Non-linear and Lagging Convergence Effects of the EU's Regional Support at NUTS3 Level

Reduction of the territorial disparities in terms of their development level is the main aim of the European Union's (EU's) regional support. Most of the previous studies investigate the linear relationship between support and growth at countries' or NUTS1/2 disaggregation level, omitting the question on what is the impact of this support on regional convergence among NUTS3 regions and on whether non-linear effects occur. To fill this gap, we modified the difference-in-differences estimator to test empirically the non-linear convergence effects of the EU's regional support at NUTS 3 level over the 2000-2006 programming period, taking into account the possible lagging effect. The results revealed that the impact of regional support on convergence is positive with the diminishing marginal effect as the intensity of payments is increasing. Moreover, we find evidence that the return is higher for the post-intervention compared with the intervention period, i.e. the convergence outcomes of the EU's support occur in the long-run

Modelling of the Lithuanian enterprises' capital structure : under the aspect of the international capital mobility

Ekonominių procesų globalizacijos sąlygomis aktyvėja tarptautinis kapitalo judėjimas, kuris paskutiniaisiais dešimtmečiais daro vis didesnę įtaką tarptautinei prekių ir paslaugų bei technologijų srautų kaitai ir jų struktūrai. Lietuvos įmonėms aktyviau dalyvaujant tarptautiniuose sandoriuose, augant finansavimo poreikiui ir siekiant sumažinti galinčius atsirasti mikroekonominius ir makroekonominius nuostolius, reikia formuoti tikslinę finansavimo strategiją, akcentuojant alternatyviųjų finansavimo šaltinių kaštus rizikos ir neapibrėžtumo sąlygomis. Šiame straipsnyje siekiama teorinių metodologinių kapitalo struktūros formavimo aspektų pagrindu suformuoti sisteminį kapitalo svertų, skatinančių EVA augimą, valdymo modelį ir jį pritaikyti Lietuvos pramonės įmonių kapitalo struktūros formavimo ir valdymo sprendimams tarptautinio kapitalo judėjimo sąlygomis. Reikšminiai žodžiai: Racionali kapitalo struktūra; Ekonominė pridėtinė vertė; Finansinio sverto lygis; Skolinto kapitalo kvota; Skolos ir nuosavybės koeficientas.; Rational capital structure; Economic value added (EVA); Financial leveradge; Equity coefficient; Debt capitalThe interlace of various fields of enterprise management is the result of rapid globalisation processes. Therefore, the present businesses and economic environment need modern and complex instruments for managing enterprises' financial-economical activities. Under the conditions of economic processes' globalisation, the mobility of international capital between East and West becomes more active; moreover, these processes affect international goods and services, technology flow changes and their structure. The enterprises of smaller countries are seeking the opportunity to conclude contracts in the international finance market and to become competitive in the international market. They need additional financial resources to cover their activities. As Lithuanian enterprises more actively participate in international transactions, the financing demand is growing, and in order to minimize possible microeconomic and macroeconomic loss, it is necessary to form the expedient strategy of financing; emphasising costs of alternative financial sources under the condition of risk and uncertainty. Analyses conducted in the paper sought to contribute both conceptually and practically to the financing of companies' activities and to the maximizing of economic value added. The aim of this paper is to compose and practically apply the model allowing formatting financing policy according to the effectiveness zone of rational capital structure levers determining the growth of EVA, while assessing the uncertainty of proportions and reliability of possible results and referring it to risk management conception, under the aspect of the international capital mobility

Arbitrage pricing theory application assumptions

Financial markets are characterized as the most dynamic markets, because prices and trade conditions of financial instruments are always changing. Therefore, asset pricing remains the object for the scientific discussion for a long time. The article gives the explicit arbitrage pricing theory (APT) conception, revealing the most important asset pricing history moments, its basic assumptions and its mathematical background for better application in practice. APT was developed as an alternative asset pricing model, when CAPM - the core of modern financial theory - seemed to have failed to explain asset returns properly. CAPM and APT were compared on the basis of their application assumptions and their limitations, it allowed to identify their similarities and differences. The article presents APT empirical studies results; that allowed to summarize limitations and strengths of the theory. It also allowed to disclose the potential of APT application in emerging (or non-effective) markets, where assets are likely to be mispriced more often than in the developed (effective) markets. The sequential methodology and presented basic macro-economical factors of the country have to facilitate APT application process in order to ensure more effective portfolio management

