In countries with more secure property rights, the cost of capital is lower, suggesting higher investment rates. Using data from 49 countries we extend the conventional capital-asset pricing model (CAPM) to include a property rights risk-factor. In the conventional CAPM model only a single risk factor—systemic risk—is considered. However, when using a world market portfolio to estimate systemic risk in national portfolios, little of the required rate of return is explained in less developed as compared to more developed countries. Adding a factor representing institutional risk increases predictive power substantially. Further, we find that property rights affect the transmission of information, which suggests that markets price information differently, and allocate resources less efficiently, in countries with less secure property rights. We find that the CAPM model performs better in countries with more secure property rights.

This paper examines how institutional investors influence investment decisions and returns on investment. To measure investment performance, we use marginal q, which measures the ratio of the return on investment to the cost of capital. Institutional owners are found to have a positive but marginally diminishing effect on performance. Our paper uses longitudinal data on Swedish firms from 1999 to 2005; during this period, the ownership structure of Swedish firms underwent dramatic changes as institutional investors increased their ownership shares, while ownership by Swedish households decreased. However, controlling owners - who were often founding families - maintained their control of firms by resorting to extensive use of dual-class shares. This was an important determinant of firm performance that eradicated the positive influence of institutional ownership.

This paper contributes to the literature of ownership, control and performance by exploring these relationships for Swedish listed companies (1997-2002). A marginal q will be used as measures of economic performance. Marginal q was presented in an article by Mueller and Reardon in 1993 and has recently been used in empirical studies of ownership and performance by among others Gugler and Yurtoglu (2003). Frequently an average Tobin’s q is used in studies of this type, but Tobin’s q has a number of disadvantages which can be circumvented by employing a marginal q. In addition to marginal q estimations have been made with the valuation ratio as performance measure. The valuation ratio is interesting from a theoretical viewpoint, as it is an efficiency measure that plays a central role in Marris (1964) growth model of the firm. It is also easy to compute and is related to Tobin´s q. This study adds to earlier studies by using Swedish data with its specificities in form of pyramid ownership and a vote differential. The relationships between the two performance measures and different ownership characteristics like ownership concentration and foreign ownership is investigated. We find that firms, on average, are making inferior investment decisions and that the Swedish corporate governance system have some efficiency drawbacks.

Entrepreneurship can have important positive effects linked to job creation, wealth and income generation, innovation and industry competitiveness. Scholars and policy-makers around the world have turned to the regulatory environment as a mechanism through which entrepreneurship can be encouraged, grown and its economic benefits harnessed. The effect of regulatory conditions on entrepreneurship however is not well understood, and can be nuanced given the wide range of regulatory tools and possible areas of impact. This paper serves as the introduction to a special issue, which seeks to shed some light on the relationship between regulation, firm dynamics and entrepreneurship. We identify some foundational considerations relevant to this relationship and discuss key questions, followed by a brief overview of each of the papers contained in the special issue.

We present a modified version of the entrepreneurial choice model, where it is shown that the expected utility of becoming an entrepreneur is decreasing in both the levels of taxes and the tax administrative burden. We extend previous empirical findings by examining how these variables influence entrepreneurs at different stages in the entrepreneurial life cycle. Our findings imply that the effect of the tax administrative burden varies over the entrepreneurial life cycle from strongly negative to insignificant. The most pronounced negative effects appear in the early stages of entrepreneurship. We conclude that a 10% reduction in the tax administrative burden increases the propensity for new business establishments by 4%. Our findings support the idea that tax simplification is one way to encourage entrepreneurship, without any reduction in tax revenues.

This article extends discussions of potential biases that can exist in applying cost–benefit analysis. While there is extensive evidence that capture can result in stakeholder manipulation of inputs, there are also claims that the analysis is inherently theoretically bias in favour of over acceptance. The article shows that, contrary to these latter claims, treating projects in isolation is unlikely to produce such bias; indeed, it is as likely as not to lead to suboptimally low acceptance rates. The reason for excessive acceptance of projects therefore is largely due to institutional capture of the analysis for either self-interest or natural human over-optimism.

Purpose – The purpose of this paper is to study the efficiency of capital allocation, across levels of ownership, in the aftermath of pro-market reforms in India.

Design/methodology/approach – The paper measures investment efficiency using the accelerator principle and examines the effect of ownership type on capital allocation.

Findings – No significant improvement in capital allocation during the period studied is found. The findings suggest firms face significant costs in adjusting their capital stock.

Originality/value – The paper uses unique data to estimate the elasticity of capital with respect to output.

