IPO pricing: growth rates implied in offer prices

This paper studies the valuation of companies going public and defines a methodology to infer the growth expectations implicit in the prices of their Initial Public Offering (IPO). The proposed reverse-engineered DCF model is operable by individual investors, as it does not require access to private information or sell-side analysts’ forecasts. Applying the procedure to a sample of IPOs in three European countries (France, Italy, and Germany), we estimate the cash flow growth implied by offer prices and examine the bias of implied growth in comparison to the realized. We find that the estimated growth in cash flow is much higher than its actual realization, with the median IPO firm overvalued at the offering by 74%. Estimation errors increase with IPO firms’ leverage and underpricing, and decrease with age, size, and book-to-market ratios. Further tests find that post-IPO stock returns are lower for issues whose implied growth is more upward biased.     

Performance Heterogeneity in Latin America: An Investigation into the Transient Effects of Country of Origin

The heterogeneity of firm performance has been studied from the perspective of factors, including the firm effect, the industry effect, and the country effect. This study emphasizes the importance of country transient effects in light of the volatility present in Latin American countries. Variance decomposition was carried out for the economic and operational performance of five countries in the period from 1998 to 2007. The results show that country effects matter for Latin America, its transient effects increase in periods of higher turbulence, and have a greater effect on a firms' economic performance than on its operational performance.     

Market structure and the link between migration and trade

Many recent studies have looked at the impact of international migration on trade and found a significant effect. They posit that migration fosters trade by lowering costs or by means of a preference bias. However, to my knowledge, market structure has not as yet been considered. Using data from Switzerland, this paper empirically assesses the extent to which migration affects trade, taking goods differentiation into account. A monopolistic model with a multisector economy (Chaney in Am Econ Rev 98(41):1707–1721, 2008) is then empirically estimated. The findings show that market structure explains the different channels through which migration affects trade.

Internationale Wettbewerbsfähigkeit — Fragmente zu einer Theorie internationaler Unternehmenstätigkeit

Summary International competitiveness — fragments of a theory on international entrepreneurial activity. — Contrary to the orthodox market conception — where firms’ decisions involve merely efficiency-oriented adaptation to ensure general equilibrium — a more pragmatic approach must take account of the endogenous character of market structures: The driving forces behind innovations — and hence “progress” — are the creation and exploitation of market imperfections by firms. As companies use their core skills worldwide, international competitiveness is determined on the firm level, thereby disposing of the traditional trade theory with its focus on the nation-state and a given endowment with ressources. “Creative destruction” must be viewed as an institutional change on a global basis, enterprises being the center pivot of dynamics in the course of which the means of internationalizing and internalizing business functions will differentiate more and more.

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Résumé Capacité de concurrence internationale: fragments d’une théorie de l’activité d’entreprise internationale. — Contrairement à la conception orthodoxe de marché — oú les décisions des entreprises consistent seulement d’adaptions orientées à l’efficience pour assurer l’équilibre général — une approche plus pragmatique doit considérer le caractére endogéne des structures de marché: la force motrice derriére les innovations et avec cela ?le progrés? sont la création et l’exploitation d’imperfections par des entreprises. Comme ceux-ci appliquent leurs connaissances essentielles universellement, la capacité de concurrence internationale est déterminée sur le niveau d’entreprise, ainsi disposant la théorie de commerce traditionnelle avec sa concentration sur l’état-nation et la dotation donnée en ressources. ?Destruction créative? doit être considérée comme un changement institutionnel de mesure universel oú les entreprises sont le pivot central d’un processus dynamique à la suite duquel les mesures d’internationaliser et d’internaliser les fonctions commerciales différencieront de plus en plus.

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Resumen Competencia international: elementos de una teoria sobre la actividad empresarial international. — Al contrario de la opinión ortodoxa sobre el mercado, donde las decisiones de los empresas implican simplemente una adaptatión de cara a la eficiencia para asegurar equilibrio general, un enfoque mas pragmático debe tener en cuenta el carácter endógeno de las estructuras de mercado: El motor detras de los innovaciones y por tanto del ?progreso? es la creation y explotaci?n por las empresas de imperfecciones en el mercado. Considerando que los empresas utilizan sus abilidades basicas en un contexte global, la competencia international se dètermina a nivel de empresa lo que permite prescindir de la teoria traditional del comercio internacional con su èmfasis en los conceptos de estado national y riqueza de recursos. ?Destruction creativa? debe ser observada como cambio institucional a nivel global, con las companias constituyendo el centro del proceso dinámico en el curso del cual los medios de internacionalizar e internalizar funciones empresariales darám origen a diferencias cada vez más grandes.

     

The Effects of the Specialization of Private Equity Firms on their Exit Strategy

We investigate how industry and stage specialization of Private Equity (PE) firms affect the likelihood to exit investments by means of trade sales, Initial Public Offerings (IPOs), or Secondary Buyouts (SBOs). Our empirical analysis relies on competing risks models. Using a sample of 818 Leveraged Buyouts (LBOs) by US and European PE firms over the period 2000–2015, we find that both industry and stage specializations of PEs increase the likelihood of exiting via IPO, whereas only industry specialization positively affects the likelihood of divesting through a trade sale. Finally, SBOs are more likely for non‐specialized investors.     

Globalization and electoral outcomes: Evidence from Italy

We study whether and to what extent the electoral dynamics in Italy over the 1994–2008 period can be explained by the development of economic factors associated with globalization. To measure the level of exposure to globalization for local labor markets, our main unit of analysis, we use the intensity of import competition from China and the presence of immigrants. Looking at parties’ political positions and employing an estimation strategy that accounts for endogeneity and time‐invariant unobserved effects across local labor markets, we find that both immigration intensity and exposure to import competition from China have contributed positively to the electoral outcomes of far‐right parties, whereas only immigration intensity has increased the vote shares of right‐wing and traditionalist/authoritarian/nationalist parties. Some evidence, albeit not robust, shows that immigration may have also had a positive impact on far‐left parties, thus possibly further contributing toward political polarization. Moreover, electoral turnout has responded negatively to an increased presence of migrants. While the above effects seem to work through the mediation of labor markets, our results, especially those related to immigration, suggest that other mechanisms at the level of local communities are also at play.     

Change and commitment: beyond risk and responsibility

Risk and responsibility have always been linked philosophically in the Western tradition. The purpose of this article is to discuss possible alternatives to the centrality of the risk discourse, arguing that such alternatives call for a revision in the concept of responsibility, decoupling it from the aspirations of control over Nature and the future. It implies also a more complex relation between knowledge and action. Rather than believing that contemporary global challenges will be sufficiently met by being responsible under risk, we will explore how to stay committed in times of uncertainty and change.     

Changes in the second-moment properties of disaggregated capital flows

Using formal statistical tests, we detect (i) significant volatility increases for various types of capital flows for a period of changes in business cycle comovement among the G7 countries, and (ii) mixed evidence of changes in covariances and correlations with a set of macroeconomic variables.