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Author: Bahman Fathi Ajirloo Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
This dissertation consists of three essays that address recent topics in corporate finance that concern for scholars, policymakers, and investors. Main body of this dissertation has been developed based on the "nexus of contracts" theory of the firm which in recent years has sparked renewed debates on the motivation underlying firm size and boundary. The first essay explores a network of interconnected firms and examines the impact of the firm's relationships with peers, rivals, and customers on its capital structure, and how the firm's revealed peers influence its financing decisions. We demonstrate that industry classification approach is fraught with measurement error, and instead implement an alternative peer identification scheme that designates peer groups as those explicitly disclosed by managers to shareholders. The results contrast with previous studies that find only weak evidence for peer effects on capital structure. We find that peer effects are particularly strong when focal firms have persistent rivals, in the sense of supplying common customers for at least two consecutive years. While constructing the firm's actual network poses a challenge, the new approach can lead to more real-world insights about firm behavior. In the second essay, I approach to a challenging version of peer effects model with firm's and peer's multinomial decision outcome as endogenous and financial fundamentals as exogenous explanatory variables. I show that managers do not set dividend policy independently and they are significantly under the influence of few self-disclosed diverse competitors rather than industry peers. The test results show that firm's dividend change actions are significantly correlated with past dividend actions of its peers and it is highly predictable for the next period. I also investigate and report marginal effects of firm's and peers' different endogenous and exogenous determinants on the outcome decision variable for example a peer group with an overall dividend increase action in the past 180 days, increases the chance of the dividend increase in the focal firm. Considering the market capitalization of dividend paying firms, the identified marginal effects and prediction of the cash distribution are economically meaningful and important. In the third essay, I propose a new approach to model and measure intangible value of the firm as the joint of network feature and book value of the firm. Despite the growing importance, the empirical asset pricing research has struggled to evaluate the effects of intangible assets on firms' market value. Utilizing characteristics of the firm network, I propose a network-centric value factor to replace the under-performing traditional value factor (HML) in a series of asset pricing factor model. I show that the new value factor portfolio provides stronger performance in all periods of the sample. I also explore short and long strategies to better understand effects of the networks on value of the firms. Initial findings emphasize that asset pricing studies should adjust the factor models by including intangible network value of the firm.
Author: Bahman Fathi Ajirloo Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
This dissertation consists of three essays that address recent topics in corporate finance that concern for scholars, policymakers, and investors. Main body of this dissertation has been developed based on the "nexus of contracts" theory of the firm which in recent years has sparked renewed debates on the motivation underlying firm size and boundary. The first essay explores a network of interconnected firms and examines the impact of the firm's relationships with peers, rivals, and customers on its capital structure, and how the firm's revealed peers influence its financing decisions. We demonstrate that industry classification approach is fraught with measurement error, and instead implement an alternative peer identification scheme that designates peer groups as those explicitly disclosed by managers to shareholders. The results contrast with previous studies that find only weak evidence for peer effects on capital structure. We find that peer effects are particularly strong when focal firms have persistent rivals, in the sense of supplying common customers for at least two consecutive years. While constructing the firm's actual network poses a challenge, the new approach can lead to more real-world insights about firm behavior. In the second essay, I approach to a challenging version of peer effects model with firm's and peer's multinomial decision outcome as endogenous and financial fundamentals as exogenous explanatory variables. I show that managers do not set dividend policy independently and they are significantly under the influence of few self-disclosed diverse competitors rather than industry peers. The test results show that firm's dividend change actions are significantly correlated with past dividend actions of its peers and it is highly predictable for the next period. I also investigate and report marginal effects of firm's and peers' different endogenous and exogenous determinants on the outcome decision variable for example a peer group with an overall dividend increase action in the past 180 days, increases the chance of the dividend increase in the focal firm. Considering the market capitalization of dividend paying firms, the identified marginal effects and prediction of the cash distribution are economically meaningful and important. In the third essay, I propose a new approach to model and measure intangible value of the firm as the joint of network feature and book value of the firm. Despite the growing importance, the empirical asset pricing research has struggled to evaluate the effects of intangible assets on firms' market value. Utilizing characteristics of the firm network, I propose a network-centric value factor to replace the under-performing traditional value factor (HML) in a series of asset pricing factor model. I show that the new value factor portfolio provides stronger performance in all periods of the sample. I also explore short and long strategies to better understand effects of the networks on value of the firms. Initial findings emphasize that asset pricing studies should adjust the factor models by including intangible network value of the firm.
