Capital Issues Research Articles

A New Transfer Pricing Regime

The authors describe the development of recent amendments to the Malaysian Income Tax Act with regard to transfer pricing, thin capitalization and advance pricing arrangements. They also explain the difficulties faced in practice due to delays by the tax authorities in issuing implementing regulations to cover transfer pricing and thin capitalization issues.

Capital Structure – Does Ownership Structure Matter? Theory and Indian Evidence

Purpose – Based on the agency theory, the purpose of this paper is to theoretically argue and empirically investigate how ownership structure impacts the capital structure of the listed mid-cap companies in India and whether the capital structure as exogenous variable has a role in determining ownership structure as well. Design/methodology/approach – Simultaneity between capital structure and ownership structure is checked through Hausman specification test on endogeneity. Fixed effect panel regression model is used to analyze five years of data (2005-2009) on the sample units, to find the relation between leverage and ownership structure after controlling for profitability, risk, tangibility, growth and size. Findings – Empirical results on Indian firms suggest that the ownership structure does impact capital structure but not the vice versa. Consistent with theoretical prediction empirical results reveal that the leverage is positively related to concentrated shareholding and has a negative relation with diffuseness of shareholding after controlling for profitability, risk, tangibility, growth and size. The findings are consistent with “managerial entrenchment hypothesis” and “pecking order theory” of capital structure. Practical implications – The findings of the paper will enable the practitioners and analysts to understand as to why, in the bank and financial institution-dominated debt financing system in India, leverage is closely associated with concentrated ownership pattern and why retained earning is a preferred vehicle of financing for the firms with diffused shareholding. Originality/value – The results of the study enrich the literature on capital structure, agency cost and corporate governance issues in several ways.

A Reply to “Stranded Capital in Fisheries: The Pacific Coast Groundfish/Whiting Case” (The Comment)

James E. Wilen is a professor in the Department of Agricultural & Resource Economics and director of the Center for Natural Resources Policy Analysis at the University of California, Davis, CA 95616 USA. He is also a member of the Giannini Foundation (email: wilen@primal.ucdavis.edu). 1 Matulich states, “I begin this comment by anchoring the stranded processing capital issue in the literature Wilen anchors it—in the article by Matulich, Mittelhammer, and Reberte...MMR.” This overstates the connection between my article and MMR. To the extent that my article is “anchored” in any literature, it is in the literature on deregulation in non-fishery settings, notably electricity deregulation, as well as the corresponding literature on policy remedies in those cases. I do acknowledge MMR’s role as the source of the conceptual argument behind the stranded capital claims made by West Coast processors. The main issue I raise is empirical; namely whether the conceptual argument laid out in MMR is relevant to West Coast fisheries. A Reply to Stranded Capital in Fisheries: The Pacific Coast Groundfish/Whiting Case (The Comment)

