Underdeveloped Market Research Articles

Informal Institutions as Constraints to an Active Market for Corporate Control: The Case of Japan

The market for corporate control serves as an external mechanism for corporate governance and plays a vital role particularly in the market-oriented economies. However, the system is much less prevalent in Japan than its counterparts like USA and UK. This study aims at explaining the state of underdeveloped corporate takeover market in Japan shedding an analytical light on informal institutions including relation or trust among and between groups. Informal institutions work as fundamental building blocks for corporate governance which in turn, have either led the market for corporate control a redundant institution or worked as hindrance to its development in Japan. Support to this argument is provided through analyzing various anecdotal facts from the current affairs as well as a widely-cited case, Livedoor-Fuji TV takeover battle.

Capital Market Efficiency in the British Industrial Revolution: The Case of the Lancashire Cotton Industry, 1760-1840

Recent debates on the industrial revolution have continued to showcase the role of the cotton textile industry. These discussions have centred on the Schumpeterian view of rapid growth based on a disequilibrium model in which capital market imperfections allow innovative firms to restrict entry, thereby earning long run super-normal profits. Neo-classical interpretations, in contrast, argue that firms were relatively untroubled by capital market imperfections and experienced few problems accessing finance, facilitating entry and rapid adjustments to equilibrium profit levels, with the gains from technological innovation transmitted through falling prices. Important questions can therefore be addressed by examining further the question of capital market efficiency. To operate efficiently, inter alia, a capital market should allow freedom of access, equalise rates of profit across sectors and accurately price the risk of economic activity. To investigate efficiency of the capital market in these respects, the paper uses firm level data to examine whether or not, first the firm’s access to capital was restricted by outdated business practices, second, whether capital goods suppliers were able to charge monopoly rents to textile firms and third, whether the cost of finance accurately reflected the risk of the enterprise. The research uses archival evidence for a sample of cotton textile firms and the steam engine manufacturer, Boulton and Watt. These records are investigated to examine how, and at what cost, firms accessed financial resources. The results show that an important source of disequilibrium was the slow pace of capital market development relative to the technological pace and demands of industrialisation. The underdeveloped capital market perpetuated pre-industrial methods of finance, including high dependency on bills of exchange at prescriptive interest rates. Although some entrepreneurs took advantage of the most efficient steam technology, returns did not systematically reflect underlying risk. At the same time, profitable opportunities remained for firms entering the market using old technology and traditional organisational networks. For these reasons, cotton firms had the potential of super-normal profits but these opportunities were dissipated by the costs of circulation arising from capital market inefficiencies and the rents associated with monopoly, asset mispricing, arbitrage and fraud. As a consequence, although the story of the industrial revolution is one of Schumpeterian disequilibrium, the apparent lack of sustained abnormal profits in manufacturing reflected embedded local networks of capital and transaction cost, rather than the neo-classical story of rapid adjustment to equilibrium.

Institutional constraints for outsourcing services in Russia

PurposeThe purpose of this paper is to show how the institutional context in an emerging economy, Russia, moderates the “do or buy” decision of international firms operating in the country. This is examined through the influence of institutional voids on transaction costs and definition of core competencies.Design/methodology/approachThe paper adopts a qualitative research approach, where the empirical data are based on interviews with executives of eight Finnish companies, which have invested in Russia's second largest city, St Petersburg.FindingsThe key findings include first, that the formal and informal constraints in the Russian business environment influence outsourcing decisions in terms of increased transaction costs, and in terms of resources needed to be competitive. Second, the authors show that, due to these constraints, a firm in Russia may need to insource functions that it would otherwise outsource as non‐core activities and invest in building of competencies specific to the Russian business environment.Research limitations/implicationsThe limitation of the study is its focus on two countries. However, the analytical framework proposed for examining influence of institutions on outsourcing strategies is applicable to other country contexts.Practical implicationsThis paper shows how the institutional constraints of the host country, reflecting in this case as underdeveloped market for business services and complex state regulation, can result in a significant need for adaptation of a foreign firm's business processes. This must be taken into account in business planning and allocation of resources to the Russian operations.Originality/valueThe paper provides researchers and practitioners with new information about a little‐studied topic by showing concrete ways of how institutions influence outsourcing strategies in Russia.