Author: Zheng Wang Publisher: ISBN: Category : Econometrics Languages : en Pages : 0
Book Description
This thesis contributes to the understanding of peer effects, both methodologically and empirically. The endogeneity of network formation has been a major obstacle to the study of peer influence. The first and the second chapters of the thesis propose a causal identification solution in the potential outcome framework. Combining results from multiple causal inference and statistical network analysis, I show that confounding can be addressed by inferring propensity scores of network link formation from the adjacency matrix. This identification strategy imposes minimum restrictions on the data-generating process and, unlike existing econometric solutions, does not rely on any parametric modelling. As an application, I estimate the effect of high school friendships on bachelor's degree attainment. While previous literature finds that exposure to more high-achieving boys makes girls less likely to obtain a bachelor's degree, I show that if the girls consider the boys as friends, their interactions induce a positive impact instead. Since friendship endogeneity has been addressed, the estimated effect is causal. The third chapter looks at the peer effects generated by group competition. It focuses on the gender differences in preference for competition in a setting where the competition does not involve face-to-face confrontation, and effort is the only determinant of the final ranking. I first develop a model of group competition with heterogeneous preference for ranking. With empirical implications generated from the theoretical model, I then test the gender difference in the preference parameter using web-scraped data from Duolingo, a free online foreign-language learning platform with over 300 million users. Every week, language learners on Duolingo are randomly allocated to groups of 30 people to compete on the number of language lessons completed during that week. The empirical results suggest in this setting, females have a stronger preference for ranking than males.
Author: Pier-André Bouchard St Amant Publisher: ISBN: Category : Languages : en Pages : 336
Book Description
This thesis is a collection of three essays. The first two study how ideas spread through a network of individuals, and how it an advertiser can exploit it. In the model I develop, users choose their sources of information based on the perceived usefulness of their sources of information. This contrasts with previous literature where there is no choice made by network users and thus, the information flow is fixed. I provide a complete theoretical characterization of the solution and define a natural measure of influence based on choices of users. I also present an algorithm to solve the model in polynomial time on any network, regardless of the scale or the topology. I also discuss the properties of a network technology from a public economic standpoint. In essence, a network allows the reproduction of ideas for free for the advertiser. If there is any free-riding problem, I show that coalitions of users on the network can solve such problem. I also discuss the social value of networks, a value that cannot be captured for profit. The third essay is completely distinct from the network paradigm and instead studies funding rules for public universities. I show that a funding rule that depends solely on enrolment leads to "competition by franchise" and that such behavior is sometimes inefficient. I suggest instead an alternate funding rule that allows government to increase welfare without increasing spending in universities.
Author: R David Ratigan Publisher: ISBN: Category : Languages : en Pages : 123
Book Description
In this dissertation, I study three economic issues in the field of entrepreneurship and a fourth that looks at the network structure of financial markets. Chapter 1, titled "Patenting and Nascent Firm Performance", examines how patents interact with nascent firm outcomes. The primary motivation follows a puzzle present in the data and discussed in the literature. Patents are prized possessions for business owners but the value that they confer is dubious. In this sample, patenting firms have no better survival rates and have significantly worse profit outcomes. A Oaxaca decomposition demonstrates the reason for this lies with patents' attraction of equity financing. The burden of the equity relationship proves to be a strain on the young firms. Chapter 2, titled "Signal vs Appropriation Value in Patenting" provides insight into the causal connection between patents and equity financing. This chapter also weighs in on the source of the equity firms' attraction to patents. Controlling for unobservable influences via fixed effects regression, the value measured by the coefficient on patent, demonstrates the appropriative value of the patent, rather than the signal value. Further examination reveals that equity firms are very sensitive to the legal status of the firm, eschewing general partnerships. Chapter 3, titled "Peer Effects in Entrepreneurship", studies gender differences in firm financing as a function of response to peers. This research borrows from the social interaction modeling pioneered by Charles Manski by adopting methods to include peer variables. The main finding is that males are positively and significantly affected by peer financing levels but females are not. This result is robust to industry, experience, credit risk, and other financing sources. Chapter 4, "Network Analysis of the S\&P 500", examines the financial market as a network. The literature takes two approaches to performing this analysis but no study has compared the two approaches. This chapter is the first study to compare them and provide insight as to which provides the more descriptive model. The threshold correlation approach provides much more useful results for any kind of analysis involving market connectedness and shock transition dynamics.
