On fitting distributed lag models subject to polynomial restrictions

A methodology is presented for fitting distributed lag models with polynomial restrictions on the lag coefficients. The model incorporates autoregressive residuals. Orthogonal methods are employed so that the procedures are numerically sound. Furthermore, these have the effect of allowing for inference to be made about the three integer parameters in the model: (i) the length of the lag, (ii) the degree of the polynomial, and (iii) the order of the autoregression. The methodology is applied to the extended Almon data. This analysis suggests that estimation of polynomial distributed lags is highly sensitive to autoregressive disturbances. This underlines the importance of modeling the disturbances.     

The welfare effects of liquidity constraints

We analyze the welfare implications of liquidity constraintsfor households in an overlapping generations model with growth.In a closed economy with exogenous technical progress, liquidityconstraints reduce welfare if the economy is dynamically inefficient.But if it is dynamically efficient, some degree of financialrepression is required to maximize steady-state utility, eventhough some generations are hurt in the transition. With endogenoustechnical progress, financial repression may increase welfareeven along the transition path, thus leading to a Pareto improvement.In this case the optimal degree of financial repression increasesas the economy grows.     

The role of relational capabilities in the organization of international sourcing activities: A literature review

Multinational companies (MNCs) establish subsidiaries in various countries, spreading the value chain internationally and fostering the involvement of external partners. The global supply network has become a major source of the total value generated by MNCs, which are pushed to develop “relational capabilities” to interact with their suppliers. The main objective of this article is to assess the current understanding in the academic literature of the intra-organisational dimension of relational capabilities, focussing on the adoption of internal mechanisms supporting international sourcing activities. A total of 47 articles are identified and assessed. The literature review shows that thus far fragmented and in some areas limited research has been conducted on the development of relational capabilities by MNCs within international sourcing activities. Research efforts have been placed mainly on the examination of organisational units active in international sourcing and on control and management processes, while less attention has been paid to knowledge management solutions.     

Cultural globalisation, institutional diversity and the unequal accumulation of intellectual capital

National economies used to be characterised by cultural standardisationand social protection. Globalisation pushes cultural standardisationbeyond the boundaries of national states and induces a globaldilution of the standards of social protection. At the sametime, if national economies specialise according to their comparativeinstitutional advantage, global economic integration may helppromote institutional diversity and variety in welfare policies.However, the institution of a global system of intellectualproperty rights may seriously limit the ‘biodiversity’of capitalism and imply a global revenge of a new internationalform of Taylorism. The overall result may be a very unequalaccumulation of intellectual capital. Paradoxically, the modernglobal economy may end up sharing some aspects of the agrariansocieties that have been displaced by modern nation states.     

Information technology, organizational form, and transition to the market

The paper reviews theories of information technology adoption and organizational form and applies them to an empirical analysis of firm choices and characteristics in four transition economies: Czech Republic, Hungary, Romania, and Slovakia. We argue that two major structural changes have occurred, one concerning technology and another concerning firm ownership and boundaries, and we consider how each change may have affected the other. We estimate the impact of firm size, integration, and ownership on new information technology adoption and the impact of information technology on changes in firm boundaries and ownership, using a sample survey of 330 firms.     

The Empirical Average Cost of Capital: A New Approach to Estimating the Cost of Corporate Funds

The authors develop a new way to measure the cost of capital, called the empirical average cost of capital (or “EACC”), which is consistent with existing methods of calculating the weighted average cost of capital, but uses information from the firm's financial statements and requires fewer and less subjective inputs. The authors’ model relies on the concept of economic profit while using data from the period 1990‐2012 on net operating profits and total capital to estimate the EACC at both the individual company and industry‐wide levels. Estimates of the EACC and rolling quarterly forecasts of future net operating profits for a single company, McDonald's, for its related industry, and for 57 other U.S. industries are compared to five conventional “textbook” estimates of the weighted average cost of capital published by Ibbotson Associates. The authors find that the EACC yields forecasts of future net operating profit after taxes that compare favorably to those of the five published measures of the weighted average cost of capital, as well as the average and median of these measures.     

A New Application of Sustainable Growth: A Multi‐Dimensional Framework for Evaluating the Long Run Performance of Bank Mergers

Abstract:   We study the mergers of US publicly traded bank holding companies during 1987–2000 and find that the acquiring firm's sustainable growth rate is an important determinant of the cross‐sectional variation in the merged entity's long‐term operating and stock performance. The most economically significant determinants of the merged bank's abnormal stock return performance are the acquiring bank's estimated sustainable growth rate prior to the acquisition, as well as post‐acquisition changes in this growth rate, and the bank's dividend payout ratio. Our findings are robust even after controlling for several potentially confounding factors.