José de Torres and the Spanish Musical Press in the Early Eighteenth Century (1699–1736)

ABSTRACTThe history of the Spanish musical press in the eighteenth century has usually been interpreted as an ongoing struggle against a narrow and underdeveloped market. Print itself has been seen as a superior technology that helps to secure stability and clarity of the musical text. In this light, José de Torres, prestigious organist and composer, music director of the Spanish Chapel Royal from 1720 and owner of an important musical press, has appeared to be a heroic modernizing figure. This article challenges this received image, underlining the effectiveness of censorship and the control of individual initiatives in the field of music publishing in early eighteenth-century Spain. This is demonstrated by newly discovered documents concerning a lawsuit brought against Torres, who owned a royal printing privilege from 1700 until his death in 1738, by Francisco Díaz de Guitián, who wanted to establish a music press of his own. Several musicians acted as witnesses, giving a detailed view of how the music press worked at the time, notably how the approbations customarily given by established musicians on behalf of music treatises intended for publication were used to promote or block a career. Based on these new insights, a general study of all the known prints by the Imprenta de Música is presented in a broader editorial, political and cultural context.

Analyzing Public Expenditure Benefit Incidence in Health Care: Evidence from India

The effectiveness of public spending remains a relatively elusive empirical issue. This preliminary analysis is an attempt, using benefit incidence methodology, to define the effectiveness of spending at the subnational government level in India’s health sector. The results reveal that the public health system is “seemingly” more equitable in a few states, while regressivity in the pattern of public health-care utilization is observed in others. Both results are to be considered with caution, as the underdeveloped market for private inpatient care in some states might be a factor in the disproportionate crowding-in of inpatients, making the public health-care system simply appear more equitable. However, patients “voting with their feet” and choosing better, private services seems evident only in the higher-income quintiles. Results also suggest that polarization is distinctly evident in the public provisioning of health-care services, though more related to inpatient, rather than ambulatory, services.

Transmission Of Interest Rates Volatility: A Case Study Of Upper, Middle And Lower Income Groups Countries

With the development of liberalization of capital movements, an increasing attention has been given to international transmission of volatility to different market returns. This article empirically tests the effects of the volatility in the time value of the US t bills and RBI t bills on the developed, developing, and underdeveloped market. By using daily values of twelve equity markets and the interest rates on the 10 years treasury bills from 2000 to 2010, the Gaussian and Student’s-t GARCH models are tested to display the international Transmission effects of the US and Indian interest rates on the world equity markets. The empirical findings vary between the sub-economy groups. The equity markets in the upper, middle, and lower income group do not have strong interestrate effects. The markets are affected by the volatility in the US and RBI interest rates at low levels. On the other hand, impacts of the volatility in the US interest rates on the domestic money markets –i.e. bond spreads- in the emerging economies are stronger with negative direction.

가전제품 소음등급 기준설정에 관한 연구

ABSTRACT No matter how low it might be, noise from home appliances in indoor environment cause dis-pleasure for residents as it is produced nearby. Electronic goods including vacuum cleaner and wash-ing machine generate high frequency noise, which interrupts TV-watching or conversations and cause noises between floors in apartment houses. In particular, refrigerators make constant noise late at night, hampering the study for exams and causing sleeplessness. Korea, despite the government's ef-forts to promote low-noise goods based on the noise test by corporation, there is a lack of stand-ardization in the test method, test condition and measuring equipments. This is a major reason that lowers the reliability of low-noise products. At present, low-noise home appliances are certified with eco labeling in the nation but, only 7 brands of refrigerators, 4 brands of washing machines and 97 brands of air-conditioners obtained certification as of august, 2011. In addition, none of Kimchi-re-frigerator and vacuum cleaner brands were approved as low-noise home appliances. This shows Korea's relatively underdeveloped market for low-noise products, which, in part, is because of the difficulties companies face in being certified with eco labeling as they should satisfy various require-ments such as power-saving and eco-friendly design besides low-noise features. As a result, low-noise labeling for home appliances should be established for the revised noise and vibration management law and the study was carried out to establish low-noise labeling system for major noise sources including vacuum cleaner, washing machine, air-conditioner and refrigerator.

HOW EFFICIENT ARE REAL ESTATE AND CONSTRUCTION COMPANIES IN IRAN'S CLOSE ECONOMY?

This paper empirically explores various efficiency aspects of real estate and construction companies in Iran in light of their remarkable growth in recent years. The technique used to measure the efficiency is DEA and the sample is taken from the construction and real estate companies in Iran. Results from our analysis reveal that most of the real estate and construction companies in Iran are generally technical, scale and mix efficient. However, they are less cost efficient due to increasing higher cost of production. The sensitivity analysis results also suggest that the real estate and construction companies are experiencing diseconomies of scale. As Iran is an underdeveloped market and is currently one of the most interesting frontier markets in the world, this research contributes substantially to investors and multinationals (who have growing desire to gain exposure in this market) by providing current information about the efficiencies of real estate and construction companies in Iran. In addition, this research also provides some institutional voids on how to penetrate market environment in Iran through real estate development.

