Transport and Logistics in a globalizing world. A focus on Italy.

open1Mariotti, IlariaMariotti, Ilari

The impact of competition and internal corporate governance mechanism on bank performance: the case of North American and European countries

This thesis examined the effect of antitrust law and bank concentration on European and North American bank performance and managerial slack. This study empirically investigated the interrelated issues of antitrust policy, competition, and corporate governance and showed their significant roles in maximising shareholder wealth. Our analysis also examined the impact of concentration, antitrust law, internal corporate governance, and bank-specific and macro-economic factors on European and North American banking industry performance. With attention to E.U. commercial banks (1998-2014), European savings banks (2001-2014), European cooperative banks (2005-2014), United States commercial banks, Canada commercial banks, and European/North-American listed commercial banks (Part A – Data analysis with no governance variable [1995-2018]; Part B – Data with governance variables [2006-2018]). The higher level of property and agricultural loans, loan loss allowance, loan charges off, and non-performing loans to total asset ratio contributed to United States commercial bank failures (Alali and Romero, 2012). Also, in years leading to the 2007-09 financial crisis, banks failed to comply with the minimum capital requirements for risk-weighted capital ratio, and many banks held an excessive level of capital on the balance sheet above the minimum regulatory threshold (Lindquist, 2004; Jokipii and Milne, 2008; Ayuso et al., 2004). The holding of excessive capital buffer signified managerial risk aversion, under-investment, and reduced bank competitiveness. This study investigated how antitrust policy helped increase bank competitiveness and profitability in the European Union and North America. Our study found evidence that antitrust policies increased bank profitability and minimised managerial slack. In addition, many studies showed that the management ownership structure aligned the managers' interests with that of the shareholders (Saunders et al., 1990; Gorton and Rosen, 1995; Houston and James, 1995). Our study explored new empirical evidence for the nineteen European listed and unlisted banks with different bank specialisations. Bank profitability is proxied by return-on-average-equity, return-on-equity, and equity returns, which are the dependent variables in this study. The explanatory variables considered are bank-specific, macro-economic, internal corporate governance proxies, age, bank concentration, antitrust law, and financial crisis dummy variables. We utilised different panel data estimators (such as pooled ordinary least, between estimator, population average, fixed effects, first differences, and random effects estimators) and other estimation techniques (probit/logit regression, principal-component-analysis, difference-in-difference (DID) estimation, and instrumental variable regression) to examine the causal effect of bank longevity, antitrust policy, bank concentration, internal corporate governance, bank-specific factors, macro-economic factors and dummies of year, country and specialisation on bank profitability. The difference-in-difference estimation assists in exploring the effects of concentration (HHI) interaction with antitrust policy and governance measures on bank performance. We also examined the effects of other explanatory variables and interactions on managerial slack. Our fixed effect analysis showed that liquidity ratio, cost-income ratio, net-loan-to-total-asset, non-earning-assets-to-total-asset, asset utilisation, income diversification (BAAM), inflation, and credit risk had significant beneficial effects on cooperative bank performance. However, certain interactions (mHHIxAge, lHHIxAge), bank-specific (age, total-earning-asset-to-total-asset, capital-fund-liabilities, burden-total-asset) and macro-economic factors (GDP per capita) have significant and negative effects on EU co-operative banks performance. The bank-specific, exogenous factors (anti-trust-policy), and macro-economic factors that positively influence savings banks' performance are, for ROAE, Age-HHI-interactions, antitrust-policy, and total assets. On the other hand, the following explanatory factors negatively influenced E.U. saving bank performance, GDP per capita, credit risk, market share, net-loan-to-total-asset (NLTA), and cost-income ratio. The following bank-specific and exogenous factors improved European commercial bank performance. For ROAE, we confirmed antitrust-policy, capital-funding-liabilities (CFL), burden-total-asset, asset utilisation, income diversification (BAAM). The capital strength, cost-income ratio, and financial crisis adversely influenced European commercial bank performance. The United States commercial banks shared a similar beneficial influence of antitrust policy and CFL on profitability. Our random effect analysis showed that liquidity ratio, CFL, NEATA, and asset utilisation influenced Canada's commercial bank beneficially. On the other hand, average bank concentration, capital strength, cost-income ratio, and credit risk hampered Canadian commercial bank performance. According to the managerial slack (QLTTTA) findings, our random-effects modelling of European