Introduction: Capital & Class at 100

The publication of the hundredth edition of Capital & Class provides us with an opportunity to discuss and debate some of the key issues that have been central to the development of the journal since the first issue was published in 1977. Since then, the world has seen a transformation both in terms of production and political society. We have seen the demise of 'actually existing socialism' and the rise of a neoliberal culture that was initially synonymous with the Thatcher--Reagan years of the 1980s, and later with the subsequent rise of the 'globalization' discourse of the following decades. During this period, the relevance of Marx and Marxism has also fluctuated, with the 'legitimation crisis' of the 1970s providing Marxist analysis with a favourable setting in which to flourish, whilst the 'triumph of capitalism' that was proclaimed in the aftermath of the demise of the Soviet system claimed to have sidelined Marxism as a theoretical project in all but in its most abstract form (Giddens, 1994). In recent years, the work of Marx (if not the influence of Marxism in practical political circles) has certainly made something of a comeback, with both the academic and the popular press attributing new importance to his forms of critique. Capital & Class has retained its status as a forum in which such developments have been documented and debated within and across a variety of academic disciplines. In adopting a multi-disciplinary approach, the journal has opened up and stimulated debate across a wide variety of subject areas. The purpose of this anniversary special issue is to open up some of the ongoing debates that have developed within the context of the journal. This is not to say that these were initiated solely by Capital & Class, but to note that the journal has facilitated such discussions at different points in its history. The first issue of Capital & Class included an article written by the Brighton Labour Process Group, one of the many focus groups that the CSE sponsored in its earlier years (the most notable here perhaps being the London CSE group and its work on the alternative economic strategy, which appeared in Issue 8 in an article entitled 'Crisis, labour movement and the alternative economic strategy'). The Brighton Labour Process Group article, 'The capitalist labour process', provided Capital & Class with its first piece geared towards developing labour process theory (LPT). In this hundredth issue, Paul Thompson provides us with a critical outline of the evolution of LPT and highlights not only its achievements, but also its shortcomings and in particular a lack of engagement with some of the innovations made in the field of political economy. Thompson's suggestion that LPT might have looked towards some of the regulationist schools arguments, of the sort espoused by Bob Jessop, is interesting in a number of ways and also leads us into the next section, 'The State and the Global Economy'. Regulation theory itself provided a Marxist conception of post-Fordism--the condition of which LPT was conceived to contest--that understood the transformation of production that emerged in the 1970s in terms of a change in the regime of accumulation. It was articles by prominent regulationist theorists such as Lipietz and particularly Jessop that led to another significant set of discussions that focused on the nature of the state. The second issue of Capital & Class saw the publication of two articles published that would each invite debates from those rooted in regulationist or Gramscian-inspired theories, and also inspire a separate Marxist school of thought that would become loosely referred to as 'Open Marxism' (Clarke, 1977; Holloway & Picciotto, 1977). Moving beyond the Poulantzas/ Miliband debates that were prevalent in Marxist debate at the time, Clarke argued in 1977 that relations of production should always be the starting point for Marxist analysis (Clarke, 1977: 11), and subsequently called for a move away from 'structural-functional' accounts of the capitalist state and towards understanding the state through the sum of class struggle and the expression of its production. …

Perceptions of Human Capital Measures: From Corporate Executives and Investors

This study compared the perceptions of executives and investors in terms of the importance to disclose human capital measures and their knowledge of those measures. Forty-nine senior-level executives (41% response rate) from service-oriented, public-listed companies in Australia and 33 investors (47% response rate) from various fund management companies responded to our survey. The investors indicated the importance to disclose certain human capital measures more than the executives. The executives appeared to show a better understanding than the investors on indicators such as staff satisfaction index, staff capacity, motivational index, workforce stability, and workforce competence profile. To date, researchers have explored human capital from a piecemeal perspective. A more integrated and multifaceted measure of human capital has the potential to benefit fund managers and executives. Disclosure of value added by employees, composition of staff (full-time, contract, or temporary), staff turnover, average years of experience, and average age of management and operational staff would shed some light on investment decisions for fund managers. Executives could utilize the measures to reflect on an assortment of human capital issues that are relevant to their organizations and stakeholders, especially the investment community. This study proposed a more inclusive measure of human capital by integrating traditional measures of human capital and non-accounting measures (e.g., educational level, experience, and motivation). A comparison of the perspectives of executives and investors revealed preferences for certain information, which can help to improve the perception of transparency and accountability.

Digital Inequality and Place: The Effects of Technological Diffusion on Internet Proficiency and Usage across Rural, Suburban, and Urban Counties*

AbstractRecently researchers have made efforts to reconceptualize digital inequality into discrete levels. These levels reflect access to and diffusion of technologies, proficiency in Internet usage, and propensity to take advantage of the opportunities afforded by information and communication technologies for assistance in daily life. We assess the utility of this approach for studying digital inequality across rural, suburban, and urban counties. Based on data from a 2005 nationally representative random sample telephone survey of 2,185 adults, the results provide mixed support for using this approach to studying digital inequality. In particular, we find that rural residents use Internet technologies less for assistance in helping with economics and other daily activities when compared with individuals from suburban and urban areas; however, our results suggest that this relationship is the product of the slow diffusion of advanced technologies to rural areas. The implications of these findings for understanding this under‐theorized form of inequality are discussed, and we make contributions to this literature through empirically addressing issues of digital capital.