Open-Ended Funds in Romania. Their Performance in an Economically Difficult Environment

ABSTRACT.Romania is one of the emerging markets, where the investment funds market is less developed than in other European countries, but developing fast. The number of open-ended funds increased in the 20 years of existence of the investment market, reaching 60 in 2012. The paper looks at the open-ended funds' evolution (measured through the yearly changes in value of the fund unit), in the period 2010-2012. The main objective is to analyze the performance of the different types of mutual funds in a comparative manner and to assess them against the industry benchmark. The analysis takes place in a period of economic turmoil and based on the findings, the paper attempts to point out advices on what would be good placements for investors during economically difficult periods.JEL Classification :G23, G11, D53, E22Keywords: open ended funds, Romania, investment funds' performanceIntroductionInvestment funds represent an alternative investment opportunity to bank deposits or to direct investments on the Stock Exchange. They contribute to the development of financial markets, as new possibilities of investment for those who have available resources. Among those, open ended funds are seen as a primary instrument of investment for most individuals and households (Lenard et al., 2003). In the last decades, the role of mutual funds increased in the financial markets, as in 2007 the world mutual funds industry administered financial assets of 26 trillion USD compared to 1996 when there were administered 6 trillion USD assets (Ferreira et al., 2010).The investment funds industry in Romania is a young industry, as it has only 20 years of existence. Its youth places it as an underdeveloped market, by comparison to the U.K, Germany and France from Europe or United States from America. The industry had an initial difficult start at the beginning of 1990's, when due to the lack of regulating rules, investors lost a lot of money and registered high failures on the investment funds market. Once the market started to be better regulated, allowing for higher control and less risk of failure for investors (due to un-appropriate calculation methods), it also started to develop.The main objective of this paper is to compare the evolution of different types of open ended funds of Romania and their performances in the last years in order to identify which categories of funds performed better in the context of the present economic crisis. The evolution is measured through the funds' yearly changes in value of the fund unit.Investment funds and their performance - a literature reviewInvestment funds are organizations that gather funds from individuals and invest these funds in securities traded on the stock exchange, in money market instruments and in municipal or corporate bonds. They represent an alternative investment option to deposits in commercial banks and to direct investments on the Stock Exchange (Prisacariu et al., 2008; Bodie et al., 2009). Investment funds are classified according to different criteria: method of management, goals, the composition of the fund's portfolio, markets and investment strategy. The method of management is seen as the most important criterion to classify investment funds and according to it, there are three types of investment funds: a) unit investment trusts, b) open-ended funds and c) closed-end funds. The unit investment trusts administer a fixed portfolio that is seen as being unmanaged (Bodie et al., 2009), as compared to the other two types of investment funds (open- ended and closed-ended funds) that hold portfolios that are continuously bought and sold, therefore being managed. The open-ended funds issue permanently investment assets, allowing some investors to subscribe permanently and simultaneously allowing others to totally drop out. On the other hand, the closed-ended funds do not issue permanently and they address only to a limited number of investors, who purchase the shares when the fund is launched and redeem them when the fund closes. …

Direction of CRT waste glass processing: Electronics recycling industry communication

Cathode Ray Tube, CRT, waste glass recycling has plagued glass manufacturers, electronics recyclers and electronics waste policy makers for decades because the total supply of waste glass exceeds demand, and the formulations of CRT glass are ill suited for most reuse options. The solutions are to separate the undesirable components (e.g. lead oxide) in the waste and create demand for new products. Achieving this is no simple feat, however, as there are many obstacles: limited knowledge of waste glass composition; limited automation in the recycling process; transportation of recycled material; and a weak and underdeveloped market. Thus one of the main goals of this paper is to advise electronic glass recyclers on how to best manage a diverse supply of glass waste and successfully market to end users. Further, this paper offers future directions for academic and industry research. To develop the recommendations offered here, a combination of approaches were used: (1) a thorough study of historic trends in CRT glass chemistry; (2) bulk glass collection and analysis of cullet from a large-scale glass recycler; (3) conversations with industry members and a review of potential applications; and (4) evaluation of the economic viability of specific uses for recycled CRT glass. If academia and industry can solve these problems (for example by creating a database of composition organized by manufacturer and glass source) then the reuse of CRT glass can be increased.

