Herfindahl Research Articles

INVESTIGATING THE RELATION OF SYSTEMATIC RISK AND THE HERFINDAHL INDEX WITH THE COST OF STAKEHOLDERS’ EQUITY

Customers for company managers are their most important asset, so they consider communication with customers as a beneficial interaction. Indeed, all customers play an equal role in the success of organizations. When most markets are mature and getting new customers is difficult, companies have an urgent need to maintain loyal and key customers so that acquiring a new customer, as experts say, costs six to nine times more than keeping current customers. This research determines the relationship between the Herfindahl index, systematic risk, and the cost of stakeholders’ equity. Its statistical population consists of companies admitted to the Tehran Stock Exchange. 119 companies as sample population were selected from the statistical population (510 people) by stratified random sampling method. The results showed a relationship between the Herfindahl customer index and the cost of stakeholders’ equity. There is also a relationship between systematic risk and the cost of stakeholders’ equity. Such a reaction by investors can be because of the asymmetry of information. Their reaction to changes in cash is not because of the profitability of investments and the growth rate of companies in the coming years, but only for the financial limitations of companies.

The Structure-Conduct-Performance Paradigm in the Indonesian Manufacturing Industry

This study examines the structure, conduct, and performance (SCP) of the Indonesian manufacturing industry, contributing the most to the national economy from 2017 to 2021. The research employed SCP analysis, which entails evaluating market concentration using the Herfindahl Hirschman Index (HHI) and analyzing market performance and industry behavior utilizing literature reviews. Based on Indonesian Central Statistics Agency groupings, the sample data covers 23 sub-sectors of the manufacturing industry. The results of the HHI calculations also show that the concentration of the manufacturing industry market is at a moderate level, mergers and acquisitions that result in moderate market concentration of HHI enhancements will raise anti-competitive concerns and will require further analysis and often require scrutiny. Hence, requiring proper supervision and strategy in developing competitiveness amidst global uncertainty. The conduct and performance of the manufacturing industry show an effort to grow better amid fairly tight global competition. Therefore, it is necessary for a number of parties to play a part in boosting productivity and the competitiveness of goods produced by the manufacturing sector. Governments should reduce their direct intervention in the market by implementing industrial policies and seeking market-oriented policy means to influence the economy.

THE IMPACT OF PORTFOLIO DIVERSIFICATION ON THE PROFITABILITY OF LICENSED COMMERCIAL BANKS IN SRI LANKA

Licensed commercial banks are essential for ensuring the stability of any country's financial system. According to the 2022 annual report of the Central Bank of Sri Lanka (CBSL), licensed commercial banks collectively held fifty-five percent of total assets. Portfolio diversification stands as a fundamental strategy for mitigating risk and enhancing returns in the banking sector. Thus, this study aims to investigate the relationship between portfolio diversification and profitability within the realm of licensed commercial banks operating in Sri Lanka. The researcher set out to achieve two research objectives by examining the correlation between the diversification index and profitability. Return on Asset and Return on Equity were used as measurement criterion of profitability. The dependent variable, portfolio diversification, was measured using a diversification index derived from the Herfindahl-Hirschman Index (HHI). A sample of ten listed banks was selected out of twenty-four licensed commercial banks. Secondary data were collected from the annual reports of ten listed commercial banks for the period of 2012 – 2022. A fixed effect model was selected among panel data regression models after conducting the F test, LM test, and Hausman test. The study's findings indicate that the diversification index has an insignificant negative impact on ROA and a significant negative impact on ROE. The equity ratio of banks has a negative, insignificant impact on both ROA and ROE. Bank size has a significant and negative impact on both ROA and ROE. Therefore, the findings of the study demonstrate that diversification negatively impacts both ROA and ROE. The findings from this study hold significant implications for both banking institutions and policymakers in Sri Lanka. Understanding the relationship between portfolio diversification and profitability can inform strategic decision-making within banks, guiding them towards more effective risk management practices and resource allocation strategies. In essence, this study contributes to the existing literature by offering empirical evidence and theoretical insights into the impact of portfolio diversification on the profitability of licensed commercial banks in Sri Lanka.

