Why and How the Value of Science-Based Firms Violates Financial Theory: Implications for Policy and Governance
How and why the positive net effect of science related activities substantially increases the value that would be anticipated by the financial theory that seems to work so well for other fields is considered here. A qualitative analysis of 25 small listed biotechnology R&D firms illustrates that these firms do not follow the neo-classical expectation of Gaussian returns. To better understand this deviation from the expected Gaussian returns the firms are compared to S&P 100 and Thomson Reuters Global Innovator List. It is found that while these large firms have a higher than expected frequency of non-Gaussian events, the causes appear to be dominated by macro-economic or industrial events that impact large numbers of firms. With the small R&D intensive biotechnology firms, it is possible to identify specific events that appear to trigger the sudden increase or decrease in value. A better understanding of the nature and magnitude of these events allows for policy makers, investors and managers to better comprehend the unusually large risks and new opportunities associated with biotechnology R&D. From this, a greater insight is afforded into the dynamic value of R&D in general.
The focus of this paper is the reasons of suboptimal investment policy that consists of over- or underinvestment. We consider the definitions of risk-shifting and risk avoidance effects that lead to suboptimal investments. These problems are connected with the agency conflicts in the firm between different parties: shareholders, debt holders and managers. Since the preferences of claimholders vary from one stage of the life-cycle to another, the incentives for over- and underinvestment differ in the stages of the life-cycle. The originality and the focus of this paper are the reasons for the exposure of overinvestment and underinvestment at different life-cycle stages. The research was conducted on a sample of Russian nonfinancial companies from the period 2003-2012. This sample was divided into three life-cycle stages: growth, maturity and decline. The method of life-cycle stages identification was modified in order to use only available data and make the model more business oriented. Risk-shifting and risk avoidance, as the reasons to the problem of suboptimal investment were studied. For this purpose the estimations with one of the effects were identified. The life-cycle stages, at which the effects took place, were determined, and also the strength of risk-shifting and risk avoidance was identified with the help of the regression analysis. In addition there was considered a way to mitigate these effects. According to the results they might be eliminated by the adjustment of short-term debt level.
The purpose of this paper is to analyze the effect of the corporate ownership diversification, i.e. how the involvement in the ownership of other non-financial firms affects the value of listed firms. The authors control for the unrelated diversification when the firm has different business segments in different sectors. Design/methodology/approach - The authors analyze a sample of Chilean-listed firms between 2005 and 2009, in two stages. First, the authors compute the diversification premium or discount, defined as the part of the firms' capitalization that stems from the diversification strategy. Then, the authors regress the premium or discount against the business and ownership diversification measures and other control variables. Findings - In addition to a discount for unrelated business diversification, the authors find an ownership diversification discount when non-financial firms are shareholders of other firms. However, this discount turns into a premium when the firm gains the control of the owned firm, especially in related sectors. Originality/value - The authors pioneer the analysis of the ownership diversification in Latin American firms. The results apply not only to Chile but also to a number of Latin American countries since many of these countries have, in common with Chile, a concentrated corporate ownership structure and a weak protection of investors' rights.
The level of corporate diversification is one of the most important decisions that management makes. The diversification strategy has its benefits and costs. According to the principles of corporate finance the efficiency of diversification strategy is always assessed by its impact on shareholder value. The article discusses the main value-creating and value-destroying drivers of diversified firms.
The paper examines the structure, governance, and balance sheets of state-controlled banks in Russia, which accounted for over 55 percent of the total assets in the country's banking system in early 2012. The author offers a credible estimate of the size of the country's state banking sector by including banks that are indirectly owned by public organizations. Contrary to some predictions based on the theoretical literature on economic transition, he explains the relatively high profitability and efficiency of Russian state-controlled banks by pointing to their competitive position in such functions as acquisition and disposal of assets on behalf of the government. Also suggested in the paper is a different way of looking at market concentration in Russia (by consolidating the market shares of core state-controlled banks), which produces a picture of a more concentrated market than officially reported. Lastly, one of the author's interesting conclusions is that China provides a better benchmark than the formerly centrally planned economies of Central and Eastern Europe by which to assess the viability of state ownership of banks in Russia and to evaluate the country's banking sector.
The results of cross-cultural research of implicit theories of innovativeness among students and teachers, representatives of three ethnocultural groups: Russians, the people of the North Caucasus (Chechens and Ingushs) and Tuvinians (N=804) are presented. Intergroup differences in implicit theories of innovativeness are revealed: the ‘individual’ theories of innovativeness prevail among Russians and among the students, the ‘social’ theories of innovativeness are more expressed among respondents from the North Caucasus, Tuva and among the teachers. Using the structural equations modeling the universal model of values impact on implicit theories of innovativeness and attitudes towards innovations is constructed. Values of the Openness to changes and individual theories of innovativeness promote the positive relation to innovations. Results of research have shown that implicit theories of innovativeness differ in different cultures, and values make different impact on the attitudes towards innovations and innovative experience in different cultures.
The paper examines the principles for the supervision of financial conglomerates proposed by BCBS in the consultative document published in December 2011. Moreover, the article proposes a number of suggestions worked out by the authors within the HSE research team.