Market-based Structure Research Articles

The effect of ownership concentration on firm risk and value: evidence from Germany

Aim: This paper aims to understand the effects of between ownership concentration on firm risk and value.
 Design / Research methods: The author focuses on the largest publicly listed 91 German corporations in the time period 2010 to 2021. The resulting sample contains between 928 and 1051 observations and is analysed through a pooled OLS regression analysis. Ownership concentration is measured in terms of the number of blockholders, the size of the largest shareholder, and the Herfindahl Index of the ten largest shareholders. Firm value is captured with Tobin’s Q and firm risk is computed as the annualised daily stock price volatility.
 Conclusions / Findings: It is found that ownership concentration affects firm risk significantly negatively. Moreover, results suggest an inverse U-shape relationship between ownership concentration and firm value. This relationship can be explained by combining the negative effects of rising ownership concentration on firm risk with its implications for the creation of firm value.
 Originality / Value of the article: The German market has used to have a network-like structure with a concentrated ownership structure. However, over the past two decades, it transformed towards a more Anglo-Saxon-like and market-based structure with a rather dispersed ownership structure. Furthermore, factors which govern the relationship between ownership concentration are used to explain parts of the relationship between firm value and ownership concentration in a new way, thereby adding value to understanding the latter, highly debated, relationship.

Does the impact of geopolitical risk reduce with the financial structure of an economy? A perspective from market vs. bank-based emerging economies

In this paper, we investigate if negative effect of geopolitical risk on economic growth reduces with the financial structure of emerging economies. Although previous studies do not find market-based structure to boost economic growth, we cast a light upon why countries still opt for shifting to that structure. We mainly utilize panel autoregressive distributed lag (ARDL) for the period between 1985 and 2021 and employ country-based geopolitical risk (GPR) indices for 15 emerging markets. Findings depict that market-based structure reduces negative impact of geopolitical risk on economic growth, which might be attributed to increasing transparency and hence investors feeling less hesitant in investing market-based economies. On the other hand, we also show that market-based system reduces the adverse effects of GPR on consumption, whereas bank-based system has the same effect on investment growth in the long-run. Therefore, our paper asserts that the financial system is not irrelevant in terms of growth perspective, if the geopolitical risk is a key factor for an emerging country.

Financial Structure and Stability: An Empirical Exploration

Abstract This paper attempts to investigate empirically whether financial and macroeconomic stability of economies are significantly affected by the structure of their financial systems, viz., bank-based and market-based structures. Using panel data estimations based on data from 82 countries for the period of 1996-2012, we find that in general, bank-based financial system contributes significantly to instability of the financial sectors and currency market. We also find some evidence that within the bank-based structure, higher presence of foreign banks is positively associated with currency market pressure. Additionally, the results show that the choice of bank-based versus market-based financial structure is important for low income countries. Banks in low income countries contribute to exchange market pressures whereas stock markets leads to reduction in such pressure. In high income countries, stock markets do not significantly affect banking and currency market instability.

“Ethical capitalism” in the city: Embedded economy or marketization? The case of social impact bonds

ABSTRACT This paper offers a cultural political economy approach to efforts to advance the “social investment market” as a specific crisis management strategy in response to the economic crisis of 2008. Analyzing social impact bonds (SIBs), it looks at efforts to combine market mechanisms with new notions of public responsibility, and structures of accountability often described as “ethical capitalism” today. Three central claims are interrogated, both as forms of framing and resolving the crisis. First, the paper is concerned with SIBs’ approach to socio-economic polarization through the development of preventative services focused on creating “social impact.” Second, it focuses on their efforts to avoid exacerbating the state’s fiscal crisis by allowing for private investment in public services. Third, the analysis shows how SIBs intend to counter the economic problem of slow and uneven growth with its idea of creating “shared value” between society and investors. The text is based on empirical case research into two of the world’s first two SIBs, seeking to reduce prisoner re-incarceration in New York City and Peterborough, UK. It analyzes policy papers and 30 interviews conducted with policy actors, to reconstruct the SIB as an asymmetrical, contradictory, and provisional compromise between actors holding divergent policy agendas. Drawing on Nancy Fraser’s concept of “progressive neoliberalism,” it shows how SIBs combine notions of public responsibility with market-based structures of a profit-oriented economy, thereby limiting the effort to re-embed the economy in society. Connecting empirical research to theory, it describes a complex process of negotiation on the conflicted terrain of city politics, between efforts to extend market governance on the one hand, and those initiatives seeking to overcome it, on the other.