Market Concentration and Firm Value

In this study, we examined the relationship between market concentration using the Herfindahl-Hirschman index and firm values among listed companies in both the markets for the period 2011–2020. We found a negative association between market concentration and firm value. This relationship was mitigated by such factors as dividend payments, auditor size, and financial reporting opacity. This study contributes to the existing literature by corroborating the influences on firm value and addressing the prevailing research paradigm suggesting that market competition is a mechanism for overseeing managerial behavior (i.e., an external corporate governance structure).

Research on the impact of virtual agglomeration of the Chinese manufacturing on the efficiency of enterprise technological innovation

ABSTRACT The virtual agglomeration of manufacturing realises the ubiquitous connection and efficient allocation of technological innovation resources, and becomes a new driving force for improving the technological innovation efficiency of enterprises and building a strong manufacturing country. This paper constructs a theoretical framework to investigate the impact of the specialised and diversified virtual agglomeration of manufacturing on the efficiency of enterprise technological innovation. This paper uses the adjusted location entropy and the Herfindahl-Hirschman index to measure the level of specialised and diversified virtual agglomeration of manufacturing. Using Chinese manufacturing data (2008–2021), empirical tests confirm that the specialised and diversified virtual agglomeration of manufacturing can improve the efficiency of enterprise technological innovation. Additionally, the mechanism test results show that the specialised virtual agglomeration of manufacturing improves the technological innovation efficiency of enterprises through competition and knowledge spillover, and the diversified virtual agglomeration improves the technological innovation efficiency of enterprises through knowledge spillover. However, the effect of specialised virtual agglomeration of manufacturing on the efficiency of enterprises` technological innovation will be adjusted by the age of enterprises. These results are pivotal for understanding the realistic path of virtual agglomeration of manufacturing to improve the technological innovation efficiency of enterprises.

Hospital Patient Experience: Exploring Hospitals as Shifters and Sustainers Over Time.

Patient experience is a key factor in measuring hospital performance, and the Hospital Consumer Assessment of Healthcare Providers and Systems survey tool is used to assess patient perceptions. Hospitals with positive patient experience tend to have a better quality of clinical care, lower readmission and mortality rates, and an overall shorter inpatient length of stay. Studies have identified several organizational determinants of high- and low-rated patient experiences, including hospital size, type, staffing levels, and patient demographics.This study aims to explore the determinants of consistently high- and low-rated patient experience, as well as factors associated with positive and negative changes in patient experience over time. The 2014 to 2019 American Hospital Association annual survey and the Centers for Medicare and Medicaid Services Hospital Value-Based Purchasing database were used. A total of 2801 acute-care hospitals were included in this study. A series of multivariate logistic regressions were used to model the probability of "1" (being a superior hospital or an inferior hospital). In addition, a generalized linear mixed model for binary responses was used to analyze the change (probability of positive and negative change). The results showed that most hospitals did not sustain superior or inferior performance, and competition decreased the likelihood of a hospital consistently performing well in terms of patient experience. Superior performance was associated with hospital ownership (P <.001), size (P =.026), location (P =.002), teaching status (P =.009), average Herfindahl-Hirschman Index value (P =.005), and Medicaid and Medicare patient population. On the other hand, inferior performance was associated with hospital ownership (P =.003), size (P <.001), teaching status (P =.003), safety net status (P =.020), and Medicaid and Medicare patient population. This study aimed to examine the trends in hospital patient experience performance and the influence of hospital organizational characteristics on those trends. Our findings allow us to question the widely held belief that patient experience is a metric of differentiation and industry competition, suggesting that performance in this domain has not been utilized by most hospitals as a source of sustainable competitive advantage. The findings from this study highlight the importance of considering changes in performance over time and the need for significant organizational efforts to improve hospital performance in terms of patient experience.