Regulatory Framework to Accommodate Geological Storage of CO2 in Alberta

This article, written by Senior Technology Editor Dennis Denney, contains highlights of paper SPE 121000, "Guidelines for a Regulatory Framework To Accommodate Geological Storage of CO2 in Alberta," by M. Zeidouni, SPE, M. Moore, and D. Keith, University of Calgary, prepared for the 2009 SPE Americas E&P Environmental & Safety Conference, San Antonio, Texas, 23-25 March. The paper has not been peer reviewed. A variety of methods has been proposed to reduce the effects of carbon dioxide (CO2) emissions. One method is CO2 capture and storage (CCS) in geological formations. Despite exceptional CCS potential in the Province of Alberta, Canada, legal and regulatory issues must be resolved to allow implementation. Without changes, there will not be enough certainty to enable the industry to make appropriate decisions that encourage investment. Introduction The Canadian federal government has announced a national objective to reduce emissions nationally by 20% from current levels by 2020, and by 60 to 70% by 2050. Various target levels have been defined for greenhouse-gas (GHG) emissions in Alberta. Alberta is the first province in Canada to introduce legislation to reduce GHG-emission intensity from large industrial sources. Large companies in Alberta emitting more than 100 000 t/a of GHGs will have to reduce their annual emissions intensity by 12%, or they will be charged USD 15/t (all costs are in 2005 dollars) above the 12% target. Alberta claims that it wants to cut its projected GHG emissions in half, by 200 Mt, by 2050. CCS CCS is a process for reducing GHG emissions into the atmosphere by first extracting CO2 from gas streams typically emitted during electricity production, fuel processing, and other industrial process. Once captured and compressed, the CO2 would be transported by pipeline or tanker to a storage site, often to be injected into an underground storage site (or geological formation). Potential sites for geological storage of CO2 include enhanced oil recovery by use of CO2, CO2 storage (CS) in depleted oil and gas reservoirs, replacement of methane by CO2 in deep coalbeds, injection of CO2 in deep saline aquifers, and CS in salt caverns. Among these options, saline aquifers possess the highest potential for CS in Alberta. Preliminary estimates indicate that the capacity of the Alberta basin to sequester CO2 dissolved in the formation waters at depths greater than 1000 m is on the order of 4000 Gt of CO2. Challenges and Deployment High capital costs and regulatory issues are the main challenges to CCS. Although all the components of CCS technology (i.e., capture, transport, and storage) are available and being demonstrated, they are not fully integrated in commercial-scale facilities. The current cost of CCS is USD 65 to 85/t of CO2. This cost is predicted to reduce to USD 20 to 30/t of CO2 after the technology is fully commercialized, which is expected to occur along with technology advancement after 2020. Financial and regulatory support is needed to make this happen. The industry requires policy and regulatory certainty to assess financial risks of carrying on with investment.

Using Ethnic Bonds in Self-Employment and the Issue of Social Capital

This paper considers the role of ethnic bonds as social capital. We use three family case studies of entrepreneurs from minority ethnic groups in the food sector in the UK to explore the complex uses of ethnicity in the pursuit of a better social and economic position. We also consider the ways in which ethnicity and ethnic bonds are often understood and used differently across gender and generation. Although the uses of ethnic bonds are multidimensional and contextual, and at times function to help actors cope with marginality, we argue that they are resources which do not usefully function as social capital unless they additionally provide ways of compensating for structural forms of disadvantage.

