the Fast Moving Consumer Goods sector in Italy is made. The direction and intensity of the impact of assortment, price and sales promotion is measured for different product categories. OLS and GMM regressions run on an IRI Group dataset indicate a strong positive effect of product range, which can be considered as a proxy of on-shelf brand visibility. Increasing private label assortment share thus appears to constitute the key supply-side factor in augmenting sales share on the Italian grocery retailing market.