cooperative banks showed age, average concentration, high-concentration-age interaction, CFL, overheads, total assets, market share, GDP per capita, and financial crisis reduced managerial slack significantly. On the other hand, high-HHI, liquidity ratio, cost-income, NLTA, BURDENTA, TEATA, NEATA, asset utilisation (AU), BAAM, inflation, and credit risk significantly increased cooperative bank managerial slack. Our fixed effect analysis of United States commercial banks showed that antitrust policy, ETA, inflation, government debt significantly reduced managerial slack. The effect of age and total assets on QLTTTA is similar to our European cooperative bank findings. The adverse effects of our control variables on managerial slack follow the same pattern as European cooperative banks in some respect. For listed commercial banks, our fixed effect modelling showed that the loan-loss-reserve, capital expenditure, and the interaction of low HHI with structural changes in antitrust policy significantly minimised the likelihood of negative return-on-equity. The marginal effect analysis also confirmed that the structural change in antitrust policy at low bank concentration minimised the possibility of negative ROE empirically and graphically. The DID analysis also confirmed that the interaction of high HHI with the structural change in antitrust policy and dividend-per-share significantly increased listed bank ROE. The probit/logit analysis showed that earnings-per-share, board-specific skills, and the interaction of high-HHI with the independent board members significantly reduce the likelihood of negative returns. As the non-executive total compensation increased, the marginal effects of independent board members on the probability of negative returns increased. Our thesis implied that the non-executive board members must be optimally incentivised to ensure effective oversight. This thesis contributed to previous bodies of empirical studies on bank efficiency and profitability in four ways. Firstly, we measure bank concentration proxied by the Herfindahl-Hirschman-Index method on total assets [chapter 4 and 5], return-on-invested-capital [Chapter 6 Part A], and price [Chapter 6 Part B]. Secondly, we assumed the interaction of bank concentration with antitrust policy and the interaction of concentration with corporate governance proxies had not been explored at the time of this study. The first empirical chapter examined the impact of the HHI-Antitrust law on bank performance and managerial slack. The process of interacting governance proxies with competition measures contributed to policy efforts to improve corporate governance. Finally, this study contributes to the literature by examining the impact of income diversification as part of the control variables on bank performance. This study presents conclusive findings on changes in bank performance around the antitrust policy in European and North American banks. The coefficients of the antitrust policy dummy (AT2004) for European commercial banks, United States commercial banks, and European savings banks are positive and significant, which implies that the antitrust policy significantly increased return-on-average-equity. The findings provided a contrasting view to Giroud and Mueller (2010) that empirically showed that business combination laws significantly minimised return-on-asset in North American banks. As expected, the results are not homogeneous in the European Union. For instance, the antitrust policy was not significant for Cypriot commercial banks and significantly negative for the returns on assets of Swedish savings banks. The negative effects of antitrust policy on bank performance may explain the less competitive banking industry in Cypriot and the European savings banks are generally less competitive than commercial banks. In previous studies, the impact of HHI and business-law interaction on managerial quiet life had been explored in the United States (Giroud and Mueller, 2010). Their analysis indicated overhead, input, and real incomes surge due to business law introductions. There is a significant positive relationship between the HHI-BC-Law interaction and some quiet life proxies in non-competitive industries, i.e., the ratio of overhead costs to total assets; the cost of goods sold to sales; and the ratio of real wages to the number of employees, deflated by inflation. This type of research had not been conducted in Europe, and there are no comparative studies on North American Banks and Europe. In Table 19, 22-24, our findings are similar to Giroud and Mueller's (2010) study. Structural changes since the antitrust regulatory changes only significantly increased the negative ROE or the likelihood of poor bank performance. Contrary to Giroud and Mueller's findings, there is a significant negative relationship between the antitrust policy and QLTTTA (for European savings banks, U.S. commercial banks), while previous studies found no link. Our findings indicated that the overheads and employee wages decreased due to antitrust laws for less competitive and competitive banking industries. QLPEE (Ratio of personnel expenses to no of employees, deflated by CPI) – In support of previous literature (Bertrand and Mullainathan, 1999; 2003; Giroud and Muller, 2010), our REM model findings found a positive relationship between U.S. commercial banks QLPEE and antitrust policy

