india going global.indd - The IIPM Think Tank

RESEARCH
Tabel 3
Test of Structural Shift in the ROE of Merged firms in
Emerging Economies
Series Country Jump Growth and
Shift Model
Acquirer
Series
Target
Series
therefore are asymptotically equivalent to maximum likelihood
estimators.
The regression coefficient of equation 8, their standard
errors and t-statistics are presented in Table-4. All coefficients
except one are statistically significant at the one
percent level of significance. This is true for both the
Results of Translog Cost Function of Merged Firms
Coefficient Standard
Error
Coefficients
for India†
60 Need the Dough July-October - 2007
Intercept and
Growth Model
India 1. 501 0.05 0.48
Brazil 0.89 0.12 0.11
Malaysia 0.95 0.125 0.23
India 0.15 0.087 0.37
Brazil 0.853 0.22 .12
Malaysia 1.03 0.31 .23
Coefficients
for Brazil†
total sample as well as individual countries.
The results relating to the test of homotheticity
expressed in restriction stated in equation
(10) are presented in Table 5. The test
of restrictions imposed on cost function as
well as share functions support the hypothesis
of homotheticity. The cost function of
the sample firms therefore is separable between
output and input prices. This shows
that cost, output and input price relationships
can possibly be characterized globally. The
strong acceptance of homotheticity implies
strong support of homogeneity also. It can
be observed from Table 4 that the direct test
of homogeneity also accepts the homogeneity
hypothesis. It is obvious that Cobb-Douglas
specification as well as global constant returns to scale
is also strongly supported.
This implies that the assumptions underlying the restrictive
cost functions and hence production structures
offer a valid representation of technology of the merged
sample companies. The production technology over the
sample period is consistent with homothetic
production process. The
Coefficients
for Malaysia†
Intercept 1.6949 0.573617 2.3123 1.8956 0.0198
ln Z (L) 0.4422 0.008483 0.5823 0.4184 0.0089
ln Z (K) 0.1023 0.000360 0.8790 0.0271 0.0022
ln Z (M) -0.4558 -0.000177 0.6631 -0.0074 0.0069
ln Z (LL) 0.7191 0.009455 0.0388 0.0033 0.0257
ln Z (LK) 0.0761 0.001223 0.6819 0.0040 0.0195
ln Z (LM) 0.1524 0.002126 0.0004 0.0134 0.0306*
ln Z (LQ) 0.0044 0.000120 0.0008 0.0094 0.0016
ln Z (LT) -0.0061 0.000933 -0.0340 -0.0036 -0.0066
ln Z (KK) -0.0031 -0.000554 0.0183 0.0020* 0.0169
ln Z (KM) 0.0015 1.489630 0.00061* 0.0064 -0.0085
ln Z (KQ) 0.0586 -0.000647 0.0807 -0.0020 0.0163
ln Z (KT) -0.0110 0.000672 0.0015 -0.0138 -0.0010
ln Z (MM) -0.0865 -0.000154 -0.0042 -0.0216 0.0036
ln Z (MQ) 0.0023 0.000059 0.0015 -0.0173 0.0013
ln Z (MT) 0.0456 0.000817 -0.0003 0.0137 -0.0053
ln(Q) 0.7053 0.002343 0.6336 0.9018 0.8001
ln(QQ) 0.0799 0.007583 0.0070 0.0136 0.0208
ln(QT) -0.0759 0.000630 -0.0019 0.0103 -0.0139
ln(TT) 0.0443 0.000306 0.0005 -0.0049 0.0010
ln(T) 0.0014 0.000317 0.0020 -0.0068 0.0191
† All coeficients are significant except for those marked with *
finding provides justification for the
use of both a flexible functional form
(adopted in the present study ) such
as translog cost functions as well as
restrictive production functions to
capture the underlying production
process.
To understand the nature of production
process of the merged firms
more elaborately, estimates of the
Allen elasticities of substitution were
computed in respect of the firms in
the sample. The results are presented
in Table-6. The estimates show that
all inputs are substitutes. Profit is
a strong substitute for each of the
other factors. There is a strong substitutability
between materials and
profits perhaps because if material
cost goes down profits are likely to
increase. The results also show presence
of strong substitutability between
physical inputs namely labour
and capital. It is explained probably
by the tendency of merged firms
to economise on labour costs. The
degree of substitution between materials
and profits on one hand and