Financial Structure and Systemic Risk of Banks: Evidence from Chinese Reform

Using Chinese data from 2006 to 2014, we find that a shift in the financial structure towards a more market-based structure can reduce the systemic risk of the banking sector. One transmission channel through which this occurs is the improvement in an individual firm’s debt repaying capacity, which is positively influenced by the development of stock markets. Another channel is the enhanced credit monitoring of borrowers by banks, owing to their slower credit growth. Our results imply that the shift toward market-based financial structure could lead to the development of financial market as well as the enhancement of the stability of an economy.

The relationship between insurance and banking sectors: does financial structure matter?

This paper employs panel data of 36 countries over the period from 1980 to 2015 to investigate whether financial structure matters for the linkage between the insurance and banking sectors. Panel co-integration tests find that the significant relationship varies across different financial structures. Specifically, a developed financial system and market-based structure reinforce their long-run linkage. Panel Granger causality tests show that the market-based structure strengthens the insurance–bank nexus for the financially underdeveloped group of countries and that a financially developed system is conducive to realising a short-run dynamic linkage for a bank-based economy. More importantly, the linkages between insurance and banking sectors can be complementary or substitutive, depending on the relative importance of risk transfer and capital allocation in the insurance market. These findings offer useful insights into achieving the two sectors’ co-evolution and further provide some evidence from the market-based and financial services viewpoints.

Distributed Optimal Control of Smart Electricity Grids With Congestion Management

In this paper, we consider the balancing problem in a hierarchical market-based structure for smart energy grids that is based on the Universal Smart Energy Framework. The large-scale introduction of renewable, intermittent energy sources in the power system can create a mismatch between the forecasted (day ahead) and the actual supply and demand. Without a proper control strategy, this deviation could lead to network overloads and commercial losses. We present a multilevel distributed optimal control formulation to the problem, in which the appliances of prosumers that can provide flexibility are optimally dispatched based on local information. The control strategy takes the capacity limitations of the distribution network into account. We provide example simulation results, obtained by distributed model predictive control.

The river basin as a new scale for water governance in transition countries? A comparative study of Mongolia and Ukraine

While various studies on river basin management (RBM) in industrialized and developing countries exist, limited attention has so far been paid to RBM in transition countries, i.e., countries that move from a centralized socialist system to democratic, decentralized and market-based structures. However, given that transition countries are characterized by fundamental changes in their political and economic setting, they amend themselves to the study of the role of both institutional design and contextual factors in the institutionalization of RBM. Against this background, this paper analyzes similarities and differences in the institutionalization of RBM in Mongolia and Ukraine and asks how they can be explained. The paper finds that while the two countries are converging in terms of the model of the river basin organization (RBO) adopted, they differ significantly in detailed institutional design and dynamics. The differences in institutional design are likely to influence the effectiveness of RBM in both countries. The differences in design and dynamics can be understood if contextual factors such as the severity of the water problem, economic conditions, the overriding governance context and the role of various actors are taken into account. The results show that not only is the detailed design of RBOs crucial for successful implementation of RBM, but also problem pressure as well as the broader governance and economic context.

