Daniela Vandone

Price discovery in commodity markets

This article investigates the long-run relationship between spot and futures prices for corn and soybean. We apply cointegration methodology, allowing for the presence of potentially unknown structural breaks and then study the causality relationships between spot and futures prices within each specific subperiod identified with the aim of analysing the price discovery. Empirical estimates highlight (i) multiple breaks exist in the cointegrating relationship between prices and (ii) subperiods consequently identified express different dynamics in the causal relationship between spot and futures prices and support the idea that fundamentals are important in explaining the 2007/08 food price increase.

Risk of over-indebtedness and behavioural factors

The aim of this paper is to analyse the link between behaviour and overindebtedness and to shed light on the effectiveness of policy measures to tackle household financial fragility. Behaviour leading to overindebtedness is often put down to social and psychological factors that reduce an individual’s capacity to evaluate the consequences of his/her consumption and borrowing decisions. Such decisions may not be rational from a classic economic point of view. In fact individuals tend, on the one hand, to overestimate their capacity to manage domestic financial resources and, on the other hand, to underestimate the possibility of being affected by negative events. As a result, these individuals systematically underestimate the risk of not being able to meet their financial commitments. Furthermore, they overestimate the immediate benefits and undervalue the future costs; such behaviour leads to the decision to purchase, using debt if necessary, regardless of the effect this choice may have on the sustainability of future debt levels. The fact that overindebtedness may be caused by individuals’ irrational behaviour is relevant and has to be taken into account in order to devise appropriate measures to prevent or manage situations of financial difficulties and to evaluate their effectiveness. The empirical literature has shown how psychological factors have an impact on the effectiveness of policies adopted to prevent and manage financial difficulties arising from overindebtedness. Studies carried out within behavioural economics have also shown that individuals have little awareness of these psychological mechanisms. Indeed, individuals in financial difficulties tend to lay the blame on exogenous factors such as job or family difficulties, which reduce income level below expected. Rarely do individuals recognise that the causes for their difficulties lie principally - or at least also - with their inability to manage money and the decisions made regarding spending and indebtedness. Furthermore, many studies have shown how deviant behaviour patterns persist even when individuals are aware of the risks they face. Individuals’ incapacity to take corrective steps despite knowing the dangers of overindebtedness may have significant implication for designing effective policies to management situations of indebtedness that may become pathological.

Public Enterprises in the Market for Corporate Control: Recent Worldwide Evidence

This paper analyzes deals involving private and public enterprises, i.e. State-Owned Enterprises (SOEs) worldwide since 2004. We consider four types of deals: privatizations of SOEs, public enterprises acquiring private ones (public-private deals), private reorganizations (i.e private firms acquiring a private target) and public reorganizations. (i.e. both acquirer and target are SOEs). We study whether the pre-deal performance and corporate characteristics of the acquirer and target companies vary across the four types of deals depending on ownership: public or private. Data are taken from Zephyr (Bureau Van Dijk), which provides information on completed deals worldwide and Orbis, a firm-level dataset (also implemented by BvD). Some results of previous literature on M&As performed by private firms (˜the inefficiency management hypothesis) are both confirmed and expanded. Acquirers involved in deals are both larger and better performing than their targets but some qualifications are in order with respect to ownership. The difference in size and performance between acquirers and targets is in fact more pronounced for public with respect to private acquirers. The evidence thus points to an active role of SOEs as acquirers, as they significantly out-perform relative to their targets, including private ones, in terms of return on sales. Given these novel findings, further research is needed to examine the motivations behind the different types of deals considered and to verify the role of government ownership in the contemporary global economy.

Publicization versus Privatization: Recent Worldwide Evidence

This paper analyzes deals involving private and State-owned enterprises (SOEs) worldwide since 2004. We consider four types of deals: privatizations, publicizations, private reorganizations (i.e private firms acquiring a private target) and public reorganizations. (i.e. both acquirers and targets are SOEs). We study whether the pre-deal performance and corporate characteristics of the acquirer and target companies vary across the four types of deals depending on ownership: public or private. Data are taken from Zephyr, which provides information on completed deals worldwide and Orbis, a firm-level dataset. The empirical analysis suggests the following. Some results of previous literature on M&As performed by private firms (‘the inefficiency management hypothesis’) are both confirmed and expanded. Acquirers involved in deals are both larger and better performing than their targets but some qualifications are in order with respect to ownership. The difference in size and performance between acquirers and targets is in fact more pronounced for public with respect to private acquirers. The evidence thus points to an active role of SOEs as acquires, as they significantly out-perform relative to their targets, including private ones, in terms of return on sales. Given these novel findings, further research is needed to examine the motivations behind the different types of deals considered and to verify the role of ownership.

