"Too dispersed to monitor? Ownership dispersion, monitoring and the prediction of bank distress"

This paper conducts an empirical assessment of the theories stating that ownership concentration improves the quality of shareholders' monitoring. In contrast with other studies, we do not use regressions of risk/performance on ownership concentration. Instead, we build an early warning model of bank distress that includes a leading indicator derived from banks' share price, the Merton-KMV distance to default (DD). The significance of this indicator depends on the efficacy of shareholders' monitoring. On a sample of European banks, we show that the predictive power of the DD is satisfactory only when banks' shareholding is characterized by the presence of blockholders.Monitoring; Ownership concentration; Block ownership; Bank distress; Early warning models; Distance to default

Definitions and Measures of ICT Impact on Growth: What is Really at Stake?

Many innovations have been introduced in national accounts in order to better gauge the information and communication technologies (ICT) diffusion impact: new ICT definitions; recognition of business and government software expenditures as fixed investment; hedonic price index. Nevertheless, there still does not exist any clear consensus about the magnitude of the ICT impact on growth. Our aim is to propose some explanations of this relative failure and also show that the debate should not be exclusively centered on quantitative methods. To this end, we take a close look at the two main questions concerning the debate surrounding the measure of the ICT impact: 1) Are there any substantial total factor productivity (TFP) gains generated by ICT diffusion or is it only a classic story of capital deepening increase ? 2) If there are indeed TFP gains, are they limited to ICT producers, as Robert J.Gordon claims, or is there any diffusion to ICT users ? The answer to the first question is really important only if it determines the length and the extent of an eventual growth cycle impulsed by ICT. The possibility that productivity gains mainly due to capital deepening generate strong and durable growth has been theoritically demonstrated by Greenwood and Jovanovic (1998), thanks to a vintage capital model. We precise the conditions under which this result can be obtained and discuss their empirical relevance. According to this approach, the true debate concerns the durability of the present technological shock, instead of its capacity to generate an autonomous technical progress. The answer to the second question is crucial because it could guide industrial policy choices. If TFP gains are limited to ICT producers, should a country always be an ICT producer, or will it anyway grow at a strong pace thanks to the fall of ICT prices ? The relevance of this economic debate is unfortunately poised by the shortcomings of available statistical tools. On one hand, the distinction between ICT users and producers is purely discretionary. On the other hand, TFP measure is completely distorted by the method used to evaluate the value of capital (cost-based prices against adjusted-quality prices). That is why we argue that the international diffusion of growth gains due to ICT essentially depends on the capacity of ICT producers' countries to stay in a rent keeping situation. The text is divided into two parts. The first one first makes a quick assessment of the adaptation of american national accounts to the " new economy ", and then underlines the limits of these changes. The second one shows that the economic debate on the importance of TFP gains acceleration and where they occur, although more complex because of these limits, can quite ignore them thanks to the implications of some endogeneous growth and international trade models.ICT; multifactor productivity; national accounts; hedonic prices

Getting Into Networks and Clusters: Evidence on the GNSS composite knowledge process in (and from) Midi-Pyrénées

This paper aims to contribute to the empirical identification of clusters by proposing methodological issues based on network analysis. We start with the detection of a composite knowledge process rather than a territorial one stricto sensu. Such a consideration allows us to avoid the overestimation of the role played by geographical proximity between agents, and grasp its ambivalence in knowledge relations. Networks and clusters correspond to the complex aggregation process of bi or n-lateral relations in which agents can play heterogeneous structural roles. Their empirical reconstitution requires thus to gather located relational data, whereas their structural properties analysis requires to compute a set of indexes developed in the field of the social network analysis. Our theoretical considerations are tested in the technological field of GNSS (Global Satellite Navigation Systems). We propose a sample of knowledge relations based on collaborative R&D projects and discuss how this sample is shaped and why we can assume its representativeness. The network we obtain allows us to show how the composite knowledge process gives rise to a structure with a peculiar combination of local and distant relations. Descriptive statistics and structural properties show the influence or the centrality of certain agents in the aggregate structure, and permit to discuss the complementarities between their heterogeneous knowledge profiles. Quantitative results are completed and confirmed by an interpretative discussion based on a run of semi-structured interviews. Concluding remarks provide theoretical feedbacks.Knowledge, Networks, Economic Geography, Cluster, GNSS

French connection: interlocking directorates and the ownership-control nexus in an insider governance system

We reveal the non-separation of ownership and control for multiple blockholders in the French insider governance system. We show that overlapping directorships of large listed corporations are explained by their ownership connections. Both large and small stakes, from 20% to 1% of cash-flow rights or voting rights, have high explanatory power. Some shareholdings are control rather than monitoring related. We provide evidence also that cross-ownership allows CEOs to entrench themselves. Finally, we demonstrate that causality goes from ownership to interlocking directorates, for both unilateral stakes and cross-shareholdings