Corporations have become the dominant organizational form in modern market economies, managing vast resources. Corporations are however associated with a number of governance problems. This dissertation deals with these corporate governance issues from an investment perspective. The dissertation comprises one introductory chapter and five, from each other independent, essays. These essays can be read independently, but are kept together by a corporate governance and investment theme. The essays mainly contribute to the empirical literature on corporate governance and investment behavior. In chapter 2 a measure of capital allocation, based on the acceleration principle, is estimated across 44 countries. Capital allocation is compared to ownership concentration and indicators of corporate governance. Support for the so-called economic entrenchment hypothesis is found, whereas the legal origin hypothesis is rejected. Chapters 3, 4 and 5 look at corporate governance and investment in Scandinavia, and Sweden in particular. Chapters 3 and 4 look into how ownership concentration affects firm investment performance. Performance is measured with marginal q. How dual-class shares affect this ownership-performance relationship is examined. Dual-class shares are, in chapter 4, found to reduce the so-called incentive effect and enhance the so-called entrenchment effect. The role of profit retentions for investment is examined in chapter 5. Scandinavian firms are found to rely on earning retentions to a higher degree than firms in other countries. Chapter 6 contains an analysis of how the quality of property rights and investor protection affect the cost of capital.

In a frictionless milieu, retentions should have no impact on investment behavior. Empirical studies, however, typically find that retentions are an important determinant of investment. Managerial discretion and financial constraints are two alternative explanations that have been suggested. This article uses a panel of listed Scandinavian firms to examine the importance of earnings retentions as a determinant of investment. Measures of Tobin’s Q, marginal q, and sales accelerator are used to control for investment opportunities. Scandinavian firms are found to depend on earnings retentions to a high degree, more so than in other developed economies. This high dependence on retentions suggests that the Scandinavian capital markets are suffering from allocational inefficiencies. This can be assumed to have detrimental effects on the speed of structural change. Moreover, these market frictions appear too large to per se be caused by information asymmetries or managerial discretion phenomena. Possible institutional explanations are suggested.

Vilka faktorer är av betydelse för långsiktig svensk konkurrenskraft och förmå- gan att generera tillväxt? I Svensk konkurrenskraft – Har vi problem med den ekonomiska förnyelseförmågan? får du svaren. Med utgångspunkt i kunskaps- uppbyggnadens betydelse för konkurrenskraft, via förutsättningar för entre- prenörskap och värdeskapande, ges policyrelevanta förslag för hur Sverige långsiktigt kan upprätthålla förädlingsvärden i ekonomin.

Entreprenörskapsforum presenterar för nionde året i rad en forskningspublikation i anslutning till konferensen Swedish Economic Forum. Rapportserien bidrar till att fördjupa samhällsdebatten genom djuplodande analyser och policyrekommenda- tioner. Analyserna har ett entreprenörskaps-, småföretags- och innovationsfokus kopplat till samhällsekonomiska effekter och svensk ekonomisk förnyelsekraft.

Författarna till Swedish Economic Forum Report 2017 är Johan Eklund, vd Entreprenörskapsforum och professor BTH, Pontus Braunerhjelm, forsknings- ledare Entreprenörskapsforum och professor KTH, Dan Brändström, profes- sor och ordförande Linnéuniversitetet, Anders Grufman, ekonom, Pernilla Johansson, ekon dr och chefekonom Sydsvenska Handelskammaren, Christian Ketels, forskare Harvard Business School, Emma Lappi, doktorand JIBS, Göran Reitberger, tidigare adjungerad professor KTH och Per Thulin, forskare Entreprenörskapsforum och ekon dr KTH. 

This paper examines the tax administrative burden and its effect on new firm formation. It is well recognized that entrepreneurship and new firm formation are critical factors in determining economic growth and development. New firm entry into the marketplace enhances welfare in two distinct ways: 1) by promoting innovation, productivity and economic growth and 2) by increasing competition, which lowers prices and expands output. It is also well documented that barriers to entry reduce the likelihood that new firms will enter various sectors. We argue that the burden imposed by tax codes and tax compliance constitutes a barrier to entry that has been neglected in the previous literature. We use data from the World Bank to measure the administrative burden that the complexity of tax policy imposes on new firms. Additionally, we use a measure of new firm formation – entry density. Our data cover 118 countries over a period of six years. We find that the entry rate is significantly reduced by the tax administrative burden and that this effect is unrelated to general taxes on corporate profits and is robust to the inclusion of several important control variables.

In an efficient economy, capital should be quickly (re)allocated from declining firms and sectors to more profitable investment opportunities. This process is affected by the concentration of corporate control, which in turn is affected by market institutions. We employ a panel of 11,984 firms across 44 countries to estimate the functional efficiency of capital markets. We adapt a measure for the efficiency of capital allocation using the accelerator principle. Our empirical results show weak property rights and highly concentrated ownership reduce the functional efficiency of capital markets.