Scenario analysis report with policy recommendations: An assessment of sustainability, resilience, efficiency and fairness and effective chain relationships in VALUMICS case studies : Deliverable 8.4

This is an open access article distributed under the Creative Commons Attribution License, to view a copy of the license, see: https://creativecommons.org/licenses/by/4.0/. The final version of this report is available at https://doi.org/10.5281/zenodo.6534011The functioning of food value chains entails a complex organisation from farm to fork which is characterised by various governance forms and externalities which have shaped the overall food system. VALUMICS food value chain case studies: wheat to bread, dairy cows to milk, beef cattle to steak, farmed salmon to fillets and tomato to processed tomato were selected to enable explorative and empirical analysis to better understand the functioning of the food system and, to identify the main challenges that need to be addressed to improve sustainability, integrity, resilience, and fairness of European food chains. The VALUMICS system analysis was executed through four operational phases starting with Groundwork & analysis including mapping specific attributes and impacts of food value chains and their externalities. This was followed by Case study baseline analysis, which provided input to the third phase on Modelling and exploration of future scenarios and finally Policy and synthesis of the overall work. This report is an overall synthesis of the VALUMICS results as follows: • Key findings from the VALUMICS project on the functioning of European food value chains and their impacts on more sustainable, resilient, fairer, and transparent food system are summarised through a compilation of 25 Research Findings and Policy Briefs. • By highlighting the major contributions from the research activities throughout the four phases of the VALUMICS project, this report delivers an assessment of various factors influencing sustainability, resilience, efficiency and fairness and effective chain relationships of different food value chains, and their determinants. • The synthesis of the outcome allows the identification of opportunities and challenges characterising the functioning of food supply chains, and thus, the prospects and potentials for strengthening the EU food sector

Employment of young and older workers : three policy evaluations

The dissertation has the goal of providing a better understanding on the effectiveness of specific active labour market policies that aim at integration of young and older workers. The first Chapter evaluates the effectiveness of the 2003 reform of the Italian apprenticeship regime. This reform raised the age-eligibility and revised the training component. The different timing of the implementation of the reform in the Italian regions and sectors is exploited. To estimate the treatment effect (ATT) of the apprentices in the reformed regime (compared to the old regime), the Covariate Balancing Propensity Score estimator is implemented (CBPS - Imai and Ratkovic, 2014) employing a large set of covariates. The inflow sample of about 18,000 apprentices hired in 2007 is drawn from administrative data of the Social Security Institutions (INPS). Four years after hiring, the reform induced an increase in the transition rate to permanent jobs in the same firm and boosted the average wage of the apprentices. Finally, by a DiD estimator on the LFS, it is found that the higher diffusion of the apprenticeship among the youth becoming eligible is offset by a reduction of other temporary jobs. Granting the eligibility to the youth aged 25-29 also encouraged their transition from non-employment to employment. The research related to the second and the third Chapters assesses the effectiveness of two Belgian federal policies to boost the employment rate of the older population. In this research we rely on an endogenous stratified sample of administrative data containing about 244,000 individuals (aged between 52 and 61 years old in 2002) with their employment history since 1957. The second Chapter assesses the impact of a Belgian employers’ Social Security Contributions reduction for workers older than 58. The analysis is performed on multiple repeated cross-sections even if panel data are available, to account for age-varying confounding factors. We use a CDiD estimator (Heckman et al., 1997) and when needed a trend-adjusted version of it (Wolfers, 2006). To facilitate the integration of endogenous sampling weights in this estimator, we implement it as an Inverse Probability Weighting (IPW) estimator, which we extend to allow for multiple cross-sections in the before and after periods. We find small positive short-run impacts on working time and larger ones on the employment rate, but only for employees at high risk of leaving to early retirement. The wage is not affected. In a Cost-Benefit-Analysis, we estimate that during the 1.25 years after its introduction the subsidy imposed a net monthly cost of €3,700€ per saved job to Society. Had the subsidy been targeted to sectors where early retirement schemes are widely used, Society would instead have gained 400€ per saved job. The third Chapter evaluates the impact of the Belgian part-time Time-Credit scheme for older workers. The policy measure allows older workers to reduce their working time by 20% (or 50%) with the goal of postponing their retirement decision and possibly improve their work-life balance. Workers receive a lump-sum in-work benefit of about € 215 (€ 385), granting an average income replacement of 90% (66%) of the full-time wage. We assess the ATT on the survival in employment and we control for selection on observable (IPW) by using their whole employment history. As control units can enter the treatment in later periods, we take into account the dynamic treatment selection (Vikström, 2014). Our estimates indicate a positive employment effect in the short-run followed by a negative impact after four years with insignificant health effects. The policy does not pass the Cost-Benefit-Analysis test

