Doing business in Malaysia

The importance of international trade to the Malaysian economy can hardly be exaggerated. Trade represents a lifeline for the Malaysian economy. Export‐oriented industrialization in the 1990s converted the labor‐surplus economy into a labor‐deficit one and then back to a labor‐surplus one in 2000 and beyond. The incidence of poverty has fallen by half since the early 1980s. Trade has also contributed much to the structural transformation and modernization of the economy. Had Malaysia been a closed economy, Malaysia would have shared the same fate as some other less developed countries that remain economically backward. Its external trade policy has paved the way for greater inflows of foreign direct investment, as foreign direct investors are not so much interested in serving the small domestic market as serving the vast external market. The large inflows of foreign direct investment have conferred positive effects on the domestic economy. This has meant significant improvements in the overall living standards for the Malaysians. Internationalization has provided employment opportunities, thereby raising their living standards through higher and more stable earnings. © 2009 Wiley Periodicals, Inc.     

Authors’ Reply: Economic Valuation Models for Insurers - Discussion by Jacques F. Carriere

Abstract

This article employs a longitudinal form of the Grade of Membership (GoM) model to specify and estimate a multivariate model of the trajectories of morbidity, disability, and mortality among longitudinally followed elderly respondents to the National Long-Term Care Survey (NLTCS) of 1984, 1989, 1994, and 1999. A distinct trajectory was constructed for each individual respondent to the survey. The trajectories described the progressive declines over time in physical and cognitive functioning among a nationally representative sample of the U.S. elderly population.

The model was structured to represent simultaneously the essential features of the fixed frailty model of Vaupel, Manton, and Stallard and Strehler and Mildvan’s model of linearly declining vitality. Unlike those models, however, the longitudinal GoM model was designed for easy and direct application to existing longitudinal data sets.

The measurement space in the NLTCS application included from one to four sets of repeated measures for each survey respondent on 95 independent variables characterizing the nature and intensity of limitations in activities of daily living (ADLs), instrumental activities of daily living (IADLs), physical functioning, and cognitive functioning, as well as indicators of behavioral characteristics, medical conditions, subjective health, age, race, sex, institutional status, and survival status.

The application showed that the model can be fitted to existing data and that the results were interpretable as generalizations of fixed frailty with linearly declining vitality.     

The performance of newly privatized firms in selected MENA countries: The role of ownership structure, governance and liberalization policies

The paper analyzes 95 newly privatized firms (NPFs) in four Middle Eastern and North African countries (Egypt, Morocco, Tunisia, and Turkey). We find that these firms experienced significant increases in profitability and operating efficiency, and significant declines in employment and leverage. We also document strong performance improvements for firms that did remain state-owned, that were not sold to foreigners, and that came from Egypt. Job losses are higher in Egypt and in firms where the state is no longer in control. Also, the results indicate that revenue firms and NPFs in Morocco display significantly less leverage than control firms and those from other countries. We find that profitability changes are negatively related to state control and positively related to foreign ownership. Trade openness, change in real GDP over the privatization window, index of investor protection, and foreign ownership are important determinants of the changes in sales efficiency and output. These findings suggest that NPFs become more productive in environments where property rights are better protected and enforced and that foreign investors influence firms' productivity through their monitoring role.     

THE ARTICLES OF CONFEDERATION SHOW THE NEED FOR DIRECT TAXATION? IT JUST AIN'T SO!

Historians and economists often refer to the United States experience under the Articles of Confederation as evidence against decentralised government finance. While it is true that the US government had difficulty raising money from the states during this period, we argue that these facts are a benefit of the system, not a flaw. A 'bottom-up' system of finance, such as the one that existed under the Articles of Confederation, is an important check on Leviathan and has implications for United Nations fund-raising efforts and development economics.     

PUBLIC GOOD PROVISION AND THE COMPARATIVE STATICS OF OPTIMAL NONLINEAR INCOME TAXATION*

Comparative static properties of the solution to an optimal nonlinear income tax problem are provided for a model in which the government both designs an income tax schedule for redistributive purposes and provides a public good optimally. There are two types of individuals, distinguished by their skill levels, who have the same quasilinear preferences for labor supply and the consumption of a private and a public good. Comparative statics are obtained for the weights in a weighted utilitarian social welfare function, the prices of the two goods, a taste parameter that measures the onerousness of working, and the skill levels.     

Business Ethics on the Internet: 2

In a previous article the authors provided an introduction to using the internet as a resource for business ethics. In this sequel they look at newsgroups and chatrooms, and conclude by looking at the websites of Shell and a Shell critic on the controversial ethical aspects of its corporate policy and behaviour. Ben Fairweather is a Research Fellow, and Steve Dixon is Webmaster, at the Centre for Computing and Social Responsibility, De Montfort University, The Gateway, Leicester LEl 9BH, England (email: ccsr@dmu.ac.uk) (website http://www.ccsr.cms.dmu.ac.uk/).     

Management succession and financial performance of family controlled firms

This paper examines the immediate and long-term impacts on financial performance of 124 management successions within Canadian family controlled firms. When family successors are appointed, stock prices decline by 3.20% during the 3-day (−1 to +1) event window, whereas there is no significant decrease when either non-family insiders or outsiders are appointed. However, a cross-sectional analysis indicates that the negative stock market reaction to family successors is related to their relatively young age which may reflect a lack of management experience rather than their family connection per se. Investors are uncertain about the “management quality” of family successors who have less established reputations than more seasoned non-family insiders and outsiders. Non-family member appointments tend to follow periods of poor operating performance implying that there might be more scope for improvement when a non-family successor is appointed. Unlike the US sample in McConaughy et al. [McConaughy, D.L., Walker, M.C., Henderson, G.V., Mishra, C.S., 1998. Founding family controlled firms: efficiency and value, Review of Financial Economics 7, 1–19.], which indicates that the median percentage of votes held by controlling families is less than 15%, the Canadian sample indicates a more concentrated ownership with the median percentage of family controlled votes exceeding 51%. Of the firms in our sample, 62% use dual class capitalization to maintain control within the family.