INVESTMENT, CASH FLOW AND MANAGERIAL DISCRETION IN STATE-OWNED FIRMS-Evidence across soft and hard budget constraints

In this paper we extend to state-owned enterprises the empirical work on investment-cash flow sensitivities. Our sample is a panel of Italian state-owned manufacturing firms over the period 1977-1993. The distinctive element of public firms’ financial environment is the budget regime under which they operate. Our analysis of Italian institutions identifies a switch from a soft to a hard budget constraint regime in 1987, for which a critical determinant was Italy’s attempt to qualify for EMU. We estimate a number of models of investment with additional cash flow terms and test for parameter constancy across budget regimes and the business cycle. We find that there is a positive correlation between investment and cash flow also for public firms, but only when the budget regime is soft. We argue that excessive managerial discretion is likely to be responsible for this correlation. We also find that the switch to a hard regime brings about an important change in the investment decisions of this panel of public enterprises.

Reconstruction of material losses by perimeter penalization and phase-field methods

We treat the inverse problem of determining material losses, such as cavities, in a conducting body, by performing electrostatic measurements at the boundary. We develop a numerical approach, based on variational methods, to reconstruct the unknown material loss by a single boundary measurement of current and voltage type. The method is based on the use of phase-field functions to model the material losses and on a perimeter-like penalization to regularize the otherwise ill-posed problem.We justify the proposed approach by a convergence result, as the error on the measurement goes to zero.Comment: 28 page

Reconstruction of cracks and material losses by perimeter-like penalizations and phase-field methods: numerical results

We numerically implement the variational approach for reconstruction in the inverse crack and cavity problems developed by one of the authors. The method is based on a suitably adapted free-discontinuity problem. Its main features are the use of phase-field functions to describe the defects to be reconstructed and the use of perimeter-like penalizations to regularize the ill-posed problem. The numerical implementation is based on the solution of the corresponding optimality system by a gradient method. Numerical simulations are presented to show the validity of the method.Comment: 15 pages, 12 figure

Stable determination of a scattered wave from its far-field pattern: the high frequency asymptotics

We deal with the stability issue for the determination of outgoing time-harmonic acoustic waves from their far-field patterns. We are especially interested in keeping as explicit as possible the dependence of our stability estimates on the wavenumber of the corresponding Helmholtz equation and in understanding the high wavenumber, that is frequency, asymptotics. Applications include stability results for the determination from far-field data of solutions of direct scattering problems with sound-soft obstacles and an instability analysis for the corresponding inverse obstacle problem. The key tool consists of establishing precise estimates on the behavior of Hankel functions with large argument or order.Comment: 49 page

Corrigendum to ``Determining a sound-soft polyhedral scatterer by a single far-field measurement''

In the paper, G. Alessandrini and L. Rondi, ``Determining a sound-soft polyhedral scatterer by a single far-field measurement'', Proc. Amer. Math. Soc. 133 (2005), pp. 1685-1691, on the determination of a sound-soft polyhedral scatterer by a single far-field measurement, the proof of Proposition 3.2 is incomplete. In this corrigendum we provide a new proof of the same proposition which fills the previous gap.Comment: 3 page

Firm Diversification in the European Union: New Insights on Return to Core Business and Relatedness

According to ex-ante expectations, one effect of the increased competitive pressure within the Single Market was to drive firms to reduce diversification and refocus on their core business. This paper addresses two main questions: the extent and the purpose of multi-product strategies. Using a large database of 223 leading manufacturing firms in the EU, we document whether EU leaders reduced diversification over the decade 1987-1997. We then investigate if firms have de-diversified by re-focussing around a core of related activities, testing for alternative measures of "core" and "relatedness". Our results confirm that firms readjusted corporate structures around one (or more) core(s) of related activities.Firm diversification, European integration, Return to Core

Regulatory Independence and Political Interference: Evidence from EU Mixed-Ownership Utilities’ Investment and Debt

This paper examines the investment and financial decisions of a sample of 92 EU regulated utilities, taking into account key institutional features of EU public utilities, such as: a) regulation by agencies with various degrees of independence; b) partial ownership of the state in the regulated firm; and c) the government’s political orientation, which may ultimately influence the regulatory climate to be either more pro-firm or more pro-consumers. Our results show that regulatory independence matters for both investment and financial decisions. Investment increases under an Independent Regulatory Agency (IRA), while ownership has no effect. Leverage also increases when the IRA is in place, especially so if the regulated firm is privately controlled. Finally political orientation does matter, as firm investment increases under more conservative (pro-firm) governments, but this effect appears to revert when the IRA is in place.Regulated Utilities, Investment, Capital Structure, Private and State Ownership, Regulatory Independence, overnment’s Political Orientation

Access Regulation, Financial Structure and Investment in Vertically Integrated Utilities: Evidence from EU Telecoms

We examine theoretically and empirically the relationship between access regulation, financial structure and investment decisions in network industries, analyzing if financial variables can be used as a strategic device to influence the regulator’s price setting decisions. Using a panel of 15 EU Public Telecommunication Operators (PTOs) over the period 1994-2005, we first investigate the determinants of regulated prices (both wholesale and retail), firm financial structure and investment, and then test the relationship between leverage, regulated charges and firm’s investment. However, our model suggests that if leverage influences the regulated access charges, then it will also impact competition in the downstream segment. Therefore, we also investigate the impact of the PTO’s leverage on market competition. Our results show that leverage positively affects regulated rates, as well as the PTOs’ investment rate, as predicted by Spiegel and Spulber (1994). Moreover, higher leverage also leads to higher access charges and an increase in leverage is followed by a decrease in the number of competitors and by an increase of the incumbent’s market share. This suggests that the strategic use of debt to discipline the regulator’s lack of commitment within a vertically integrated network industry may somewhat impair or delay competition in the retail segment, but has a favorable counterpart in mitigating the underinvestment problem.