Do Market Regulation and Financial Imperfections Affect Firm Size? New Empirical Evidence

This paper investigates the importance that market regulation and financial imperfections have in firm size. We analyse institutions affecting labour market as Employment Protection Laws (EPL) and Product Market Regulation (PMR). Moreover, we study the effects of these institutions on firm growth. We use data from 29 industrial sectors across 15 developed countries. We find that market regulations related to financial imperfections help to explain differences in firm structure across countries.Financial development, labour market institutions, firm structure

Bureaucrats or Markets in Innovation Policy? – a critique of the entrepreneurial state

This paper takes stock of recent suggestions that the state apparatus is a central and underappreciated actor in the generation, diffusion and exploitation of innovations enhancing growth and social welfare. We contrast such a view of “the entrepreneurial state” with theories and empirical evidence of the microeconomic processes of innovation in the modern economy which focus on well-functioning markets, free entry and competition among firms, and independent entrepreneurship as central mechanisms in the creation and dissemination of innovations. In doing so, we identify several deficiencies in the notion of an entrepreneurial state by showing that (i) there is weak empirical support in the many hundreds empirical studies and related meta analyses evaluating the effectiveness of active industrial and innovative policies, that (ii) these policies do not take account of the presence of information and incentive problems which together explain why attempts to address purported market failures often result in policy failures, and that (iii) the exclusive focus on knowledge creation through R&D and different forms of firm subsidies ignores the equally important mechanisms of knowledge dissemination and creation through commercial exploitation in markets. We discuss how a more theoretically well-founded focus on the state as investing in knowledge generation and securing the conditions of free and competitive markets will lead to a more innovative economy

Are family firms good employers?

Family firms employ about 60 percent of the global workforce. While it is widely assumed that they are good employers, data about their conduct is mixed. In this study, we extend stewardship and agency theories to test competing propositions about the impact of family on employment practices using data from 14,961 private Belgian firms over a 19-year period. Higher investments, lower dividend payout, and higher risk tolerance indicate that family firms are better financial stewards of their companies than nonfamily firms. However, family firms are worse organizational stewards than nonfamily firms: They offer lower compensation, invest less in employee training, and exhibit higher voluntary turnover and lower labor productivity. Further, and contrary to earlier research, we find that financial practices in private family firms do not change over time, and that the deleterious influence of family on employment practices rises with both firm age and with heightened family involvement. Together, our findings suggest that a more nuanced understanding of stewardship and agency theory is needed to understand the impact of family on the governance of private firms

An empirical investigation of the relationship between inequality and growth

This paper studies the correlation between inequality, measured by the Gini coefficent of incomes, and the growth rate of per capita GDP in a panel of countries between the late 1950s and late 1990s. Inequality Granger causes growth with a negative coefficient, while growth Granger causes inequality with a positive sign. Quantitatively, the former effect appears much larger than the latter. Once I allow for the effect to differ between rich and poor countries interesting differences emerge. While lagged inequality appears positively correlated with growth in the subgroup of rich countries, in poor countries besides a negative and significant effect of lagged inequality on growth there is a negative and significant effect of lagged growth on inequalitygrowth; inequality; panel; GMM; Granger causality

The impact of innovation on employment in Europe - an analysis using CIS data

Technological progress in western economies has contributed to an immense rise in productivity, incomes and goods available over the last hundred years. Though not to the same extent as productivity and wages, population and employment have risen as well. Nevertheless, innovations are often blamed for job destruction and unemployment, with workers historically fighting against technological progress