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In broad terms, recent theory suggests that the increased emphasis that has been placed in many countries on "market forces' may be misplaced. The failure of competition to establish desirable outcomes provides a prima facie case for government intervention. At the same time, it has become clear that diagnosing instances of competitive failure is not straightforward and the determination of appropriate remedies requires detailed analysis. Blanket intervention by means of taxes, regulation and rules to guide competition policy may do more harm than good. This Assessment describes some of these recent theoretical developments and applies the analysis to important areas of policy.
Clearly, the UK government's privatization program has been a large-scale exercise in new capital issues. There are 3 main considerations that may have influenced the form of the asset sales: 1. extent of ownership, 2. costs of sale, and 3. disruption to markets. Little evidence exists that the first 2 objectives are being met; costs have been high, primarily as a result of the underpricing of assets, and large personal shareholdings have been maintained only for very short periods of time. There appears to be a simple way to avoid high costs by staggering the sales, which would also reduce disruptions to the equity markets. Furthermore, there is no clear statement as to why huge corporations have to be brought to market in a single sale. Analysis shows that accounting conventions give misleading impressions of the effects of asset sales on the private and public sectors.
The anatomy of strategic change in companies in Europe has been little investigated. Recently the British Economic and Social Research Council sponsored an audit of management based on interviews with over 1000 middle and senior executives and directors in 190 companies. The survey examined the origins and correlates of change and found that based on the perceptions of the managers, an orientation towards change in its various dimensions was most closely correlated with companies which had explicit management development programmes.
Two forest products manufacturers negotiate the sale of a group of assets. ACRS would allow the buyer to rapidly depreciate the stepped up basis to justify a high valuation. The seller recently paid greenmail, and this transaction may be linked to its desire to avoid paying off a second investor.