The Effect of Bank Relations on Investment Decisions: An Investigation of Japanese Takeover Bids

We study 154 domestic mergers in Japan during 1977 to 1993. In contrast to U.S. evidence, mergers are viewed favorably by investors of acquiring firms. We document a two-day acquirer abnormal return of 1.2 percent and a mean cumulative abnormal return of 5.4 percent for the duration of the takeover. Announcement returns display a strong positive association with the strength of acquirer's relationships with banks. The benefits of bank relations appear to be greater for firms with poor investment opportunities and when the banking sector is healthy. We conclude that close ties with informed creditors, such as banks, facilitate investment policies that enhance shareholder wealth.     

Properties of Multinomial Lattices with Cumulants for Option Pricing and Hedging

In this paper, we analyze properties of multinomial lattices that model general stochastic dynamics of the underlying stock by taking into account any given cumulants (or moments). First, we provide a parameterization of multinomial lattices, and demonstrate that mean, variance, skewness, and kurtosis of the underlying may be matched using five branches. Then, we investigate the convergence of the multinomial lattice when the basic time period approaches zero, and prove that the limiting process of the multinomial lattice that matches annualized mean, variance, skewness and kurtosis is given by a compound Poisson process. Finally, we illustrate the effect of higher order moments in the underlying asset process on the price of derivative securities through numerical experiments using the multinomial lattice, and provide a comparison with jump-diffusion models.     

Health and Income Variation – A Panel Data Study on the Developed and Less Developed Economies

In this paper, human capital in the form of ‘health status’ is introduced into a neoclassical economic growth model as one of the main factors differentiating rich and poor countries. Various panel data models are used to examine how health and other growth factors affect average income in different countries. Our main empirical finding indicates that a one-year increase in life expectancy (the health status measure) raises GDP per capita by 0.5–0.9%. Based on this result, a baseline health status can be established to help poor countries achieve a targeted economic growth rate.     

Modes of international activities and the innovativeness of firms: an empirical analysis based on the Japanese National Innovation Survey for 2009

We quantitatively examine the factors which account for differences in innovation output depending on the mode of international activities, employing the innovation accounting framework proposed by Mairesse and Mohnen [2001. To be or not to be innovative: An exercise in measurement. NBER Working Paper No. 8644. Cambridge, MA: National Bureau of Economic Research; 2002. “Accounting for Innovation and Measuring Innovativeness: An Illustrative Framework and an Application.” American Economic Review 92 (2): 226–230]. We find that internationally engaged firms use more innovation inputs and generate more innovation outputs. Firms with R&D establishments abroad show the best innovation performance. A significant part of the higher innovation performance of internationally engaged firms can be explained by their greater intra-firm knowledge spillovers, R&D intensity, perceived competitive pressure, and proximity to basic research. However, more importantly, our innovation efficiency analysis suggests that engagement in international activities increases the sales amount of innovative products though it does not necessarily raise the probability that a firm successfully develops a new product or process.     

Long-term cost-effectiveness of home versus clinic-based management of chronic heart failure: the WHICH? study

Background: The cost-effectiveness of a heart failure management intervention can be further informed by incorporating the expected benefits and costs of future survival.

Methods: This study compared the long-term costs per quality-adjusted life year (QALY) gained from home-based (HBI) vs specialist clinic-based intervention (CBI) among elderly patients (mean age = 71 years) with heart failure discharged home (mean intervention duration = 12 months). Cost-utility analysis was conducted from a government-funded health system perspective. A Markov cohort model was used to simulate disease progression over 15 years based on initial data from a randomized clinical trial (the WHICH? study). Time-dependent hazard functions were modeled using the Weibull function, and this was compared against an alternative model where the hazard was assumed to be constant over time. Deterministic and probabilistic sensitivity analyses were conducted to identify the key drivers of cost-effectiveness and quantify uncertainty in the results.

Results: During the trial, mortality was the highest within 30 days of discharge and decreased thereafter in both groups, although the declining rate of mortality was slower in CBI than HBI. At 15 years (extrapolated), HBI was associated with slightly better health outcomes (mean of 0.59 QALYs gained) and mean additional costs of AU$13,876 per patient. The incremental cost-utility ratio and the incremental net monetary benefit (vs CBI) were AU$23,352 per QALY gained and AU$15,835, respectively. The uncertainty was driven by variability in the costs and probabilities of readmissions. Probabilistic sensitivity analysis showed HBI had a 68% probability of being cost-effective at a willingness-to-pay threshold of AU$50,000 per QALY.

Conclusion: Compared with CBI (outpatient specialized HF clinic-based intervention), HBI (home-based predominantly, but not exclusively) could potentially be cost-effective over the long-term in elderly patients with heart failure at a willingness-to-pay threshold of AU$50,000/QALY, albeit with large uncertainty.     

A supply chain-transport supernetwork equilibrium model with the behaviour of freight carriers

This paper presents a supernetwork equilibrium model integrating supply chain networks with a transport network, namely, a supply chain-transport supernetwork equilibrium model. The model takes into account the behaviour of freight carriers and transport network users to endogenously determine the transport costs generated in the supply chain networks. The interaction between transport network and supply chain networks can also be examined. Results of the numerical tests reveal that the improvement of transport network could enhance the efficiency of supply chain networks. The paper makes contributions to modelling of supply chain networks as well as to that of transport networks.     

A reconciliation between equity and efficiency in public goods economy

Journal of Economics -     

Appropriation Of Returns From Technological Assets And The Values Of Patents And R&D In Japanese High-Tech Firms †

This paper investigates the extent that technological assets contribute to the value of the firm, using the sample of 90 Japanese firms in pharmaceutical, chemical, and electrical equipment industries. We use the firm's R&D expenditures and the number of patents (in stock) as the measures of its technological assets and show that the relative usefulness of these two measures varies across industries. Particularly, Tobin's q is positively related to the technological assets most strongly in the pharmaceutical industry. It is also most sensitive in this industry to the level of patent stock, coinciding with the view that drug patents are more effective than other patents as a means of appropriating returns from innovation. The communications equipment industry is also characterized by its q's dependence on patent stock. In addition, this industry's q is particularly sensitive to the level of net R&D investment in the most recent year, presumably because of the rapid technological progress in this industry.     

Appraising Unhappiness in the Wake of the Great East Japan Earthquake

Considering the case of the Great East Japan Earthquake, we use the experienced‐utility approach to appraise the psychological distress from disaster‐related news. We take advantage of the serendipitous timing of our original nationwide weekly panel survey that became a fitting resource for the investigation of subjective well‐being in the immediate aftermath of the earthquake. Although all of Japanese society was affected, we found geographical heterogeneity between the affected areas (Sendai and Tokyo) and the unaffected areas in terms of mental costs. Our finding reminds us of the focusing effect (Kahneman et al., 2006 ; Dolan and Kahneman, 2008 ) as captured by Schkade and Kahneman ( 1998 ) in the maxim “Nothing in life is quite as important as you think it is while you are thinking about it”.     

A new computational tool for analysing dynamic hedging under transaction costs

This paper highlights a framework for analysing dynamic hedging strategies under transaction costs. First, self-financing portfolio dynamics under transaction costs are modelled as being portfolio affine. An algorithm for computing the moments of the hedging error on a lattice under portfolio affine dynamics is then presented. In a number of circumstances, this provides an efficient approach to analysing the performance of hedging strategies under transaction costs through moments. As an example, this approach is applied to the hedging of a European call option with a Black–Scholes delta hedge and Leland's adjustment for transaction costs. Results are presented that demonstrate the range of analysis possible within the presented framework.