Market Structure as a Vehicle for its Plasticity: an Introduction to the International Cachaça Market from the Perspective of the Industrial Organization Paradigm

Objective: The objective of this study was to present how market structure serves as a vehicle for market plasticity. To achieve this objective, the example of the international cachaça market was used. Theoretical Framework: To understand the structure, we utilized the theory of the Industrial Organizations paradigm. This paradigm specifically considers three areas of concentration for its study efforts: the firm, the markets, and the industries. Method: Using secondary data provided by the English beverage magazine Millionaires, a quantitative study of the distilled beverages market, and more specifically the Brazilian cachaça market, was developed. For the empirical study of the market, measures used included the Concentration Ratio (Cr), the Herfindahl-Hirschman Index (HHI), and the Theil Coefficient (ET). Results and Discussion: In the direct competition of the international distilled beverages market, the cachaça industry stands out with 55.71% of the total market. In terms of concentration in the international distilled beverages market, the concentration ratio (Cr) of the four largest companies was 59.76%, indicating a moderately competitive market. The HHI (Herfindahl-Hirschman Index) was 928.99, which suggests a competitive market according to the standards of the U.S. Department of Justice. The Theil Coefficient (T) was 0.92, indicating a low concentration market. Research Implications: Supported by the Structure-Conduct-Performance approach, Industrial Organization enabled the identification of some dynamics of the cachaça market in this study. Finally, we believe we have contributed to the understanding of the structure of the international cachaça market and some of the influences of this structure on market plasticity. Originality/Value: As presented in this study, the market structure denotes the potential to reshape the market, promoting responses to the actions of its players.

ANALYSIS OF THE MARKET STRUCTURE OF HOSPITAL INDUSTRY IN INDONESIA

Background: Over the past decade, private investments in health care including hospital have grown significantly, more than doubling. As the number of hospitals in Indonesia increases, a competitive business environment develops. Identifying hospital market structure can help various stakeholders to optimize the hospital's performance. Aims: This study analyzed the market structure and concentration of the hospital industry in Indonesia. Methods: This study used hospital characteristics data from Ministry of Health of Indonesia that retrieved in October 2020. Market concentration is determined by the number of industry players operating in a market, the distribution of services, and the types of services offered. The hospital market concentration was identified by measuring the Concentration Ratio (CR) and the Herfindahl–Hirschman index (HHI). Results: The results showed that the market share of hospitals in Indonesia was still dominated by government hospitals, which represent 51.4% of the market share. The concentration ratio of four companies (CR4) remains &lt;40, indicating that competition remains relatively open among private hospitals at the national level. Conclusion: Several cities have established hospital markets that are characterized by robust competition, whereas in other cities, the hospital industry remains oligopolistic or monopolistic. It is important to note, however, that this does not imply that the market structure is ineffective on account of competition; rather, it is the result of a scarcity of hospitals in a number of Indonesian cities. Keywords: Concentration ratio, Economic competition, Herfindahl–Hirschman Index, Hospital market

Assessing Productivity Dynamics in the Indian Pharmaceutical Industry: A Comparative Analysis of the Foreign and the Domestic Ownership Influences

This study investigates the impact of competition (foreign vs. domestic) on the total factor productivity of domestic firms. We used two specific indicators to measure foreign and domestic competition in the Indian pharmaceutical industry: market shares and The Herfindahl-Hirschman Index, constructed for a five-digit NIC level, highlighting the intensity of product-level competition. The Levinsohn and Petrin methods calculate the total factor productivity, and dynamic panel data estimators are applied to estimate the model. The research findings indicate that foreign presence has a notable and statistically significant influence on the productivity levels of domestic firms. In contrast, the impact of domestic competition is found to be inconsequential. This research addresses the policy debate by providing convincing evidence that the existence of Multinational Enterprises (MNEs) can increase local business productivity through knowledge spillovers and competitiveness.