State-owned banks in the market for corporate control

We study the pre-deal characteristics of state-owned banks acquiring other companies, relative to their private counterparts. We build a unique international data-set of 3682 deals in the years 2003–2013. Econometric results highlight that those state-owned banks that are acting as acquirers have an ex-ante performance similar to their private benchmarks. The results are driven by the role of development banks. This new finding points to the recent evolution of some types of contemporary state-owned financial players.

Consumer Credit in Italy and Financial Fragility

The paper focuses on the consumer credit market in Italy and on the related risk of over-indebtedness. Using survey data, it investigates the impact of over-indebtedness on consumption behaviour, evaluating in particular if consumer credit is used to cover gaps in income and if this is associated with an increased and diffused inadequacy of financial and economic position of indebted households. Results highlight that a relatively consistent part of consumer credit is concentrated in the hands of financially fragile individuals. Moreover, when considering the amount of debt measured in relative terms, a difficult financial position adds 2,7 percentage points to the risk of over-indebtedness compared to households without any financial difficulty.

Motives of mergers and acquisitions by state-owned enterprises: A taxonomy and international evidence

This paper looks at state-owned enterprises (SOEs) from the angle of the market for corporate control and analyzes in detail the reported rationales of a sample of 355 mergers and acquisition (M&A) deals performed by SOEs as acquirers over the period 2002-2012. The purpose of this paper, after having created a taxonomy of deal motivations, is to empirically test two alternative hypotheses: deviation vs convergence of M&A deal rationales between state-owned and private enterprises.,The data set is obtained by combining firm-level information from two sources, Zephyr and Orbis (Bureau Van Dijk). A recursive algorithm is developed to infer the ownership nature of the enterprises at the time the deal took place and then the authors double-checked the identity of the global ultimate owner by visual inspection of all the available information. Motivations are analyzed through a case-by-case analysis and classified into several categories, thereby providing a taxonomy of rationales behind SOE M&As and discussing their differences and similarities relative to private firms.,More than 60 percent of the deals performed by SOEs as acquirers are driven by “shareholder value maximization” motives, similarly to private enterprise acquirers. The other 40 percent of deals are almost equally spread among three rationales that specifically relate to the role of modern state capitalism in the economy. “Financial distress” motivation, which is the only one clearly deviating from the objectives of profit maximization typical of private ownership, is far less important than the others.,The paper does not analyze the case studies in detail. Neither does it correlate the evidence with the quality of corporate governance or the quality of institutions in the country. This would be interesting in order to discover whether the alignment of objectives between public and private enterprises is enhanced by certain features of public sector management, as suggested by the OECD (2015) Guidelines.,The paper suggests some policy implications in terms of reforms of the corporate governance of the SOEs and accountability of their management against clearly stated public missions. It also calls for the need for citizens to be informed in a transparent way about the rationales of major M&A deals when a SOE is on the acquirer side, and the consistency of such rationales with the mission assigned by governments to the enterprises they own. Finally, it underlines that regulatory concerns raised in many countries by the rise of cross-border SOE M&As are in most of the cases unfounded.,Existing literature has mainly focused on private corporate M&A deals or has just disregarded the ownership status of the acquiring firm. This paper focuses on the motivations for SOE deals in order to elaborate a taxonomy of SOE deal rationales and to identify the differences and similarities between private corporate firms.

Investing in the wine market: a country-level threshold cointegration approach

In recent years, investments in commodities, via commodity futures and commodity index funds, have grown rapidly. The appeal of investing in commodities is generally attributed to the low correlati...

The Profitability of the Consumer Credit Industry: Evidence from Europe

The paper focuses on the profitability of the consumer credit industry in Europe. Using consumer credit companies’ financial statement data, we investigate the effect of firm-specific and market-specific factors on the profitability of a sample of French, German, Italian and Spanish consumer credit companies over the period 2005-07. Results highlight that, among firm-level determinants, diversification of products and services within lending to households is the most influential driver of profit. With regards to market-specific factors, the profitability of consumer credit companies is positively affected by the size of the market, and negatively determined by the level of household debt burden.

Bank Ownership and Firm-Level Performance: An Empirical Assessment of State-Owned Development Banks

The goal of this chapter is to investigate state-owned development banks and to analyse their performance vis-a-vis to other state-owned and private-owned banks. We use firm-level evidences from Europe to analyse the performance of state-owned development banks and the difference compared to state-owned commercial banks and private banks. Analysing the performance of development banks is a relevant issue. First: assessing development banks’ performance is important to determine their financial sustainability. Second: extant empirical literature on bank ownership and performance has always considered state-owned banks as belonging to the same type, whereas they do not. Our results point to clear differences between development and commercial state-owned banks, with the former performing better than the latter in terms of efficiency. They recognize that state-owned banks are not a monolith and that development banks have specific features and operate in a way not completely examined in the extant literature.