Modern portfolio theory genesis and development

Straipsnio tikslas - apibendrinti modernios portfelio teorijos genezės aspektus, kurių pagrindu suformuojamos portfelio teorijos vystymosi prielaidos. H. Markowitz teorija ir kapitalo rinkos vertinimo modelis dažniausiai taikomi vertybinių popierių portfelio rizikai įvertinti. Bet praktikoje vertybinių popierių rizika priklauso ne tik nuo svyruojančių jų kainų. Galima drąsiai teigti, kad kapitalinių aktyvų įkainojimo (CAPM) modelis yra modernios finansų teorijos ašis. Kadangi CAPM turi šiek tiek nerealios ekonomikos požymių, S. Ross patobulino modelį, įtraukdamas į jį papildomų veiksnių. Arbitražo įkainojimo teorijos (APT) teorijos šalininkai nurodo du APT privalumus prieš CAPM. Pirma, APT turi mažiau hipotetinių apribojimų, lemiančių investuotojo rizikos ir pelno santykio suvokimą. Antra, APT gali būti patikrinama ir patvirtinama empirinės studijos metu. Nors APT laikoma prastesne nei CAPM, tačiau ji įvertina vertybinių popierių pelningumo priklausomybę nuo įvairių bendraekonominių veiksnių, pvz., BNP didėjimo, infliacijos lygio ir realiųjų palūkanų normų prognozių, įmonių dydžio bei kainos ir pelningumo santykio. Plėtojant portfelinių investicijų mokslą, atsiranda naujų, perteikiančių naujausias rinkos tendencijas, vertybinių popierių portfelio sudarymo ir valdymo teorijų bei modelių, tokių kaip vidurkio - absoliutaus nuokrypio požiūris, praradimų optimizavimo modelis, minimax modelis ir kiti. Nagrinėjant daugybę jau egzistuojančių vertybinių popierių portfelių sudarymo ir valdymo metodų, visada susiduriama su jų taikymo rinkoje problema bei jų rezultatų patikimumu. Šios problemos ir yra nuolatinės naujų modelių paieškos ir klasikinių modelių modifikacijos skatinimas.An investment theory enters a new stage with H. Markowitz'(1952) efficient portfolio that is described as a concept having both risk and return characteristics. H. Markowitz' "Portfolio theory" was the incentive for other scientists to contribute to the further modern financial market theory development. His followers such as J. Tobin (1958), W. Sharpe (1964), S. Ross (1976), G. Fama and K. French (1993) and others analyzed the portfolio construction criteria, the portfolio optimization problems, assets allocation and their pricing specific aspects and factors influencing the portfolio value, at the same time searching for the ways how to quantify the m. The article presents the modern portfolio theory genesis that reflects various scientists' contribution to assets portfolio management, including portfolio construction, the expected portfolio return forecast and portfolio monitoring problems. While developing the conception of the investment selection, new portfolio construction and management theories and models are generated, such as the mean-absolute deviation approach, the expected loss optimization model, minmax model and others, which reflect brand-new market trends. There are ongoing academic discussions on these models' advantages, disadvantages and their applicability in practice. Analyzing a great number of existent assets portfolio construction and management methods, the researcher always faces their applicability and the results reliability problems. These problems are the incentive for the ongoing new models search and for the modification of classic models

Problems of small and medium business integration into the European Union economy

