The information content of productivity measures

Pao Yue-kong Library Electronic Theses Database

The information content of productivity measures

 

Author: Au, Mei-wah Cindy
Title: The information content of productivity measures
Degree: D.Acc.
Year: 2005
Subject: Hong Kong Polytechnic University -- Dissertations.
Industrial productivity -- Measurement.
Industrial productivity.
Economic development.
Department: Graduate School of Business
Pages: x, 107 leaves ; 31 cm.
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b2088943
URI: http://theses.lib.polyu.edu.hk/handle/200/1262
Abstract: There is a general impression that the American economy has been doing very well in the latter half of the 1990s. For example, the USA has higher investment in computers than any other country and it has large IT multinational companies providing IT products and services (e.g. Microsoft and IBM). American companies are the most important and influential manufacturers and suppliers of IT. The World Bank shows the USA has more personal computer users and the largest internet usage and far outstrips Europe and Japan. Technology and productivity are the major factors that explain economic growth. Productivity growth is the excess of output growth after the deduction of input growth. The World Bank and OECD data show that the USA's productivity has risen rapidly when compared to Europe and the rest of the world in the latter half of the 1990s. Among the European industrialised countries, Italy has lagged behind and its GDP growth rate has declined in recent years. The OECD forecasts that America's economic growth will be higher than Europe's until 2007. This thesis gathers evidence on productivity from macro economic data and firm level data. This thesis is concerned with examining productivity changes in different countries and the usefulness of productivity measures at the firm level. Economists typically separate productivity data into value-added output, hours worked, and unit labour cost. In the private sector, companies calculate accounting earnings after the deduction of all expenses including employee expenses. Employee expenses reflect the net effect of labour hours and wage rates. Productivity can be interpreted as the amount of earnings generated by one dollar of employee expenses. Manufacturing companies with information on employee expenses listed in USA, Italy, France, Sweden and Ireland for the period of 1997 to 2001 are examined in this paper. Productivity is based on the general concept of the amount of operating income generated by a dollar of employees' expenses. The sample results show that the productivity of the Italian companies is not low but has declined compared to an increasing trend for the USA. The performance results of the sample companies match the overall performance direction of the national economy in terms of GDP and the productivity data from the OECD. Empirical results match economic trend. Productivity is important - a key factor for growth both at the level of the firm or on an economy-wide basis. Positive correlation between UE and CPR is evident of information content. This thesis also examines the share prices of the sample against the overall performance of the country's stock market for each quarter of the year. The signal provided by a company's announcement and disclosure of the company's performance and productivity does have a significant impact on the share prices. The results of a two stage regression show that changes in productivity have incremental information content (above and beyond unexpected earnings) in the U.S. and Italy. No such relationship is found for France, Sweden, and Ireland.

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