Runt om i världen pågår ett arbete med att minska regelbördan för företag och medborgare. I Sverige har detta arbete huvudsakligen fokuserat på att minska de direkta administrativa kostnaderna för företag. Att betrakta regelbördan som enbart de direkta administrativa kostnaderna ser vi som alltför snävt. I stället bör regelbördan definieras som den totala samhällsekonomiska kostnaden orsakad av en regel. Vidare, i syfte att göra regeltillkomsten samhällsekonomiskt mera effektiv, menar vi att nya regler bör underkastas utförliga konsekvensanalyser. Dessa konsekvensanalyser bör bl.a. innehålla kostnads-nyttokalkyler och kostnads-effektivitets analyser. Slutligen menar vi att det är nödvändigt att dessa konsekvensanalyser granskas av en oberoende myndighet med starkt mandat.

Profits that persist above or below the norm for prolonged periods of time reveal a lack of competition and imply a systematic misallocation of resources. Competition, if unimpeded, should restore profits to normal levels within a relatively short time frame. The dynamics of profits can thus reveal a great deal about the competitiveness of an economy. This paper estimates the persistence of profits across the European Union (EU), which adds to our understanding of the competitiveness of 18 EU member states. By using a sample of approximately 4700 firms with 51,000 observations across the time period of 1995–2013, we find differences in the persistence of short-run profits, implying that there are differences in competitiveness across the EU. The Czech Republic and Greece are among the countries with the highest profit persistence, whereas the United Kingdom is among those with the lowest persistence of profits. Furthermore, we provide evidence that there are significant permanent rents present in the EU across countries as well as in the different broad sectors across the EU. 

In competitive markets, profits deviating from the norm will not persist for extended periods. If unimpeded, entry and exit of firms should restore profits to competitive levels. This dynamic process is influenced by regulations that temporarily or permanently impede competition. We study how product market regulations (PMR)—as measured by the OECD—affect competition by their impact on the profit persistence (Wölfl et al. in Ten years of product market reform in OECD countries-insights from a revised PMR indicator, 2009, Product market regulation: extending the analysis beyond OECD countries, 2010). To examine profit dynamics, we follow the methodology developed by Mueller (Economica 44(176):369–380, 1977), which measures both the short run persistence of profits and the long run permanent rents. The method can be used to measure: (1) short run transitory rents; (2) long run permanent rents. To this end we use firm level data from 30 OECD countries over the period 1998–2013. Results show that PMR increase the permanent rents of firms but we find no significant effect on short run profit persistence. We conclude that PMR negatively influence competition and increase permanent rents, resulting in misallocation of resources.

This paper contributes to the literature on management in family firms by investigating how succession in family firms affects returns on investment. The identities of the chief executive officer (CEO) and the chairman of the board (COB) were used to establish whether the management of the firm can be characterized as founder, descendant, or external management. A unique, unbalanced panel data set on listed Swedish firms covering the period from 1990 to 2005 was used in the analysis. The results show that founder management has a positive effect on the returns on investment in family firms, whereas descendant management has a negative impact. An external CEO as a successor in family firms leads to more efficient investment policies with increased firm value as a result. That is, when studying corporate governance in family firms it is important to account for what type of management the firm has. Further studies are required to understand the relationship between ownership, control, management, and firm performance.

In this paper the relation between ownership structure, board composition and firm performance is explored. A panel of Swedish listed firms is used to investigate how board composition affects firm performance. Board heterogeneity is measured as board size, age and gender diversity. The results show that Swedish board of directors have become more diversified in terms of gender. Also, fewer firms have the CEO on the board which can be interpreted as a sign of increased independency. The regression analysis shows that gender diversity has a small but negative effect on investment performance, and the same holds for CEO being on the board. The analysis also show that board size has a significant negative effect on investment performance. When incorporating all the explanatory variables into one equation however, the negative effect of larger boards dilutes the effect of gender diversity and having the CEO on the board.

Sverige har aldrig haft så många högutbildade i arbetskraften som idag, men arbetsmarknaden fungerar allt sämre. Frågan är vilka ekonomiska utfall högskoleexpansionen har bidragit till.

Slutsatser är att högre utbildning i Sverige inte främjar ekonomisk utveckling och välfärd. Det som bestämmer studenternas val och lärosätenas utformning av utbildningar anpassas inte efter behoven på arbetsmarknaden.

Utbildning är kostnadsfri för studerande och finansieras via skatteuttag, samtidigt som utbildningspremien och den privatekonomiska avkastningen, tillhör världens lägsta.

Detta bidrar inte till att lösa matchningsproblem på arbetsmarknaden. Istället finns en risk att utbildning ses som konsumtion snarare än investering i kunskap.

Resultatet riskerar bli en högskola som går i otakt med det omgivande samhället och framförallt näringslivet.