Adoption des tic, proximité et diffusion localisée des connaissances

International audienceWe use a specially designed survey on French firms to provide empirical evidence suggesting that IT adoption is not only influenced by the traditional factors of technology diffusion (rank, stock-order, epidemic effects and organizational practices) but also by localized knowledge spillovers. We make several advances. Firstly, we study the adoption of authentic Information and Communication Technologies while the recent empirical literature has been mainly focused on computer capital stocksor automation tools. Secondly, we construct measures to replace the traditional epidemic effect by different proximity variables. Thirdly, we examine different channels of knowledge transmission among nearby firms, from unintended knowledge spillovers to well-regulated arrangements. Our econometric methodology is designed to deal with potential biases that are encountered when implementing technology adoption equations. In particular, we explicitly deal with the problem ofsimultaneous technological choices, using bivariate adoption equations.Une enquête sur les entreprises de Haute-Savoie montre que l’adoption des TIC est influencée non seulement par les facteurs traditionnels de la diffusion technologique (effets rang, stock-ordre et épidémique, pratiques organisationnelles), mais aussi par des effets de diffusion localisée des connaissances. Les données permettent plusieurs avancées. Tout d’abord, nous étudions l’adoption de véritables TIC alors que la plupart des études récentes ont privilégié des mesures du stock de capital informatique ou de l’automatisation des tâches. Ensuite, nous construisons des variables qui permettent de remplacer le traditionnel effet épidémique par différents effets de proximité. Pour finir, nous examinons différents canaux de transmission de la connaissance entre firmes géographiquement proches, depuis le simple spillover non-intentionnel jusqu’à des interactions plus maîtrisées. Notre méthodologie empirique traite les biais habituellement rencontrés dans les équations d’adoption technologique ainsi que dans les tests de la complémentarité organisationnelle

Cognitive & Relational Distance in Alliance Networks: Evidence on the Knowledge Value Chain in the European ICT Sector

This paper deals with the firms’ motives for entering into knowledge partnerships. We start by showing that networking strategies are designed to access external knowledge whilst maintaining at the same time a sufficient level of knowledge appropriation and tradability. The ICT sector (and interplaying ones) is particularly concerned by this accessibility/appropriation trade-off. The questions of modularity, complementarity, compatibility and standardisation are critical in the formation of corporate strategic and technological partnerships. Considering that knowledge in this sector is complex and systemic, we construct a theoretical typology of knowledge partnerships by crossing the levels of cognitive and relational proximity with the knowledge phases of exploration, examination and exploitation. This typology is then tested on empirical data through the use of a classification algorithm. The dataset is based on a sample of strategic alliances in the European ICT sector extracted from SDC Platinum. We show that strategic alliances are clustered in relation to the knowledge phases (exploration, examination, exploitation), and that the alliance categories are characterised by levels of relational and cognitive distance which actually are in keeping with the theoretical predictions.knowledge networks; knowledge phases; proximities; strategic alliances; ICT sector

Hoarding and short-squeezing in times of crisis: Evidence from the Euro overnight money market

International audienceWe study at an individual level the prices that banks pay for liquidity, measured here by overnight rates charged for unsecured loans on the e-MID trading platform, which is an important and transparent money market for European banks. Using data from both before and within crisis sub-periods, we provide evidence that borrower's and lender's own liquidity status has a significant impact on overnight rates, both before and during the turmoil periods. We first review the literature focused on the role of liquidity risk in the recent interbank turmoil. We then implement an integrative LSDV estimation to assess the determinants of e-MID overnight rates. In these regressions, we put together measures of the three types of factors that have received theoretical and empirical support, namely, counterparty risk, liquidity factors and market imperfections. We find that even when counterparty risk and market imperfections are controlled for, banks with higher funding liquidity risk pay an interest rate premium. We show that this is probably explained by hoarding and short-squeezing behavior of liquidity-long banks. These phenomena disappeared when the ECB launched its full allotment policy in October 2008

"Too dispersed to monitor? Ownership dispersion, monitoring and the prediction of bank distress"

37 pagesThis paper conducts an empirical assessment of the theories stating that ownership concentration improves the quality of shareholders' monitoring. In contrast with other studies, we do not use regressions of risk/performance on ownership concentration. Instead, we build an early warning model of bank distress that includes a leading indicator derived from banks' share price, the Merton-KMV distance to default (DD). The significance of this indicator depends on the efficacy of shareholders' monitoring. On a sample of European banks, we show that the predictive power of the DD is satisfactory only when banks' shareholding is characterized by the presence of blockholders

"Too dispersed to monitor? Ownership dispersion, monitoring and the prediction of bank distress"

This paper conducts an empirical assessment of the theories stating that ownership concentration improves the quality of shareholders' monitoring. In contrast with other studies, we do not use regressions of risk/performance on ownership concentration. Instead, we build an early warning model of bank distress that includes a leading indicator derived from banks' share price, the Merton-KMV distance to default (DD). The significance of this indicator depends on the efficacy of shareholders' monitoring. On a sample of European banks, we show that the predictive power of the DD is satisfactory only when banks' shareholding is characterized by the presence of blockholders

Ownership concentration and market discipline in European banking: Good monitoring but bad influence?

We investigate the impact of banks’ ownership concentration on the effectiveness of shareholders’ market discipline. More precisely, we first assess whether the ability of the distance to default to predict banks’ financial distress is affected by the level of ownership concentration (“monitoring” hypothesis). We also assess whether banks’ future financial situation is directly affected by ownership concentration (“influence” hypothesis). Our econometric estimates are conducted on a panel of 77 European banks observed between the first quarter of 1997 and the last quarter of 2005. We find that ownership dispersion reduces the predictive power of the distance to default. The data collected come from three sources: Bankscope, Datastream and Thomson One Banker Ownership. The econometric methodology is based on simple pooled-logit estimates corrected for the clustering effect. Several tests are then conducted to assess the robustness of the results. We also recall that theoretical results do exist to explain why banks’ ownership structure can alter market discipline and the ability of market-derived indicators to predict future financial distresses. This work finally suggests that the empirical literature dealing with market discipline should not focus only on the moral hazard potentially created by bad insurance deposit design, balance sheet opacity or the safety net: the evolution of banks ownership structure might also be an important prudential issue.market discipline; ownership concentration; banks’ risk taking