The Future of Higher Education: Rhetoric, Reality, and the Risks of the Market (review)

Reviewed by: The Future of Higher Education: Rhetoric, Reality, and the Risks of the Market Jim Eck (bio), Darla Fletcher (bio), and Katherine Merrill (bio) F. Newman, L. Courtier, & J. Scurry . (2004). The Future of Higher Education: Rhetoric, Reality, and the Risks of the Market. San Francisco: Jossey-Bass. Wanted: Flexible, focused leaders to direct the future of higher education. Must not succumb to believing existing rhetoric or have egotistical views of current state. Must be able to rise above corporate influence to maintain society's best interests. Candidates should hold student learning and attainment in high regard. Narrow-minded and uncommunicative people need not apply. An employment ad such as this, of course, would never exist. But in a broad sense, it seems to capture some of the traits of good higher education leaders highlighted in The Future of Higher Education: Rhetoric, Reality, and the Risks of the Market. The authors, Frank Newman, Lara Couturier, and Jamie Scurry, who are part of the Futures Project, provide a summary of their findings from three years of research on higher education. Throughout the book, the authors share their view that American higher education must place greater emphasis on student learning and rebuild its compact with the public. If the academy successfully accomplishes these two goals, then colleges and universities will more clearly demonstrate accountability and simultaneously earn greater autonomy. The authors suggest that adopting some of the properties of a market-based structure could benefit the existing design of the traditional institution. Market forces for higher education include access, quality, price, intense competition, and relatively inelastic demand. Policies need to be established that will enhance the positive aspects of the market system and protect higher education from the negative consequences. Those with resources usually receive the benefits of the market forces, and the authors stress that institutions must be diligent in focusing on the public good. Strategic planning efforts, while remaining dynamic and flexible, must account for higher [End Page 78] education's competitive market and articulate its commitments to society. The Futures Project has identified seven areas that need to be addressed by higher education: • accepting the responsibility of student learning • moving from access to attainment • addressing efficiency and productivity • supporting elementary and secondary education • reducing conflict of interest • serving as society's critic • rebuilding political involvement The authors maintain that institutions of higher education need to do a better job of assessing student learning and focus more on helping disadvantaged students reach attainment. Institutions must analyze their budgets to find ways to save money, and universities should join forces with the business community to support education at all levels. Colleges and universities that acquire funds from the corporate sector have to be careful not to be "bought," thus selling out their ability to correctly and completely report the findings of research. Questions have also been raised regarding the freedom of university presidents to candidly voice their opinions about societal issues, because of fear of offending donors. Last, institutions should encourage students to vote and to be involved citizens. Research generally indicates that employers do not place the greatest emphasis on content knowledge; rather, employers desire active learners who can solve ill-structured, real-world problems. One way to nurture such skills is through a renewed emphasis on student learning. Rather than blaming students for the fact that we are "a nation at risk," "learning-focused" colleges and universities should move from denial to acceptance of responsibility for student learning. By developing clear strategic plans that place paramount importance on student learning and adopting mission-driven assessment efforts, colleges can articulate clearly defined outcomes for student learning, afford students the opportunity to participate in a diverse array of learning experiences, and provide mechanisms to ensure institutional effectiveness and continuous improvement. [End Page 79] The authors warn of the dangers of the new era of competition. Institutions are grasping for students, funding, and prestige in an intense, competitive environment that has been created by the increased dependence on market forces and decreased dependence on regulation. Rather than adopting strategies that promote access with completion and foster the public good, many institutions are intensely focused on climbing in the published rankings. The...

Dependence of the Financial Structure and Efficiency of the Bank Sector on Economic Growth