The Cultural Turn in International Communication

This summative/programmatic essay outlines how the field of International Communication today is underpinned by a central concern with issues of “culture.” An epistemic model for how to understand this new use of culture is sketched, arguing that the term “culture” operationalizes issues of nationalism, modernism, capitalism, postmodernism and post colonialism. The relationship of this model for media forms such as television is then undertaken. Detailed End Notes engage with relevant literature from the field of International Communication.

Labor and the Logic of Abstraction: An Interview

In this interview, Moishe Postone, author of Time, Labor, and Social Domination, discusses the Marxian critical theory of capitalism against the background of the author's intellectual biography and central historical developments of recent decades. The interview focuses on his reinterpretation of Karl Marx's critical theory, especially on the notion of the historical specificity of the categories that purportedly grasp capitalism and its historical dynamic. It also engages the author's understandings of Georg Lukács, the Frankfurt School, and poststructuralism, while addressing issues of capitalism's historical transformations, its possible abolition, and the reconstitution of progressive politics.

W08-01 An introduction to social cognition and its relationship to mental disorders

A capital issue in human psychology is how individuals understand the actions and emotions of others. But the field of social cognition includes different concepts: the mirror system (that allows us to understand other people’s motor actions and action intentions), “theory of mind” (that allows us to understand more abstract concepts such as beliefs or wishes in others) and empathy (that allows us to understand and share emotions and sensations with others). It is known the difficulties of people with schizophrenia in interpreting social information or the “theory of mind” severe deficit in autist children, but nowdays social cognition can be a new point of view in understanding different psychopathologies, such as social phobia, pure delusional disorder or personality disorders. In regard to schizophrenia, the association between ToM deficit and negative symptoms and disorganization has been shown, whereas the association with paranoid symptomatology seems to be more controversial. A supplementary line for debate has been whether a ToM deficit is a state marker or a trait marker in relation to psychosis. In this workshop we will review the importance of this approach and the main -verbal and non-verbal- instruments used to asses social cognition in clinical practice.

Human Capital Management: What are Boards Doing?

Corporate boards are poorly equipped to deal with human capital management issues. Data from 116 firms show they lack expertise in human resources management and do not get information on the condition of their firms human capital.

Bursty transmission and glue pouring: on wireless channels with overhead costs

Power efficiency is a capital issue in the study of mobile wireless nodes owing to constraints on their battery size and weight. In practice, especially for low-power nodes, it is often the case that the power consumed for non-transmission processes is not always negligible. In this paper, we consider the channels with a special form of overhead: a processing energy cost whenever a non-zero signal is transmitted. We show that under certain conditions, achieving the capacity of such channels requires intermittent, or `bursty', transmissions. Thus, an optimal sleeping schedule can be specified for wireless nodes to achieve the optimal power efficiency. We show that in the low SNR regime, there is a simple relation between the optimal burstiness and the overhead cost: one should use a fraction of the available degrees of freedom at an SNR level of radic2epsiv, where epsiv is the normalized overhead energy cost. We extend this result to use bursty Gaussian transmissions in multiple parallel channels with different noise levels. Our result can be intuitively interpreted as a 'glue pouring' process, generalizing the wellknown water pouring solution. We then use this approach to compute the achievable rate region of the multiple access channel with overhead cost.

The Pricing and Performance of Initial Public Offerings in Australia, 1996-2007: A Comparison of Ordinary, Venture Capital and Private Equity-Backed Issues

This paper examines the pricing and performance of ordinary, venture capital and private equity-backed initial public offerings in the Australian stock market from June 1996 to May 2007. Headline underpricing, underpricing issuer loss, underpricing loss by market value, and underpricing loss by issue price are used to measure underpricing. Cumulative buy-and-hold abnormal returns with equal and value-weighted market indexes, market and book-to-market value quintile adjustments and the Fama-French three-factor model used to compare performance. The measures of underpricing indicate that venture capital and private equity-backed issues are less underpriced than ordinary issues. Further, all three forms of issuance outperform the nominal performance benchmarks. However, there is no statistically significant difference in the risk-adjusted performance of initial public offerings, regardless of backing.

