Reasons for the low valuation of Russian shares

This note analyses the valuation of Russian assets focusing on the market capitalization of major Russian firms trading in Moscow. It documents that valuations are very low compared to similar assets in mature economies. Several reasons are advanced to explain this phenomenon. The most important of these seems to be the poor record of Russian firms with respect to honouring shareholder rights. Some policy proposals are made to address this problem.     

Gesamtwirtschaftliche Wirkungen der Haushaltspolitik

In der Januarausgabe des WIRTSCHAFTSDIENST ver?ffentlichten wir einen Aufsatz von Ullrich Heilemann, Georg Quaas und Jens Ulrich zu den gesamtwirtschaftlichen Wirkungen der Haushaltspolitik des Koalitionsvertrages.¹ Hierzu eine Replik von Gy?rgy Barabas, Roland D?hrn und Heinz Gebhardt und eine Erwiderung von Ullrich Heilemann, Georg Quaas und Jens Ulrich. Dr. Gy?rgy Barabas, 48, ist wissenschaftlicher Mitarbeiter, Dr. Roland D?hrn, 51, ist Leiter des Kompetenzbereichs „Wachstum und Konjunktur“ und Heinz Gebhardt, 53, Dipl.-Volkswirt, ist wissenschaftlicher Mitarbeiter im Kompetenzbereich „Staatsaktivit?t, ?ffentliche Finanzen und Steuern“ des Rheinisch-Westf?lischen Instituts für Wirtschaftsforschung in Essen. ¹ Vgl. U. Heilemann, G. Quaas, J. U l r i c h : Gesamtwirtschaftliche Wirkungen der Haushaltspolitik des Koalitionsvertrages, in: WIRTSCHAFTSDIENST, 86. Jg. (2006), H. 1, S. 27-36.     

Price–volume relations of DAX companies

This study provides empirical evidence of the joint dynamics between stock returns and trading volume using stock data of DAX companies. Contemporaneous as well as dynamic interactions are investigated for a period from January 1994 to December 2005 on a daily basis. Our results suggest that there is almost no relationship between stock return levels and trading volume in either direction. We find that trading volume is contemporaneously positively related to return volatility. In addition, we establish that lagged return volatility induces trading volume movements. Finally, we examine dependencies in the tails and find no significant support for the hypothesis of the independence of the maximal values of absolute returns and trading volume.

Rent seeking and aid effectiveness

We introduce foreign aid and a rent seeking contest for public funds into the Barro (JPE 1990) growth model. We find that aid effectiveness depends on fiscal policies, the level of aid inflows and the quality of institutions that restrict appropriation of public funds by rent seeking agents. These results can be shown to be consistent with the best established findings in the empirical literature on aid effectiveness. Rent seeking may thus indeed be a major determinant of aid effectiveness. We further discuss how aid effectiveness depends on the way foreign aid is disbursed and on the determinants of institutional quality. JEL Classification F35 · D72 · D9 · H2     

Operational risk and reputation in the financial industry

By examining stock market reactions to the announcement of operational losses by financial companies, this paper attempts to disentangle operational losses from reputational damage. Our analysis deals with 154 events coming from the FIRST database of OpVantage. Events occurred between 1990 and 2004 in companies belonging to the financial sector and that are listed on the major European and US Stock Exchanges. Results show significant, negative abnormal returns at the announcement date of the loss, along with an increase in the volumes of trade. In cases of internal fraud, the loss in market value is greater that the operational loss amount announced, which is interpreted as a sign of reputational damage. Negative impact is proportionally greater when the loss amount represents a larger share in the company’s net profit.     

Technology-driven service strategy

Advancements in technology are radically transforming service, and increasingly providing the underlying basis for service strategy. In this paper, we develop a typology and positioning map for service strategy, in the context of rapid technological change, and outline the process for firms to position or reposition their service strategies. Which strategy to choose is based on the degree to which customer demand is heterogeneous, and the degree to which potential customer lifetime value varies across customers. This results in four strategies: the McService strategy that is standardized and transactional, the Relational Service strategy that is standardized and relational, the Customized Transaction strategy that is personalized and transactional, and the Adaptive Personalization strategy that is personalized and relational. We provide firms a roadmap for identifying a “sweet spot” strategy in relation to a segment’s realized or potential customer lifetime value, combined with the firm’s technological capabilities. Because technological capabilities inevitably advance, firms will tend to move from standardized to personalized and from transactional to relational over time, implying that firms should be alert to technological opportunities to personalize their relationships with customers. Our strategic framework also produces a useful bridge from marketing practice to the conceptual evolution of the service literature, showing how the historical trends toward continuing customer relationships and co-productive personalization should drive strategic thinking in service.     

Cellular phones in Mozambique: Who has them and who doesn't?

Cellular phones are considered one of the success stories of contemporary technology diffusion: there are three billion cellular telephones globally, and just over six billion people. This article describes the distributional boundary of the cellular telephone enterprise, as we see it in data from Mozambique. A telephone survey of mobile phone users there revealed that men outnumbered women, especially at higher levels of service and that most were urban, with a particular concentration in the capital city. Thus while pre-paid telephone plans have made basic cellular service affordable to many Mozambicans, the lack of rural infrastructure stills puts access out of the reach of a majority. In addition, pre-paid users pay more per minute for their service—probably not a fair situation for the poor families that tend to take this route to telecommunications.     

An institutional perspective of public policy and network effects in the renewable energy industry: enablers or disablers of entrepreneurial behaviour and innovation?

This study extends theory on the effects of public policies stimulating technology demand and of industry network ties on firm-level entrepreneurial behaviour. We take an institutional perspective to develop a theoretical model examining the mechanisms through which public policies, regulatory uncertainty, and industry network ties affect firm-level entrepreneurial decision-making processes and the ability to introduce highly innovative products and to sustain superior performance. We focus on firm-level effects, which enables the study of the tension between institutional pressures of homogeneity and competitive pressures of heterogeneity for entrepreneurial decision-making processes in environments characterized by policy-induced market demands. To test our hypotheses, we draw on data from a large-scale survey among German renewable energy firms. Our results show that public policies can constrain firm innovativeness and risk-taking behaviour because they steer firms towards a more conservative attitude and discourage the pursuit of high-risk innovation projects. However, firms can counteract these influences and enhance their innovativeness by maintaining close network ties with research associations as we find that innovativeness and a highly innovative product portfolio are key success factors. In summary, these findings provide important implications for the study of public policy effects, industry network ties and entrepreneurial behaviour.     

Motivations for enterprise system adoption in transition economies: insights from Poland

Enterprise system (ES) adoption can bring many benefits, but may also put tremendous strain on an organisation or business, sometimes with disastrous outcomes. The specific motivations and expectations that lead to ES adoption may impact the success or failure of these endeavours, and understanding these motivations may be useful in predicting the success of ES projects. Most of the published research on ES adoption motivation has been in the context of highly developed countries. The social, cultural, economic and political conditions in developing, emerging and transition economies make for a different business environment, and insights obtained from developed countries may not always transfer to these settings. This study seeks to identify and help understand the motivations for ES adoption specifically in transition economies, as these economies play a significant role in the global market, but have not been receiving adequate research attention. Drawing on the experience of 129 ES adopters in Poland, a transition economy, this study categorises motivations into coherent groups of issues and evaluates the influence of discovered motivations on ES adoption success. Further, motivations revealed by this study are compared with motivations reported by prior research conducted in developed countries.