Rapid growth and development of economy is taking place in Lithuania. Under such conditions the issue of choice between the forms of concentration of financial resources becomes relevant in both the theoretical and the practical respect. Research emphasizes the influence of the forms of concentration of financial resources and the financial structure formed in the country on the economic processes that are taking place. Analyzing financial systems, indicators of the size, activity and efficiency of the bank-based and market-based structures are discussed, which in their turn define the domination of these structures. For research of the Lithuanian financial structure the authors used indicators characterizing the nature of the financial structure, such as: Assets of banks/ GDP; Bank credit to private sector / GDP; Capitalization of the stock market / GDP; Stock turnover / GDP; Stock turnover/Capitalization of stock; (Assets of banks + Capitalization of the stock market) / GDP; (Assets of banks + Capitalization of the stock market) / GDP; Capitalization of stock / Assets of banks; Stock turnover / Bank credit; (Stock turnover / GDP) * (Fixed bank costs / Assets of banks). Influence of the development of the finance sector on the growth of economy and vice versa is the object of the theoretical research of the recent years. This aspect of research is especially relevant to the countries of rapidly emerging economies, as one can presume that the growth of the financial system has a positive impact on the rate of economic growth. Upon characterizing the tendencies of economic growth the most often used indicator is GDP per capita. Developing research in a similar direction and characterizing the tendencies of formation of the structure of the Lithuanian financial system a research of the bank structure and economic growth was carried out. This research does not provide an unambiguous answer as to which of the financial structures – bank-oriented or market-oriented – has a bigger influence on the economies of rapidly emerging countries. However, the dynamics of change of the size and activity of the Lithuanian bank sector corresponds to the tendencies established in research: with the growth of the economy of the country, the size and activity of the bank sector also increases. Growth of the Lithuanian bank sector and the strengthening of its influence on the economy of the country show that possibilities of concentration of financial resources through the bank sector are forming in the country, and this allows us to say that the Lithuanian financial system is oriented towards the bank structure.

Determinants of changes in accounting practices: Accounting and the UK Health Service

This paper uses the Social Forces Model to investigate the interplay between accounting change, institutional evolution and organizational transformations in UK healthcare delivery since 1800. At the same time, the catalytic role of individuals and events is highlighted. The reflexive organizational-accounting interactions are charted to reveal the changing nature of healthcare provision from communitarianism, through etatism to the (etatist inspired) market-based structure which, in turn, is now giving way to service provision based on local planning. By using a long time span it is possible to identify the modes of accounting which were present during the different phases of the development of healthcare. This analysis contributes to our understanding of the historical interplay of social forces by showing accounting as a technical instrument within an institutional setting, by highlighting the interactive nature of accounting and institutional change, by illuminating the role of individual action and by identifying the role of outside agencies.

Responding to the market: the future of British higher education?

In The Market comes to Higher Education, we are provided with a critical account of the transformation that has taken place in UK Higher Education in recent decades. It is an account that highlights the move away from a state-based University structure to one that is increasingly market-based. As a consequence, we are informed that many Universities have attempted to diversify their efforts by engaging more directly with companies and organisations by, among other means, making use of ‘knowledge exchanges’. An eagerness to respond to market conditions has in turn impacted on the remit of Universities. The argument here is that ‘The corporate University and its governance by market based criteria poses a challenge to open ended, inquiring education’. The implication is that by focusing evermore on the transferability or ‘exchange value’ of knowledge, Universities are increasingly adopting a standardised approach that downplays ‘the value of knowledge and learning as a public good’. In essence, the worry is that by developing a market-based structure, Universities will inevitably compromise their ability to be independent in their approach to critical investigation.

Responding to the market: the future of British higher education?

In The Market comes to Higher Education, we are provided with a critical account of the transformation that has taken place in UK Higher Education in recent decades. It is an account that highlights the move away from a state-based University structure to one that is increasingly market-based. As a consequence, we are informed that many Universities have attempted to diversify their efforts by engaging more directly with companies and organisations by, among other means, making use of ‘knowledge exchanges’. An eagerness to respond to market conditions has in turn impacted on the remit of Universities. The argument here is that ‘The corporate University and its governance by market based criteria poses a challenge to open ended, inquiring education’. The implication is that by focusing evermore on the transferability or ‘exchange value’ of knowledge, Universities are increasingly adopting a standardised approach that downplays ‘the value of knowledge and learning as a public good’. In essence, the worry is that by developing a market-based structure, Universities will inevitably compromise their ability to be independent in their approach to critical investigation.