Securenet, Inc.: Series A Round

This case is designed for use in JD/MBA programs or in contexts where mutual understanding of legal and financial issues is required. The case focuses on an entrepreneur in the security-software industry who is attempting to raise a first round of financing in October 2000. The firm was unsuccessful in attracting funding from venture capitalists and has relied on a small seed round and bridge loan from angel investors. The angels have now proposed investing $1.4 million in Series A convertible preferred stock. The entrepreneur must decide whether to accept the angel investors' proposal or revisit the issue of seeking venture capital. The case incorporates the Stockholder Agreement for the proposed Series A round, the capitalization of the company after the seed round, and five years of cash-flow projections for the firm. The case can be used in a law-school setting as a contract-drafting exercise and as an introduction to valuation. In a business-school setting, the case can help students understand the complex contract terms associated with a “plain-vanilla” form of venture capital. Valuation can be taught at an introductory level, or it can be made more complex if students are asked to incorporate “what-if” contract conditions into their analysis.

Earnings Management and Performance of Indian Equity Rights Issues

Earnings management occurs when managers use judgment in financial reporting and in structural transactions to alter financial reports to either mislead some stakeholders about the underlying performance of the company, or to influence contractual outcomes that depend on reported financial performance. Many research studies are conducted to investigate the earnings management in developed economies. Due to regulated operating environment of in India until 1992 earnings management was not a fertile topic for research. But, post-1992 companies are given freedom to price their capital issues. This freedom motivates the issuers to manage their earnings prior to capital issues. The objectives of the study are to investigate if firms in India manage earnings prior to launching of equity rights issues (known as seasoned equity offerings in the USA and Europe) and the post issue performance of the firms. We used discretionary current accruals (DCAs) to measure the extent of earnings management. Modified Jones Model is used to estimate DCAs during three years prior to the rights issue (pre-issue period) and three years after the rights issue (post-issue period). DCAs of rights issue firms are adjusted for DCAs of control sample (non-rights issuers).Adjusted mean DCAs of pre-issue period is compared with adjusted mean DCAs of the post-issue period to detect earnings management. The results suggest that there has been earnings management prior to the rights issues. Analysis of pre-and-post issue performance the sample firms corroborate the findings based on DCAs. Study period is 1993-94 to 2003-04. Sample size is 259.

Rise and Fall of Capital Markets in Brazil, the Experience of the 90's (Ascensao e Declinio do Mercado de Capitais no Brasil - a Experiencia dos Anos 90)

The Brazilian capital markets, in special the stock market, apparently had great development in the 90's - mainly when one considers market capitalization, traded volume and new issues. However, several signs of decline appeared at the end of the decade - decline in volume traded and new issues. High interest rates, ADRs and CPMF (tax on financial transactions) are commonly blamed for this reversion. This article presents another diagnosis. It shows that the referred development was illusionary since 1) the number of public firms was declining since the beginning of the decade, and 2) market concentration was increasing (i.e., only a small number of firms took advantage of the expansion). Some elements indicate that the low protection for minority investors is one of the reasons for the atrophy of the Brazilian capital markets.

Bell, Daniel A., Beyond Liberal Democracy: Political Thinking for an East Asian Context

