Valuing an East European Company

Investors in many parts of the world are considering opportunities in transitional economies, but such investments typically require analyses that are different from those performed in mature, market-based economies. This article evaluates the application of traditional firm valuation procedures to state-owned enterprises in the former Soviet bloc countries. The valuation problems faced by the foreign joint venture partner extend beyond those posed by an absence of capital market prices and a lack of useful managerial data in the socialist-styled financial statements. A more fundamental problem arises from the deteriorated condition of the assets of most of these firms. Years of underinvestment and neglect have eroded the worth of assets so that firm value is driven by future growth opportunities rather than currently profitable assets. Based on extensive interviews with participants and using both socialist and western-compatible financial statements, we illustrate the difficulties in obtaining valuation estimates through the example of a Czech metals manufacturer. Given the importance of growth opportunities, we recommend that valuation be undertaken with active participation of insiders, instead of a mechanical task done by outside consultants alone.     

Transaction fee economics in the Ethereum blockchain

We study the economic determinants of transaction fees in the Ethereum blockchain. We estimate an empirical model based on queueing theory and analyze the factors determining the “gas price” (transaction cost per unit of service, “gas”). Using block- and transaction-level data from the Ethereum blockchain, we show that changes in service demand significantly affect the gas price—when there is high block utilization, per-unit fees increase on average, with strong nonlinear effect above 90% utilization. The transaction type is another important factor—larger fraction of regular transactions (direct transfers between users) is associated with higher gas price.     

Do you feel like an insider? Job security and preferences for Flexibilization across Europe

The paper analyses the determinants of public opinion on flexibilisation of work contracts. While the literature on new labour market divides has rapidly expanded, few contributions directly look at employees’ demands for labour market regulation. By using a multi-level data set for 25 European countries, we find that the subjectively assessed job security is an important and valuable predictor of preferences for flexibilisation. In particular, those with very low and very high levels of perceived job security prefer flexibilisation compared to those with medium levels. We also show that the effect is stronger in countries with stricter employment protection legislation. The findings contribute to the literature on new divides of labour market politics in several ways. First, our empirical operationalization is related directly to the core of insider-outsider theory, the protection of work contracts. Second, subjective assessment of employment security yields important complementary insights into a debate usually focusing on objective measures. Third, we find that the (subjective) divide is context dependent; it is much more visible in countries where employment protection regulation is strong.     

Lifecycle-consistent female labor supply with nonlinear taxes: evidence from unobserved effects panel data models with censoring,selection and endogeneity

This paper uses the Panel Study of Income Dynamics (PSID) from 1979 to 2007 to estimate within-period lifecycle-consistent labor supply elasticities of US females in a two-stage budgeting framework. The paper combines a variety of econometric approaches to estimate unobserved effects panel data models with censoring, selection and endogeneity. The paper finds evidence of substantial upward bias in estimated wage elasticities from pooled panel models which do not account for unobserved effects, as fixed effects and correlated random effects (CRE) specifications yield smaller elasticities. Estimates are also somewhat sensitive to using a lifecycle-consistent specification versus a standard static model. The lifecycle-consistent wage elasticity from a CRE model with instrumental variables is 0.56 on the extensive margin and 0.31 on the intensive margin for an overall wage elasticity of 0.87. The standard static model, on the other hand, yields a wage elasticity of 0.46 on the extensive margin and 0.13 on the intensive margin for an overall elasticity of 0.59.     

Moving HRD from the periphery to the centre for transformation of an Indian public sector bank: Keynote address, 4th Asian conference of the academy of HRD

The transformation of Bank of Baroda, one of the largest commercial banks in the public sector in India, into a highly customer centric, technology driven and an innovative entity in retail and SME (small and medium enterprises) segments represents one of India's most remarkable success stories and one of the quickest turnarounds ever in public sector banking.

Known as an important player in commercial banking with international operations for several decades, the bank was gradually declining in recent years. In an environment of competition within the public sector as also due to entry of private banks with latest technology and young staff, the bank plunged into an unprecedented spiral of failing to innovate and adopt new technology.

Drastic action was required to regain its leadership position in the public sector space. Over the next one and a half years, the bank was back in reckoning and was firing on all cylinders. It retained its core business on track with a bang, restored its image as the most vibrant player among public sector banks (PSBs) through wide-ranging initiatives such as a logo change, hiring a cricketing icon as brand ambassador, heightened credit growth, improving the work culture, initiating many customer-centric initiatives and restoring the customer base, derisking the treasury portfolio, and winning several accolades and awards.

Today, Bank of Baroda has embarked upon more wide-ranging changes and a new vision to change the bank from a ‘vanilla banking’ entity to a ‘multi-specialist bank’. The author, who joined the bank as a HR specialist and eventually rose to become CEO of the bank, extensively used his HRD knowledge and academic background to initiate changes to harness energy in the bank's 40,000 staff to drive organization change.

Achieving a successful outcome seems to be far more difficult for a public sector bank with a legacy culture, high degree of unionization, poor compensation and aging staff. In spite of these constraining factors, the paper argues that it is through mobilizing the passion of people that leadership can transform organizations and put them on high growth trajectory.     

Delayed creative destruction and the coexistence of technologies

Disruptive innovations often engage in a fierce battle with incumbent technologies for hegemony. Past studies on technological innovations are silent about factors that extend the duration of the ‘era of ferment’—that is, the period during which competing technologies fight for dominance. We argue that complexity of the underlying technology, ecological and institutional dynamics may permit coexistence of competing technology regimes. The paper illustrates such coexistence by discussing the persistence of disparate technologies in steel making and kidney disease treatment. We conclude that the process of ‘creative destruction’ can be delayed in certain settings.     

A test for the presence of conditional heteroskedasticity within arch-m framework

This paper is concerned with testing the presence of ARCH within the ARCH-M model as the alternative hypothesis. Standard testing procedures are inapplicable since a nuisance parameter is unidentified under the null hypothesis. Nonetheless, the diagnostic tests for the presence of the conditional variance is very important since any misspecification in the conditional variance equation leads to inconsistent estimates of the conditional mean parameters. BTo resolve the problem of unidentified nuisance parameter, ‘Ne apply Davies’ approach, and investigate its finite sample performance through a Monte Carlo study.