Corporate Investment Behaviour and Monetary Policy: Evidence from Firm-level Data for Malaysia

Using a panel data-set of over 900 listed firms in Malaysia for the period 1991–2010, this paper examines the empirical evidence on the credit channel of the monetary transmission mechanism within the framework of corporate investment. The results suggest that monetary policy significantly impacts the firms' access to external finance during times of increasing interest rates, in particular, bank-dependent firms are the most vulnerable firms. The firms' investment sensitivity on external financing explains the relatively underdeveloped capital market and the prominent role played by the banking sector for capital allocation in the Malaysian economy. Internal finance is more important for high leverage firms during tight liquidity conditions.

The Fund Management Industry in Hong Kong and Asia-Pacific

Hong Kong has the largest number of fund managers, one of the largest fund management industries in Asia-Pacific, and the largest exchange-traded funds (ETFs) market by trading value in East Asia. Nevertheless this sector in common with some others examined in this study, reveals the huge impact the Chinese mainland has had on Hong Kong in terms of activity created and concurrently a relatively modest development of its international position. Some of the main themes to be developed in what follows turn on the following summary observations:Unlike the two other major regions of the world economy, there is no cooperation infrastructure nor even comparable statistics for the fund management industry in Asia-Pacific. Unlike the United States and Europe that have a national or regional industry association to advocate regulation and policy recommendations to the industry, there is no such kind of regional cooperation in Asia. In turn, is a dire lack of comparable statistics in this area across economies in the region not only impedes research but more importantly hinders the development of initiatives, strategies and policies for the region.Internationalism and diversifications. Hong Kong’s and Singapore’s industry survey reports show that the combined fund management industry is larger in Hong Kong, but (as of 2008) it appears to be more internationalized and diversified in Singapore. However, things have gradually changed. Since 2009 large banks and fund houses have started to expand their teams in Hong Kong and/or relocate senior executives to the city. While this relative but notable reconfiguration in the last year or two appears to result from the impact of the China factor, given the sector’s relative preference for greater concentration of expertise the result is also an improved the level of regional importance and internationalism for the Hong Kong fund management industry.The China factor. The enormous and underdeveloped Chinese market is without doubt one of the biggest opportunities for the Hong Kong fund management industry. China’s capital market is still subject to exchange and capital controls and its fund management industry is short of seasoned fund managers. Hong Kong, an open economy with good financial infrastructure and many experienced fund managers, is in pole position to capture the opportunity to service the Chinese market, particularly its new middle-class and expanding wealthy population. Further, it will be beneficial for Hong Kong to deepen its private investors market. In addition to be the gateway for Chinese funds to invest abroad, Hong Kong should also be the gateway for foreign companies that are interested in the Chinese market. An onshore fund management industry. Following the global financial crisis, there is greater appetite in the region and globally for the use of onshore regulated vehicles, which provide greater investor protection and ability to assess and manage risk. In this connection recent changes in European Union directives on investment funds may have a big impact on the Asian fund management industry, which relies heavily on the European market; indeed the offer of funds originating and sold in Asia but registered and marketed from Europe has expanded notably in the recent past. These developments, alongside the concurrent strengthening of Hong Kong’s fund management industry in the same period noted above, strongly suggest a good opportunity for Hong Kong to develop an onshore fund management industry and to seek to become the centre of Asia domiciled funds. However, there is limited information how local authorities want to pursue these goals.

Credit policies for Kazakhstani agriculture

This paper reviews the characteristics of the agricultural credit policy in Kazakhstan with a particular focus on emerging rural financial institutions. It is not easy to evaluate the real effect of credit policies due to the limited funds directed at agricultural production. Kazakhstani experience shows that commercial banks are used almost exclusively to provide agricultural producers with credit, while the new specialized credit institutions emerging in the agricultural sector only cater to a very small fraction of the total demand for credit. Presently, there are discussions in Kazakhstan concerning the creation of a specialized agricultural bank; however, this idea has some shortcomings that should be taken into consideration. Lack of credit is one of the main reasons for insufficient investment in agriculture. The underdeveloped land market in Kazakhstan makes formal credit institutions very cautious about accepting agricultural land as collateral.

Fragmented Networks and Entrepreneurship in Late Imperial Russia

Emergent economies suffer from underdeveloped market infrastructures and insufficient public institutions to enforce contract commitments and property rights. Informal reputation-based arrangements may substitute for government enforcement but they require close-knit networks that enable monitoring. Economic development also requires access to capital, information and other resources, which is enabled by wide-reaching and diverse networks, and not by closure. How is entrepreneurship possible given these conflicting demands? We examine how partnership networks and reputation channel the mobilization of capital for new enterprises, using quantitative information on 4,172 corporate partnerships during the industrialization of late imperial Russia (1869-1913). We find that reputation is locally effective in small and homogeneous network components. By contrast, founders in the largest components that form the network core raise more capital from investors but benefit less from reputation and more from brokerage opportunities and ties that reach diverse communities.