Controlling Pollution Using Economic Instruments in Competitive Electricity Markets: The Challenges of Multilevel Governance

In Australia, as in many other developed countries, reforms are taking place which aim at liberalising electricity markets and opening them up to more competition. The hope has been that this will achieve a market for electricity which is more efficient, provide more cost reflective prices and achieve better environmental outcomes. The relationship between market-based structures for electricity industries and improved environmental outcomes is problematic, however. The environmental sensitivity of Australian utilities has not been helped by their public ownership and frequent use by state governments as agents of economic development, so that while putting them on a more commercial footing might remedy past problems, it is by no mans clear that the full range of externalities associated with electricity generation will necessarily be addressed without putting in place policy mechanisms which will create incentives for improved environmental performance. Federal systems such as Australia permit a degree of diversity in how states address such questions, but the existence of distinct subnational political units can also create problems relating to competitiveness between utilities operating in different jurisdictions but trading in a single market. Similar issues are likely to arise in the European Union, where, under the subsidiarity principle, there are analogies with federal states,1 and more widely in competitive markets across national boundaries. This paper demonstrates these problems by exploring issues which have arisen as the result of different policy settings being adopted by states for pollution control by electric utilities, and notes that the national government in Australia has been reluctant to exercise jurisdiction to address these problems. The commission of the European Union has been less reluctant to use issues such as climate change to enhance its competence. The paper suggests that this reluctance in Australia stems from the potential for national approaches to provoke conflict between the states in the Australian federation, and argues that while this reluctance is appropriate for pollutants with predominantly local impacts, climate change issues are likely to require a greater role for the Commonwealth than it has thus far been willing to assume.

Social Security Privatization

Critics of transforming Social Security9s pay-as-you-go financing into a market-based structure claim that the transition cost would unduly burden people because they would have to pay twice - once for their own retirement and once for those already retired. This double expense is so prohibitive, it is argued as to warrant rejecting privatization out of hand. Such arguments ignore the enormous unfunded liabilities of the current Social Security system. The mechanisms for paying the costs are the same whether one attempts to maintain the existing system or shift to a new, market-based system: debt, additional revenue, reductions in spending elsewhere in the government. The author argues that moving to a market-based system will always eventually be less costly than attempting to preserve the current system.

Common Objections to a Market-Based Social Security System

t is now generally accepted that under present law Social Security taxes will not be adequate to meet promised Social Security benefits. Ths I financial dilemma reflects a demographic reality; the available number of workers to be taxed will be insufficient to pay benefits at current levels to an ever-increasing number of retirees who are living longer. As our political, academic, and business leaders wrestle with this problem, more and more often they suggest moving toward a saving and investment structure wherein some portion of the Social Security tax is invested in markets. Advocates of this view argue that because market returns are greater than those from the present pay-as-you-go system, tax increases or benefit cuts will be less onerous. Opponents, although largely agreeing, cite numerous and formidable risks associated with markets. These risks, they suggest, may be so grave as to reject a marketbased option. Are they correct? Moving from a pay-as-you-go system to a market-based structure necessitates a transition requiring some form of bridge financing, the structure of which may be critical to the success of any private alternative. This article does not analyze the transition, per se, but rather examines the arguments against the use of markets to finance retirement benefits. Among other issues, it looks at market risk, retirement benefits of low-income workers in a privatized structure, potential difficulties for unsophisticated investors in a market-based system, and the plight of survivors of deceased workers. Any politically acceptable alternative to the current payas-you-go Social Security system must adequately respond to these reasonable concerns. Our analysis will show that each objection is either factually incorrect or has a well-tested solution already in use.

Privatization, industrial policy and governing the transitions

When one looks with a clear head at the nearly mind-boggling range of pros and cons regarding the wisdom of pursuing an industrial policy, one cannot escape infusing some degree of sentiment into what should be a dispassionate debate. Mine is for exploring the positive contribution that centralizing organs can render not only to transition policies but also to operating a market-based economy into which the sociopolitical sentiment finds its reflection to the extent existing political institutions allow. Industrial policy as part and parcel of good economic governancecan under some conditions play a constructive role in creating conditions that are conducive to generating more effective resource allocation. This role should be an evolving one, with the state disengaging from detailed management or efforts aimed at steering management in a particular direction as the changes incumbent on transforming the PETs into viable market-based structures gradually solidify. This observation applies with even greater force to the conceptualization, formulation, and implementation of transformation policies with or without targeted international economic assistance.