For over a decade, Daniel Bell has been a pioneering figure in the study of democracy and human rights in an East Asian context. This remarkable book takes his study to a new level. Bell offers a critical examination of the “uniquely parochial” Western liberal democracy, which has been promoted to various parts of the world as universally valid regardless of local conditions. Based on years of first-hand experience and knowledge of East Asian societies, Bell proposes a rather ambitious alternative model of democracy that would suit a land under the long-lasting influence of Confucianism. The book opens with a critical reflection on Ronald Dworkin’s 2002 visit to China. During that visit, Dworkin “unilaterally believed that his China tour was a valuable opportunity for China to be privy to his ideas of liberty” (2). He showed no sensitivity to China’s cultural tradition and demonstrated no knowledge of China’s social context and its recent substantial improvement of legal practice. In the meantime, he was taken for a ride by the Chinese government to showcase China’s new freedoms. Dworkin’s case is a good example of showing the superficiality of some Western scholars’ attempt to force their “parochially developed” ideas of Western liberal democracy on East Asia in a “one size fits all” style. It calls urgently for a close examination of democracy and human rights in the Chinese context, an examination that comes not out of ignorance and arrogance. Calling for a culturally sensitive approach, Bell offers this much needed alternative. He argues that there are morally legitimate alternatives to Western-style liberal democracy in the East Asian region. Democracy in East Asia does not lie simply in implementing Western political ideas and practices; it involves drawing upon East Asian cultural resources and political realities. The art on the cover of the book says it all: an American Statue of Liberty holding a copy of Confucius’s Analects! The book is divided into three parts. Part One discusses human rights in an East Asian context. Part Two explores democracy in an East Asian context. Part Three investigates issues of capitalism in an East Asian context. The book ends with the author’s responses to critics, an interesting addition to the main body of the book. Following the Introduction, Part One begins with Chapter 2 on general Confucian principles of good government and Dao (2008) 7:99–102 DOI 10.1007/s11712-008-9044-2

Managing children with neurofibromatosis type 1: what should we look for?

Neurofibromatosis type 1 (NF1) is one of the most common neurocutaneous disorders. It is an autosomal dominant hereditary condition, although an half of all cases are related with spontaneous mutations. Mutations within NF1 gene (c17q11.2) result in loss of function of the protein neurofibromin leading to increase cell proliferation and tumorigenesis. NF1 is a variable condition concerning its clinical manifestations. It may also present different complications through life--a capital issue to pediatric management. Descriptive, retrospective, study based on clinical notes of patients with NF1 referred to Unidade de Neuropediatria e Desenvolvimento--Hospital Garcia de Orta, between 1992 and June of 2005. Diagnostic criteria were those of National Institute of Health Consensus Development Conference. Thirty-five patients were included (20 male,15 female). Age distribution: <3-year-old--4; 3-6 year-old--3; >6-year-old--28. NF1 diagnosis was proposed at the mean age of 4,7 year-old. Patients were referred for assessment mainly for "café-aulait" spots. Other motives included: first-degree relative with NF1, cutaneous neurofibroma, plexiform neurofibroma, tibia's pseudarthrosis, headaches, seizures, failure to thrive and learning disabilities. Diagnostic criteria included: café-au-lait spots (35/35), first degree relative with NF1 (22/35), axillary or inguinal freckling (9/35), neurofibromas (5/35), iris Lisch nodules (4/35), optic glioma (3/35), dysplastic bony lesions (3/35), plexiform neurofibroma (2/35). Three patients presented short stature and 11/35 macrocephaly. MR imaging revealed unidentified bright signals (UBO's) in 12 cases. Cognitive and psychological evaluation was performed in 12 cases. Mean IQ was 87. Attention-deficit-hyperactivity disorder was present in 40% (14/35) of all cases. Learning disabilities were identified in 48% of cases however only nine children had specifically educational programming. Visuospatial deficits were present in 5/35 children, reading deficits in 4/35, graphomotor deficits in 4/35, language deficits in 3/12 and dyscalculia in 3/12 cases. Three children presented emotional disturbance and other three children social skills deficits. Management of children with NF1 should focus on complications related with its multiple clinical manifestations, some of them age-dependent. It should also involve careful neuropsychological evaluation and observe the development of social skills. A high suspicion and an early intervention are essential to prevent a poor social functioning and outcome.

The Pricing and Performance of Initial Public Offerings in Australia, 1996-2007: A Comparison of Ordinary, Venture Capital and Private Equity-Backed Issues

The Pricing and Performance of Initial Public Offerings in Australia, 1996-2007: A Comparison of Ordinary, Venture Capital and Private Equity-Backed Issues