Fragmented Networks and Entrepreneurship in Late Imperial Russia

Emergent economies suffer from underdeveloped market infrastructures and insufficient public institutions to enforce contract commitments and property rights. Informal reputation-based arrangements may substitute for government enforcement, but they require close-knit networks that enable monitoring. Economic development also requires access to capital, information, and other resources, which is enabled by wide-reaching and diverse networks and not by closure. How is entrepreneurship possible given these conflicting demands? In this article, the authors examine how partnership networks and reputation channel the mobilization of capital for new enterprises, using quantitative information on 4,172 corporate partnerships during the industrialization of late imperial Russia (1869–1913). They find that reputation is locally effective in small and homogeneous network components. By contrast, founders in the largest components that form the network core raise more capital from investors but benefit less from rep...

Vertical Economies of Scope in Dairy Farming

With the exception of Azzam and Skinner (2007), the economic literature on farm structure has largely neglected issues of vertical organization of the farm. In this article we estimate a multi-stage, multi-output cost function in order to measure vertical economies of scope in organic and conventional dairy farms. In particular, we model the integration of production of grains and forages on dairy farms. We find negligible vertical economies of scope for conventional dairy farms but significant vertical economies of scope in organic dairy production. The large vertical economies of scope for organic dairy farms are consistent with higher costs of obtaining organic feed through market transactions associated with an underdeveloped market for organic feeds.

Ownership structure and performance in family businesses at early developmental stage: evidence from China

This paper explores the impact of ownership structure on performance of family businesses at its early developmental stage in a context of under-developed market environment. Using a survey data of 296 private family firms in Ningbo, China, we find both management and single largest shareholder’s ownership is positively related to firm’s performance. However, family’s shareholding does not have significant impact on performance. Further inquiry on firm’s willingness to give shares to managers who are not family members indicates that while nearly half of the firms are willing to provide shares to professional managers, weak corporate governance mechanism and under-developed market may discourage such practice.

CEO and Director Turnover in Venezuela

The aim of this study is to achieve a better understanding of corporate governance structures and mechanisms outside the United States by looking at a specific emerging economy: Venezuela. We first build a corporate governance practices index for publicly listed companies in this country; the overall results indicate that Venezuela exhibits relatively low corporate governance scores. Using this limited sample, we are able to find a positive relation between this corporate governance index and its sub-components and alternative measures of value (Tobin`s q, price-to-book ratio, and dividend payout). In this environment, together with an underdeveloped financial market, a weak legal system, poor law enforcement, and high ownership concentration, we then address the question of whether the existing corporate governance system works at all in Venezuela. In particular, we are interested in studying the following two questions, which constitute a necessary condition for any corporate governance system to work. First, are poorly-performing CEOs more likely to be removed compared to well-performing CEOs? Second, is the role of the board to monitor the CEO or merely to serve as an advisor? To this end, we collected detailed data from 51 Venezuelan firms from 1984 to 2002. After controlling for characteristics related to CEO, board, ownership, firms, and time periods, we find that poor financial performance significantly increases the likelihood of CEO and director turnover. The empirical evidence is also consistent with the idea that directors in Venezuela play mainly an advisory role and not a monitoring role of the CEO.

Building trust—Evidence from Vietnamese entrepreneurs

In the context of underdeveloped market institutions, entrepreneurs in a transition economy are forced to rely on trust-based partnerships. In the absence of effective market institutions and sufficient elapsed time, these entrepreneurial firms find a great need to actively and intentionally develop trust with their partners. The current literature, however, has virtually overlooked the possibility of trust being intentionally developed in interfirm relationships. This study develops a model that links trust development strategies, trust, and interfirm collaboration, and reports an empirical test of that model in Vietnam. The results support the general thesis that trust can be intentionally developed to facilitate interfirm relationships.

Delegated Monitoring and Moral Hazard in Underdeveloped Credit Markets

This paper originates from the current move to individual-based lending systems by many microfinance institutions and the fear that this move will lead to a decrease in access to credit for the poor. More specifically, the paper examines how an individual-based lending scheme can be devised such that moral hazard issues can be addressed, even when straight forward individual lending is unable to do so. We show that the moral hazard problem can be solved if microfinance institutions hire informal lenders to monitor the borrowers. In addition, we show that by offering the informal lender a demandable debt contract a simple incentive scheme could be obtained that induces the informal lender to collect the necessary information, and to truthfully reveal this information.