Should we worry about the decline of the public corporation? A brief survey of the economics and external effects of the stock market

In recent years, the number of listed companies has been declining in many countries across the world. This paper provides a selective survey of the literature on the real economic effects of the stock market to assess the potential effects of this decline and determine whether it is likely to continue. The leading economic role of the stock market’s primary market, in which firms raise capital by issuing new shares, is to help growing firms secure financing. We discuss providing and certifying information, coordinating investors, and easing the redeployment of capital as the means through which capital allocation can be efficiently achieved. The main economic roles of the stock market’s secondary market, the trade in existing shares, is to provide liquidity to shareholders, to aid in price discovery and to provide diversification opportunities. Positive external effects from an active stock market may arise for consumers, labor and private firms due to increased corporate investment, more socially responsible business strategies and a more positive business climate. Negative external effects on capital allocation and productivity can arise from short-termism, market mispricing, and increased cross-ownership. Local stock markets can spur innovation and foreign direct investment (FDI) and reduce the risk of early cross-border acquisitions. Given the myriad of useful economic functions the stock market performs, a future entirely absent of public companies is difficult to imagine and the decline is therefore likely at some point to come to an end. Whether we need to worry about the decline depends on the relative importance of the positive and negative external effects, a topic we feel warrants more research.     

The information content of funds from operations and net income in real estate investment trusts

This study compares the information content of funds from operations (FFO) and net income (NI) in the real estate investment trust (REIT) industry. We find that models using FFO explain more of the variance in cumulative abnormal returns around earnings announcement dates than models using NI do. We also find that the information content of FFO differs across REITs of different sizes. FFO does not provide useful information to investors in the case of large REITs. Finally, we show that the gain or loss from sales of property is relevant to valuing large REITs.     

Socio-technical transition governance and public opinion: The case of passenger transport in Finland

As a governance perspective, transition management views the engagement of a wide variety of stakeholders in policy development as a necessary element in furthering sustainability through enhanced social learning. Yet as a literature it has paid relatively little attention to public consultation on socio-technical change. Here we set transition management in the context of longstanding debates in science and technology studies, technology assessment and deliberative democracy. Empirically, we use national survey data on Finnish public opinion of state support for future transport options. Showing how transport practices and attitudes to transport innovation policy vary with both demography and geography, we argue that these differences have implications for policy legitimacy. We suggest that, both given and despite the practical difficulties of deliberative democracy, use of participative opinion surveying to better understand social groups with needs and interests that differ from national averages, may help to enhance policy legitimacy and hence the success of transition management.     

Clustered airline flight scheduling: Evidence from airline deregulation in Korea

This paper explores the impacts of competition level on airline scheduling in the Korean domestic short-haul routes where a hub-and-spoke system is not the optimal air transport network strategy. The empirical findings using the Korean airline panel data for the period 2006–2010 suggest that competition leads to less differentiated departure flight times as expected from spatial competition theory. Unlike the previous study on the U.S airline industry, the degree of this tendency for less differentiation differs across the type of routes: the Jeju island routes (leisure type) and the inland routes (business type), in the deregulated period. Following the May 2008 Deregulation Act we find an increasingly clustered pattern of airline scheduling in the Jeju island routes where there have been competitive pressures associated with new low cost entrants. This recent evidence would imply that airline carriers strategically schedule departure flight times and allocate flights between routes as competition increases in the deregulated period.     

Exploring the green image of airlines: Passenger perceptions and airline choice

During the last few years there has been an increasing trend for companies to market their products or services as green or environmentally friendly as part of their corporate social responsibility. Few studies have analyzed the effects of this recent focus on the environment and its impact on airline passengers. Therefore, we examine passengers' general attitudes towards the green image of different airlines, perceived differences in eco-friendliness among these airlines, and effects on airline choice during booking. We also investigate how passengers' recent experiences with an airline affect perceived eco-friendliness of that airline. In addition we compare passenger ratings of airline eco-friendliness to those published by independent 3rd parties. Our findings show that the green image of airlines does influence airline choice during booking. We observed a passenger willingness to pay extra for a green image, however, not as much as their willingness to pay extra for amenities, such as additional legroom.     