Theory of economics and the world practice have proved that the small and medium business is the driver of economics. The small and medium business companies are the best mobile, permanently changing groups of companies, predetermining general economic growth and social stability. Rate of the economic growth in the small countries, like Lithuania, is in a direct relation with their business openness and international market integration degree. Lithuania's integration into EU, which should force the political and economic risk down, will attract more investments into relevant industries of Lithuania, upgrading their efficiency. Essential obstacles for trade and co-operation with EU have already been eliminated, all the rest will depend on business initiative as well as on the business policy, formed by state institutions. Integration process in a state level should not confine itself in just transferring of EU directives and their implementation in the national legal system. More detailed and deeper analysis of the industrial and service sectors as well as evaluation of the small and medium business development are necessary. Common market of European Union has the largest GDP in the world. Forecasts exist, stating that in 2003 GDP in USA will grow by 2.9 per cent and in HU - by 3.1 per cent. Being a part of a large market both creates the preconditions for economic growth and raises demands for performance in each industry and company, their competitiveness. Obviously the international economic competitiveness may not be reached separately from the external market, therefore integration into the common market is one of the ways to reach this aim. Statistical data shows that the small countries have been integrated into EU at a largest extent: Ireland, Belgium, Luxembourg, Holland, Portugal.Important are the development trends of industries of the EU states, that may aid in preparing development forecasts for Lithuanian economy. It is thought, that in 2003-2004 such activities like leisure and entertainment organising, rent of machines and equipment, hotels and restaurants, medical, precise and optical tools, computers and related activities as well as scientific research and applied works will be mostly developed by the small and medium business, taking initiative to implement new production and technologies and becoming potential labs for larger businesses. It must be noted that the small and medium business companies are developing science susceptible

Portfolio management of exchange rate as a one of financial means (devices)

In nowadays highly competitive business world risk management became one of the major areas of academic and professional research. Exchange rate risk management became extremely important in the 1980s when major currency exchange rates were set to float. In Lithuania exchange rate risk management became relevant when national currency litas was introduced and Lithuania became an active partipicipant in international trade. In this paper the results of the research on decision making in exchange market are described. The object of the research was portfolio decision making management in exchange market. Creation and utilization of the system of trading in currency exchange rates relies only on historical trading data and allows creating trading srategies, which assure positive trading results with desirable guarantee. The authors are relynig on historical trading data in global market of exchange rates (FOREX). Integral decision managing effect usually is researched by forming exchange management portfolios in exchange market

Impact of fundamental and technical factors of portfolio formation

Lietuvoje vertybinių popierių rinka darosi vis aktyvesnė, nes tie, kurie taupo, nėra patenkinti ko¬mercinių bankų už indėlius siūlomomis palūkano¬mis, kurios net nepadengia oficialiosios infliacijos lygio, todėl vis aktyviau dalyvaujama prekyboje vertybiniais popieriais. Tačiau sėkmingam investa¬vimui yra būtina tam tikra filosofija, leisianti išvengti sunkių pasekmių investuojant vertybinių popierių rinkoje. Straipsnyje pateikiamos pagrin¬dinės vertybinių popierių analizės kryptys: vertybi¬nių popierių fundamentalioji ir techninė analizė. Straipsnio tikslas - identifikuoti fundamentinius ir techninius veiksnius, turinčius įtakos verty¬binių popierių portfelio formavimui, ir sudaryti jų įvertinimo modelį. Straipsnio objektas - vertybinių popierių ver¬tės indikatoriai. Rengiant straipsnį buvo atlikta sisteminė mokslinės literatūros anali¬zė ir sintezė, loginė ir lyginamoji analizė, naudotasi apiben¬drinimo metodais, indukcija, dedukcija, modeliavimo elementais.The Lithuanian securities market is becoming more active due to an increased share of population shifting from traditional methods of saving in the form of bank deposits (which fail to cover the official inflation rate) to investments into securities. To make an investment a success an investor has to follow a certain philosophy which could help avoid grievous consequences while investing into securities. The article provides the basic trends of securities analysis: the fundamental and technical analysis of securities. The aim of the article – identify fundamental and technical factors affecting the formation of a securities portfolio and draft its evaluation model. The subject of the article – value indicators of securities. The process of writing the article involved analysis and synthesis of scholarly works, logical and comparative analysis, application of generalisation methods, induction, deduction, modelling

Decisions of formation of a trading company's capital structure based on EVA maximization