Does hospital competition improve the quality of outpatient care? - empirical evidence from a quasi-experiment in a Chinese city

BackgroundAlthough countries worldwide have launched a series of pro-competition reforms, the literature on the impacts of hospital competition has produced a complex and contradictory picture. This study examined whether hospital competition contributed to an increase in the quality of outpatient care.MethodsThe dataset comprises encounter data on 406,664 outpatients with influenza between 2015 and 2019 in China. Competition was measured using the Herfindahl-Hirschman index (HHI). Whether patients had 14-day follow-up encounter for influenza at any healthcare facility, outpatient facility, and hospital outpatient department were the three quality outcomes assessed. Binary regression models with crossed random intercepts were constructed to estimate the impacts of the HHI on the quality of outpatient care. The intensity of nighttime lights was employed as an instrumental variable to address the endogenous relationship between the HHI and the quality of outpatient care.ResultsWe demonstrated that an increase in the degree of hospital competition was associated with improved quality of outpatient care. For each 1% increase in the degree of hospital competition, an individual’s risk of having a 14-day follow-up encounter for influenza at any healthcare facility, outpatient facility, and hospital outpatient department fell by 34.9%, 18.3%, and 20.8%, respectively. The impacts of hospital competition on improving the quality of outpatient care were more substantial among females, individuals who used the Urban and Rural Residents Basic Medical Insurance to pay for their medical costs, individuals who visited accredited hospitals, and adults aged 25 to 64 years when compared with their counterparts.ConclusionThis study demonstrated that hospital competition contributed to better quality of outpatient care under a regime with a regulated ceiling price. Competition is suggested to be promoted in the outpatient care market where hospitals have control over quality and government sets a limit on the prices that hospitals may charge.

The impact of Chinese volume-based procurement on pharmaceutical market concentration.

Optimizing the pharmaceutical industrial structure is the key mission of China's healthcare reform. From the industrial structure perspective, this study empirically evaluated the impact of China's national volume-based procurement (NVBP) policy on market concentration in the hospital-end drug market. This study used drug procurement data of China's public medical institutions which obtained from the national database. A quasi-natural experiment was designed involving eleven pairs of matched treatment-control region combinations, with NVBP policy as the intervention measure. The market was defined by drug name (molecular boundary) and city/province (geographical boundary). Market changes were measured from three dimensions: the number of enterprises and products, market share, and Herfindahl-Hirschman index (HHI). Dual comparison approach and difference-in-difference (DID) method with fixed effect model were applied to quantify policy impacts. The number of enterprises and products decreased by 18 and 83 in pilot regions after NVBP policy, far more than the decreases in control regions (6 and 21). The accumulative market share of 15 bid-winning enterprises increased by 53.67% in volume and 18.79% in value, among which the increment of enterprises with low baseline market share was more prominent (66.64% and 36.40%). Among three enterprise types, the market share of generic consistency evaluation (GCE) certificated generics significantly increased, GCE uncertificated generics significantly decreased, and originators slightly decreased. DID models indicated significantly positive impact of NVBP policy on market concentration, with HHI-volume and HHI-value increasing by 49.33% (β = 0.401, p < 0.01) and 21.05% (β = 0.191, p < 0.01). The implementation of NVBP promoted the intensive drug circulation and supply of Chinese public hospitals, intensifying the exit of GCE uncertificated generics from the hospital-end market. NVBP combined with GCE standards significantly improved market concentration, which brought a positive signal of pharmaceutical industrial structure optimization in China. In the future context of normalized and institutionalized NVBP, the balance should be further sought between low drug prices and reliable hospital drug supply, sustainable industry development.

