Valuation of innovation: The case of iPhone

We estimate the private value of Apple’s iPhone by observing abnormal stock market reactions to news announcements and patent publications related to the innovation. Our estimate of the lower bound on the market valuation of iPhone is fairly high, at minimum 30 billion U.S. (event day) dollars. We find that patentable technology explains about 25% of that total value. We also find a weak negative reaction among Apple’s rivals to the news about iPhone but no significant reaction to the publication of patent documents concerning iPhone can be observed. The evidence suggests that the value of iPhone primarily stems from Apple’s management and marketing abilities and efforts rather than from underlying "hard" technologies and intellectual property.innovation, R&D, patent, iPhone, valuation

Law and stock markets: evidence from an emerging market

A sweeping and protracted reform of corporate law took place in Finland in the 1970s. The reform brought significant improvements to investor protection and, similar to the US Sarbanes-Oxley Act, tightened disclosure rules at the cost of increasing the work load in corporate reporting. We find that the Finnish stock market generally reacts negatively to news of tightened disclosure rules and increased work loads, whereas news of delays in implementation of reform were largely positive. This raises the question of whether strengthening investor protection by requiring greater transparency necessarily promotes the development of financial markets. It also serves to remind that the implementation costs of reforms should not be overlooked.corporate governance; investor protection; law and finance; transparency; Sarbanes-Oxley Act

Phoenix rising: Legal reforms and changes in valuations in Finland during the economic crisis

Finland experienced an extremely severe economic depression in the early 1990s. In the midst of this crisis, significant new legislation was passed that increased supervisory powers of financial market regulators and reformed bankruptcy procedures, significantly decreasing the protection of creditors. We show that the introduction of these new laws resulted in positive abnormal stock returns. The new laws also lead to increases in firms’ Tobin’s q, especially for more levered firms. In contrast to previous studies, our results also suggest that public supervision of financial markets fosters rather than hampers financial market development.corporate governance; bankruptcy; financial supervision; shareholder protection; creditors’ rights; corpo-rate valuations; political economy

Omistus, omistajaohjaus ja määräysvalta suurissa suomalaisyrityksissä

Tarkastelemme tässä raportissa suurten suomalaisyritysten omistusrakennetta. Luomme katsauksen yritysomistuksen kehitykseen 1970-luvulta nykypäivään ja vertaamme suomalaista omistusrakennetta kansainvälisesti. Valtionomistuksen laajuus ja osuustoiminnallisten yritysten suuri rooli ovat piirteitä, jotka erottavat Suomen monista muista länsimaista. Historiallisesti pankeilla oli merkittävä asema yritysomistajina Suomessa, mutta pankkien rooli pieneni merkittävästi 1990-luvun pankkikriisin ja sitä seuranneen pankkisäätelyn myötä. Pankkien häipyminen kartalta suuromistajina näyttäisi luoneen valtatyhjiön suomalaisiin pörssiyhtiöihin. Yleisen pääomaköyhyyden vaivatessa suomalaista yrityssektoria näemme nk. ankkuriomistajien puutteen erityisenä rasitteena. Ankkuriomistajiksi luokittelemme tahot, jotka ovat aktiivisesti mukana yrityksessä, ja joita voidaan siten pitää investoijien sijaan omistajina. Ehdotamme työmme pohjalta, että suomalaista investointi-ilmapiiriä tulisi pyrkiä parantamaan, sekä suomalaisten, että ulkomaalaisten investoijien silmissä. Mielestämme valtion roolia omistajana tulisi pienentää, joskin tulisi ottaa huomioon, että liian nopeita muutoksia tulisi välttää mahdollisten haitallisten sivuvaikutusten vuoksi. Taloudellisen tehokkuuden näkökulmasta osuustoiminta ei ole omistusmuotona optimaalinen ratkaisu dynaamisessa, integroituneessa ja nopeasti muuttuvassa nyky-maailmassa. Osuustoiminnallisten yritysten tukemista siirtymisessä osakeyhtiöpohjalle tulisi sen vuoksi harkita. Rahoitusalan instituutiot ovat merkittäviä osakkeenomistajia sekä meillä, että muualla. Väitämme, että hajaantuneen omistajuuden ja passiivisen institutionaalisen omistajuuden malli toimii Suomessa heikommin kuin angloamerikkalaisissa talouksissa. Suomessa kannattaisi miettiä tapoja, joilla yritysjohdon valtaasemaa voitaisiin vahvistaa siten, että yritysjohto pystyisi tavoittelemaan pitkän aikavälin tavoitteita vakaammalta pohjalta. Lopuksi, suomalaisesta osakemarkkinasta täytyy tehdä nykyistä houkuttelevampi. Laajempi osallistuminen osakemarkkinoille toisi mukanaan laaja-alaisia etuja taloudellemme

Valuation of innovation: The case of iPhone

We estimate the private value of Apple’s iPhone by observing abnormal stock market reactions to news announcements and patent publications related to the innovation. Our estimate of the lower bound on the market valuation of iPhone is fairly high, at minimum 30 billion U.S. (event day) dollars. We find that patentable technology explains about 25% of that total value. We also find a weak negative reaction among Apple’s rivals to the news about iPhone but no significant reaction to the publication of patent documents concerning iPhone can be observed. The evidence suggests that the value of iPhone primarily stems from Apple’s management and marketing abilities and efforts rather than from underlying "hard" technologies and intellectual property

Valuation of innovation: The case of iPhone

We estimate the private value of Apple’s iPhone by observing abnormal stock market reactions to news announcements and patent publications related to the innovation. Our estimate of the lower bound on the market valuation of iPhone is fairly high, at minimum 30 billion U.S. (event day) dollars. We find that patentable technology explains about 25% of that total value. We also find a weak negative reaction among Apple’s rivals to the news about iPhone but no significant reaction to the publication of patent documents concerning iPhone can be observed. The evidence suggests that the value of iPhone primarily stems from Apple’s management and marketing abilities and efforts rather than from underlying "hard" technologies and intellectual property

Ownership and governance of large Finnish firms

In this report, we study the ownership structure of large Finnish firms. We make an overview of the evolution of corporate ownership in Finland from the 1970s to today, and contrast the Finnish setting to international patterns of ownership. Factors that make the Finnish ownership field different from most Western countries include large government involvement, and a significant role of co-operatives. We also note that while the role of local banks was very significant, it diminished quickly upon the Finnish banking crisis in the early 1990s, and subsequent regulatory changes. The disappearance of banks as owners seems to have resulted in a power vacuum in Finnish listed firms. While the general lack of capital seems to plague the Finnish corporate sector, we note a specific need for anchor owners, in other words owners who hold a significant proportion of the firm’s shares, and who are actively involved in the firm and can thus be seen as owners, instead of merely as investors. Among our policy implications, we see a need for an improved investing climate in Finland. The goal should be to make Finnish firms attractive in the eyes of both domestic and foreign investors. The government’s large role as owner should, in our view, be reduced. However, changes in government’s role need to be viewed as a long term goal, as hasty actions are likely to cause severe side effects. From the point of economic efficiency, the co-operative form is not optimal for a dynamic, integrated, and fast-changing world. Supporting migration from co-operatives to corporations should thus be considered. Institutions play a large role in corporate ownership throughout the world. We argue that the model of dispersed ownership and large institutional ownership with no active voice works less well in Finland, compared to the Anglo-American countries. Finland should consider ways in which the power of the corporate management team could be solidified, for management to have a better footing to pursue long term policies. Finally, the Finnish stock market needs to be made more attractive. A wider participation in the stock market would have wide spread positive effects to the economy