Šiame straipsnyje analizuojami prekybinės įmonės AB „Apranga“ kapitalo struktūros, orientuotos į ekonominės pridėtinės vertės (toliau - EVA) maksimizavimą formavimo sprendimai. Įmonės dažniausia susiduria su problema, kokias lėšas - skolintas ar nuosavas - naudoti veiklai finansuoti. Įvairūs finansavimo būdai susiję su kapitalo sąnaudomis, kurias tinkamai valdant galima sukurti didesnę įmonės EVA. Analizuojant ir vertinant AB „Apranga“ kapitalo struktūros formavimo ypatumus, nagrinėti finansų struktūros rodikliai, kapitalo svertai, jų ryšys su pelningumo ir šakos rodikliais, nustatyta vidutinių svertinių kapitalo sąnaudų, ekonominės pridėtinės vertės ir skolos koeficiento priklausomybė. Atlikti skaičiavimai leido pagrįsti kapitalo struktūros formavimo ir įmonės vertės teorijų teiginius.Most of the business decisions are based on theories of capital structure formation. Appropriate choice of capital structure can guarantee a profitable and long-term activity of the company. Financial stability and problems of insolvency risk are mainly attributed to the amount of borrowed capital in the capital structure, or simply financial leverage. When choosing the most rational option for accumulation of financial resources, it is necessary to identify and assess factors affecting the making of strategic decisions on financing. Attempts to find out how the capital structure theories based on EVA (economic value added) maximization work in practice, which factors and to what extent influence the choice of leverage, remain a relevant research problem. Based on the statements about capital structuring in Lithuania and international empirical studies, it is expedient to assess the commercial companies' financial leverage with industry indicators, moreover, it is relevant to find out the "Apranga" AB company's capital leverage relationship with indicators of profitability. Retail industry data show that financial leverage ranges from 0.35 to 0.58. In this sector borrowing is very extensive. This can be justified by the fact that companies may lack the working capital for project implementation, therefore long-term debts are chosen, as they do not have to be repaid immediately. When comparing the capital leverage of "Apranga" AB company and the retail sector, it is seen that the company's quota of borrowed capital over the period under analysis generally does not deviate from the industry's indications. Significant differences may be noticed in debt-equity coefficient, which in 2008-2009 was almost twice lower of "Apranga" AB than of the retail business sector. Often there is a tendency among businesses earning more and more profit to borrow less. Perhaps the situation on the Lithuanian market is approaching the situation in the Western countries, where the theory of choice sequence is considered to be the most accurate theory to explain companies' decisions in the capital structuring. As supporters of the theory of choice sequence say, financial leverage of the company "Apranga" AB increases with tangible assets and investment opportunities, and decreases with increasing profitability. That is, investments of the company "Apranga" AB are financed by retained profit, maintaining a constant debt coefficient, except for 2009, when the share of borrowed capital in the whole capital decreased. Then between leverage and net profitability there was a negative relationship. After mercantile company's capital structure formation analysis and assessment of the potential for maximizing EVA, it was found that in formation of a company's capital structure it is necessary to take into account strengths, weaknesses, opportunities, and threats of each capital. The main criterion for decisions on enterprise development and evaluation of its evolution is value, which indicates the share price, and the main business owners' objective is maximization of it, which means a discovery of the way to maximize the company's value. In order to make the right decisions linked to the value increase, modern value measurements were introduced. One of them is the economic value added (EVA). According to mercantile company "Apranga" AB capital structure formation and EVA maximisation analysis, the dependence between weighted average cost of capital, economic value added and the debt coefficient was determined. It appears that when the weighted average cost of capital increases, the commercial value of the company decreases. To find out the mercantile company's capital structure formation decisions based on the maximization of EVA, there were situations simulated with different costs of debt capital (2.5% and 6%) and the values of rate of return required by owners (10% and 15%). This evaluation of choice of rational capital structure showed that using different cost of capital and internal rate of return required by owners, the mercantile company allocates the largest part in capital structure to borrowings. Therefore, financing of business by borrowed capital produces a positive effect on a company's economic performance, because the maximum economic value added is achieved and the weighted average cost of capital is minimized