An analysis of the greenhouse gas emissions profile of airlines flying the Australian international market

International commercial flights (with the exception of flights between countries in European Union including Iceland, Norway and Liechtenstein) are currently not subject to greenhouse gas emission reduction regulation. To formulate effective and efficiency policy to manage greenhouse gas emissions from air transport, policy makers need to determine the emissions profiles of all airlines currently flying into their country or region. In this paper, we use 2012 data on airlines' aircraft characteristics, passenger load and cargo load (obtained from statistics reported by Australian Government Bureau of Infrastructure, Transport and Regional Economics) to estimate the volume and carbon efficiency on each international route flying to and from Australia. This is the first study to use actual passenger and cargo load data to determine the greenhouse gas (specifically CO₂) efficiency of airlines operating in the Australian international aviation market. Airlines' CO₂ emission profile is dependent on many factors including but not limited to the aircraft used, payload, route taken, weather conditions. Our results reveal that the airlines’ CO₂ emission profile is not only dependent on the aircraft used and the number of passengers but also the amount of cargo on each flight.     

Voluntary disclosure,greenhouse gas emissions and business performance: Assessing the first decade of reporting

This study explores the empirical relationships between GHG emissions and an extensive range of business performance measures for UK FTSE-350 listed firms over the first decade or so of such reporting. Despite the popular and policy generated environmental imperatives over this period—along with growing evidence of the corporate added-value of having an ‘environmental conscience’, voluntary disclosure of emissions has been slow to adopt by firms. The leading contribution is to present clear evidence of a non-linear relationship, initially increasing with firm performance and then decreasing. An extensive pattern of non-reporting of emissions is also observed over time, and prior literature has introduced questions of endogeneity existing between firm performance and emissions. Steps are taken to ensure confidence/robustness of the results to these concerns. Accordingly, a two-stage (Heckman-type) selection model is used to analyse the emissions-performance nexus conditional upon the firm choosing to report (i.e. treating the choice to report as being endogenously determined with firm performance). From this—in addition to confirming the robustness of the non-linear relationship—it can be observed that the decision to report emissions is not directly influenced by wider social/governance disclosure attitudes of a firm, thus suggesting that firms disassociate environmental responsibility from social responsibility.     

Upzoning and value capture: How U.S. local governments use land use regulation power to create and capture value from real estate developments

The public sector can harness its authority to control land uses to secure valuable public benefits from real estate developments. This paper investigates how five major U.S. cities—Boston, Chicago, New York, San Francisco, and Seattle—are using their land use regulation powers to create and capture value for the public benefit. An analysis of the zoning and entitlement processes of the 20 largest real estate development projects in each city reveals that value has been captured from all 100 projects. Furthermore, these cities implicitly differentiated value capture into two distinct components: value creation and value capture. Among the 100 projects, cities created value for 90 projects by allowing greater density and height—a practice often referred to as “upzoning.” Distinguishing such upzoning incidences from traditional land use exaction tools is important because the added value gives local governments greater legitimacy in asking for public benefits. The experience of the five cities further revealed that value capture strategies can be customized to adapt to unique regulatory, political, and cultural contexts. Lastly, despite the fact that the majority of the upzoned projects increased density and height through project-specific negotiations, none of the cities had clear standards or evaluation frameworks for determining: how much value was created, what can be asked for in return, and who should benefit from the value captured. Cross-national scholarship on value capture can be leveraged to address these important questions.     

Energy efficiency promotion backfires under cap-and-trade

Major climate-cum-energy policies and respective impact projections rest on the widespread belief that increased energy efficiency can be equated with savings in energy use and emissions. This belief is flawed. Due to the rebound effect emissions savings from energy efficiency improvements will be generally less than what is technically feasible, or even be reversed. By means of an analytical general equilibrium model we demonstrate the latter to be true in a case that is both stark and relevant: if electricity generation is subject to a cap-and-trade scheme with partial coverage, increased efficiency of electric devices leads unambiguously to increased carbon emissions. The result implies that a proper distinction between the energy rebound and the carbon rebound is warranted, and that public policy must carefully consider the interactions between energy efficiency promotion and carbon pricing.     

Relationship between city size and firm productivity – A new interpretation using the Chinese experience

This paper contributes to the literature on the relationship between city size and firm productivity by focusing on agglomeration, selection (market competition), and sorting (presence of firms with diverse productivity) effects using Chinese firm-level data for 1998–2013. Contrary to the existing literature, our parametric regression estimates from nearly two million firms show that when the selection effect is controlled, productivity advantage in big cities is reversed. This outcome is explained through a quantile regression showing the existence of left-sided sorting (inefficient firms sort themselves to larger cities) in big cities which is not captured in existing empirical literature. We further find that (1) left-sided sorting is stronger in exporters than non-exporters; (2) is also generated mainly in enterprises with high asset-liability ratios; and (3) selection has a positive effect on firm productivity, suggesting that market competition is key in an explanation of the rapid growth of big cities in China.