Economic concentration in the Russian leasing market

Aim. To determine the degree of concentration of the leasing market in Russia.Objectives. To calculate the leasing market concentration index; to assign the level of monopolization to each of the leasing market segments and justify the difference in the obtained levels; to formulate promising directions for further study of the leasing market concentration.Methods. The author used empirical and analytical methods of research. The author calculated the Herfindahl-Hirschman index to determine the level of concentration of the market as a whole and in terms of segments to verify the hypotheses put forward in the research about the presence of monopolization in the market of leasing services in Russia and different levels of concentration in the segments of the leasing market.Results. The market of leasing services in Russia is not highly concentrated, despite the presence of major players that occupy a significant market share: the top-3 account for about half of the market volume, the top-10 — 80%. In segments that do not require large amounts of financing, such as special equipment, buses and trolleybuses, and trucks, there is insignificant market concentration. Segments with larger deals, such as real estate, aviation transport, ships (sea and river), are highly concentrated.Conclusions. Contrary to the opinion of some market participants about strong concentration of the leasing market, there is no such concentration in the Russian market. High concentration exists only in the segments in which the average transaction check exceeds the capacity of a number of small lessors to provide financing.

Diversity of Primary Energy Production in India- A Study for the Period 1970-2022

The diversity of energy production is vital for India's sustainable development. It enhances energy security, economic stability, environmental sustainability and resilience to climate change. By investing in a variety of energy sources and technologies, India can ensure a reliable, affordable, and sustainable energy supply for its growing population and economy. India is mostly dependent upon coal for its energy production and consumption. When we consider only primary energy sources, India produced 79.6 % of energy from coal and consumed 52.89 % of energy from coal in 2020. In this paper we have studied about the energy diversity of India based on primary energy sources using data for 53 years (from 1970 to 2022). We have used the four types of primary energy sources i.e., coal, lignite, crude oil and natural gas. We have used different indices [Shannon-Weiner Index (SWI), Herfindahl-Hirschman Index (HHI), Weighted_SWI (D_SWI) and Weighted_HHI (D_HHI)] to find the Energy Diversity Index of India. From the result, we have found that energy diversity of India is very low due to high dependency upon coal and also the index is falling which is of concern in regard to energy security of India.

Climate Induced Factors Affecting Income Diversification in Flood-Prone Areas of Punjab, Pakistan: An Application of Income Diversification Herfindahl Index

Climate Induced Factors Affecting Income Diversification in Flood-Prone Areas of Punjab, Pakistan: An Application of Income Diversification Herfindahl Index

The role of storage in energy security performance based on diversification and concentration for distributed energy systems

This work addresses the use of diversification and deconcentration strategies of primary sources of energy supply for the multi-objective design of distributed generation systems based on renewable sources. The Shannon–Wiener and Herfindahl–Hirschman indices are proposed as optimal design objectives. The utopia-tracking method is used to identify trade-offs between the total annual cost of the system and the efficiency of the storage system. The storage system is included in the assessment of diversification and deconcentration due to its functions as a backup unit in the event of adverse system operating conditions. Cases of interconnected and off-grid systems are addressed. The results show that, by including the storage system, an over-diversification of supply sources is generated and that, in the absence of various sources, as occurs in off-grid systems, storage generates sufficient flexibility to reach a trade-off among economic performance, diversification of supply sources and energy efficiency. The robust nonlinear programming model is fed with real data from a residential building.

Impact of Risk and Competition on Indonesian Islamic Bank Performance: Panel Data Evidence

This paper examines the impact of banking risk and competition on the performance of Islamic banks in Indonesia. The study used financing to deposit ratio (FDR) as a representation of liquidity risk, non-performing financing (NPF) as a representation of financing risk, and the operating expense ratio (BOPO) as a representation of operational risk. Regarding competition, market share (MS) and market concentration (MC) proxies by the Hirschman–Herfindahl Index (HHI) were used. Time series data were collected from 14 Islamic banks operating in Indonesia for the period 2010–2020 and the Least Square method was used. It was found that liquidity risk affects positively the profit of Islamic banks, while financing risk and operational risk impact negatively the variation of the profit. Only market share, influences the variation in the profit of Islamic banks in terms of competition level. Therefore, the Indonesian government should apply a competition policy to the Islamic banking sector in order to increase their profitability and improve economic growth. For future research, it is recommended to include other Islamic finance institutions like Islamic rural banks and Islamic takaful (Islamic insurance) to analyse these effects in a general way.

