Paul Kattuman

Macroeconomic Instability and Business Exit: Determinants of Failures and Acquisitions of UK Firms

We study the impact of the macroeconomic environment on business exit in a world where acquisition and bankruptcy are co-determined. We estimate competing risk hazard regression models using data on UK quoted firms spanning a 38-year period that witnessed several business cycles. We find that the processes determining bankruptcies and acquisitions depend on the macroeconomic environment. In particular, macroeconomic instability has opposing effects on bankruptcy hazard and acquisition hazard, raising the former and lowering the latter. While bankruptcy hazard is counter-cyclical and acquisition hazard pro-cyclical, the US business cycle is a better predictor than the UK cycle itself.

The Cross Sectional Dynamics of the US Business Cycle: 1950-1999

Modern interest in business cycles has focused on the co-movements and correlations in the major macroeconomic aggregates. In this paper we offer another dimension to business cycle analysis which looks at the cross sectional distribution of the growth rate of gross sales by US quoted companies from 1950 to 1999. We detect correlations between aggregate business cycle fluctuations and the higher moments of the cross sectional distribution. Using both weighted and unweighted rates of change in sales, we find a significant negative correlation between the aggregate rate of growth of GDP and the cross sectional variance and skewness of gross sales. On the other hand there is positive correlation, at business cycle frequencies with kurtosis. In order to explore this further we turn to the dynamic evolution of firms and analyse the sensitivity of growth rates to aggregate shocks conditioning on firm size. The results suggest that despite considerable heterogeneity macroeconomic shocks have pervasive effects that are, however, more pronounced for firms in the middle range of growth. This has implications for both macro and industrial economics.

Allocating electricity transmission costs through tracing: a game-theoretic rationale

Tracing is a method of assigning flows in an electricity network to particular generators and loads, assuming perfect mixing at each node. It can be used to assign costs to transmission users. We show that the resulting allocation is equal to the Shapley value of an equivalent co-operative game.

Macro Economic Instability and Business Exit: Determinants of Failures and Acquisitions of Large UK Firms

Using data over a 34-year span on UK quoted firms, this paper seeks to identify the factors that increase the likelihood of exit of firms. Firms may disappear through the mutually precluding events of bankruptcies and acquisitions. We use a competing-risks hazard model to determine characteristics leading to each outcome. Hazard models make use of the data on timing of these alternative outcomes and we exploit this to focus attention on how the hazards change over the business cycles, conditional on the post-listing age of the firm. We find that the volatility in macro environment has a role in determining, in different ways, the hazard of firms going bankrupt or being acquired.

Outline Pricing and the Euro Changeover: Cross-Country Comparisons

We study the impact of the Euro on prices charged by online retailers within the EU. Our data spans the period before and after the Euro was introduced, covers a variety of products, and includes countries inside and outside of the Eurozone. Our main finding is that the Euro changeover in 2002 neither mitigated price differences nor resulted in purchasing power parity for products sold online. In fact, evidence suggests that online prices in the Eurozone actually increased compared to prices of EU countries outside the Eurozone. Further, contrary to the predictions of purchasing-power-parity, we find significant differences in the prices charged by firms both within and across seven countries in the European Union. We also find significant differences in both the average price charged and the best price available in these countries. These conclusions are robust to a variety of controls.

One Market, One Money, One Price? Price Dispersion in the European Union

The introduction of the euro was intended to integrate markets within Europe further, after the implementation of the 1992 Single Market Project. We examine the extent to which this objective has been achieved, by examining the degree of price dispersion between countries in the eurozone, compared to a control group of EU countries outside the eurozone. We also establish the role of exchange rate risk in hampering arbitrage by estimating the euro-effect for sub-groups within eurozone, utilising differences among EU countries in participating in the Exchange Rate Mechanism. Our results, in contrast with previous empirical research, suggest robustly that the euro has had a significant integrating effect.

A Dashboard for Online Pricing

One primary difference between the online marketplace and the high street is the quality of information about product characteristics and prices that are available to all consumers and retailers. Successful online retailers exploit this rich information through innovative dynamic pricing strategies. This article identifies important considerations for devising online pricing strategies. It presents five case studies that illustrate how these strategies have been applied by successful online retailers and discusses complementary practices in innovative management and data analysis. We present a 9Dashboard9 of market specific information that will help managers identify and respond to opportunities and threats arising in the online marketplace.

Online Price Dispersion Within and Between Seven European Countries

This paper provides a comprehensive analysis of online price dispersion in Europe, across a broad range of product categories and countries. Using the dominant European price comparison site we collected firm specific prices, weekly, from sevcn European countries (Denmark, France, Italy, Netherlands, Spain, Sweden and the United Kingdom) for 31 unique products, falling into five distinct product categories (printers, PDAs, scanners, games consoles, computer games and music), over the nine month period October 2001 to June 2002. The resulting data set comprises over 17,000 individual price observations. Using a number of alternative measures of price dispersion we find significant differences in the degree of price dispersion observed in online markets, both between countries and across product categories. We consider alternative explanations for online price dispersion and analyse their significance in explaining the observed differences.

Business Failure in UK and US Quoted Firms: Impact of Macroeconomic Instability and the Role of Legal Institutions

Firms exit through the mutually precluding events of bankruptcy and acquisition. We use a competing risks hazard regression model to identify the characteristics leading to each of these two outcomes using over thirty years of data on US and UK quoted firms. We find evidence about the way in which macroeconomic factors affect firm survival in these two economies, in addition to firm and industry-specific factors. Further, there are significant differences in the way in which firms in the US and the UK react to changes in the macroeconomic environment and, particularly to macroeconomic instability. We argue that these differences in response may be attributable to differences in bankruptcy codes in the US and the UK.

Income Inequality in Hungary, 1987-1993

The authors examine the growth of income inequality in Hungary in the early transition period. They use household budget survey data from four years between 1987 and 1993 to examine the factors associated with the levels and changes in inequality. They find that public policy inhibited the increase in household income inequality initially. Tax and benefit policies, and the increasing diversity among sources of household incomes, interacted to cause a roller-coaster pattern in which the first spurt in inequality was reversed, but then followed by a further sharp increase.