The Effect Of Retrenchment Policy On Financial Recovery Of Hospitality, Restaurant and Tourism Sub-Sector Companies During The Covid-19 Pandemic

The purpose of this study is to investigate how retrenchment practices affected the company's ability to recover financially from the Covid-19 pandemic in the years 2020–2022. The population in this study were all (41) hotel, restaurant and tourism sub-sector companies listed on the Indonesia Stock Exchange with a research sample of 27 companies. Logistic regression analysis was employed as the data analysis technique in this study. The return on assets change index is used to quantify the financial recovery. The assets retrenchment variable is measured using the assets retrenchment ratio formula and the expenses retrenchment variable is measured using the expenses retrenchment ratio formula. Meanwhile, the downscoping variable is measured using the Herfindahl index. The results of this study indicate that assets retrenchment and expenses retrenchment have no effect on financial recovery. Meanwhile, downscoping has an effect on financial recovery.

Institutional Ownership and Concentration of Capital in Pharmaceutical Companies: Evidence from Iran

Background: Institutional owners influence the direction of policy and the performance of owned companies. This research was motivated by the presence of pharmaceutical companies in the Tehran Stock Exchange and the uncertainty surrounding the extent and influence of institutional owners on the policy direction and performance of the companies. Methods: This was a descriptive-analytical and cross-sectional study. The descriptive phase of the study involved measuring sales figures, market value, and market share of pharmaceutical companies listed on the stock exchange. In the analytical phase, the network of shareholders' relationships was analyzed with Gephi version 0.1 and Microsoft Excel version 2016, followed by the calculation of the capital concentration index and market share. Results: Estimates indicated that approximately 45% of the pharmaceutical companies in Iran were publicly traded in stock exchange. In 2020, the total value of these companies in the Iranian capital market reached 9.79 billion USD. Out of this amount, 45% (equivalent to 4.4 billion USD) was offered in Tehran Stock Exchange. The concentration of final shareholders, with a Herfindahl–Hirschman index(HHI) index of 0.036, signified a monopolistic competition market. On the other hand, the pharmaceutical capital market could be classified as an oligopoly market (with a value of 58.3) when analyzing only the direct shareholders at level 2. Additionally, the six main holding companies at this level collectively possess 67% of the pharmaceutical capital market. Conclusion: Based on the results, the importance of institutional owners, such as the Social Security Organization (SSO), in the decision-making process regarding the Iranian pharmaceutical market can be acknowledged. The decisions about integration and supply chains which aimed at improving the productivity of the pharmaceutical market, need to be thoroughly examined by the institutions mentioned in this research.

Towards monopolistic music promotion: an analysis of North American concert tours

ABSTRACT The music industry, and in particular the recording and publishing sectors, has historically been controlled by a handful of large firms. In recent years, this tendency towards concentration appears to have spread to the promotion sector as well. Using a Herfindahl-Hirschman Index (HHI) together with other North American tour industry figures, this study investigates the impacts of rising concentration in music promotion between 2010 and 2019. The results show a steady rise from moderate to high-level concentration over that time frame in large part driven by Live Nation alone. This rising concentration was found to be associated with higher prices for fans, bigger productions, less risk taking from promoters and more homogenous offerings, consistent with known monopolistic behaviours. Implications for theory and policymakers are suggested in closing.

Corporate Governance in Listed Firms: Does Market Competition Make a Difference?

Corporate Governance in Listed Firms: Does Market Competition Make a Difference?