Author: Qi Wu Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
This dissertation consists of three essays in the areas of Industrial Organizationand Applied Microeconomics, examining the role of social interactions on market outcomes and the welfare consequences. The first essay studies the role of social influence on consumer demand and firm competition through pricing strategies. Social influence is an important driver of consumption behavior, but its effect on firm competition and pricing is understudied. This paper investigates whether and how social influence affects product choices and firm competition, drawing on a novel dataset that consists of large-scale de-identified mobile call records from a city in China. I first identify social influence using a new identification strategy that exploits the partially overlapping network of friends and residential neighbors and the intertemporal variation in friend circles. I find that the purchasing probability for a phone model doubles with 10 percent more friends using the same model. Consumers are more likely to conform to wealthier friends and choose visually distinct features, suggesting that status-seeking motivation may be an important driver of social influence. I then evaluate how social influence affects firm competition by building and estimating a structural model that incorporates social influence in consumer demand. I find that social influence favors high-quality products while reducing low-quality products' market share. In addition, a small price drop of a product would lead to larger gains through quantity expansion by peers. Social influence, on average, reduces initial prices by 0.7 percent and increases subsequent prices by 0.1 percent. It also increases the total profits of new products by 3.4 percent and increases consumer surplus by about 1.7 percent. In the second essay, my co-authors and I examine the role of social referrals and information exchange in urban labor markets. We use the universe of deidentified and geocoded cellphone records for over a million individuals from a major Chinese telecommunication provider. We find that information flows, as measured by call volume, correlates strongly with worker flows, a pattern that persists at different levels of geographic aggregation. Conditional on information flow, socioeconomic diversity of the social contacts, especially that associated with the working population, helps to predict the worker flows. We supplement the phone records with administrative data on firm attributes and auxiliary data on job postings and residential housing prices. Referred jobs are associated with higher monetary gains, a higher likelihood to transition from part-time to full-time, reduced commuting time, and a higher probability of entering desirable jobs. The third essay studies the effects of parental retirement on adult children's labor supply through intergenerational time and monetary transfer. My coauthor and I exploit the mandatory retirement age in China as the cut-off point and apply a regression discontinuity (RD) approach to four waves of the China Family Panel Studies (CFPS) Dataset. Our findings suggest that parental retirement reduces adult children's annual hours of labor supply by 3 to 4 percent. This reduction is especially pronounced for female children. We find that the reduction can be explained by parents' increasing demand for time and care from children due to the significant drop in parents' self-rated health upon retirement. Although both male and female children increased their monetary and time transfers to parents, we find that parents tend to make more transfers to sons compared to daughters. Daughters are also more likely to make transfers to parents after they retire, both in terms of money and in terms of time.
Author: Andreas Fagereng Publisher: International Monetary Fund ISBN: 1484370066 Category : Business & Economics Languages : en Pages : 69
Book Description
We provide a systematic analysis of the properties of individual returns to wealth using twelve years of population data from Norway’s administrative tax records. We document a number of novel results. First, during our sample period individuals earn markedly different average returns on their financial assets (a standard deviation of 14%) and on their net worth (a standard deviation of 8%). Second, heterogeneity in returns does not arise merely from differences in the allocation of wealth between safe and risky assets: returns are heterogeneous even within asset classes. Third, returns are positively correlated with wealth: moving from the 10th to the 90th percentile of the financial wealth distribution increases the return by 3 percentage points - and by 17 percentage points when the same exercise is performed for the return to net worth. Fourth, wealth returns exhibit substantial persistence over time. We argue that while this persistence partly reflects stable differences in risk exposure and assets scale, it also reflects persistent heterogeneity in sophistication and financial information, as well as entrepreneurial talent. Finally, wealth returns are (mildly) correlated across generations. We discuss the implications of these findings for several strands of the wealth inequality debate.
Author: Te Ke Publisher: ISBN: Category : Languages : en Pages : 120
Book Description
My thesis consists of three essays in the field of operations management and marketing. In the first essay, I study the problem of consumer search for information on multiple products. When a consumer considers purchasing a product in a product category, the consumer can gather information sequentially on several products. At each moment the consumer can choose which product to gather more information on, and whether to stop gathering information and purchase one of the products, or to exit market with no purchase. Given costly information gathering, consumers end up not gathering complete information on all the products, and need to make decisions under imperfect information. I solve for the optimal search, switch, and purchase or exit behavior in such a setting, which is characterized by an optimal consideration set and a purchase threshold structure. It is shown that a product is only considered for search or purchase if it has a sufficiently high expected utility. Given multiple products in the consumer's consideration set, the consumer only stops searching for information and purchases a product if the difference between the expected utilities of the top two products is greater than some threshold. Comparative statics show that negative information correlation among products widens the purchase threshold, and so does an increase in the number of the choices. Under my rational consumer model, I show that choice overload can occur when consumers search or evaluate multiple alternatives before making a purchase decision. I also find that it is optimal for sellers of multiple products to facilitate information search for low-valuation consumers, while obfuscate information for those with high valuations. In the second essay, I conduct an empirical study of peer effects of iPhone adoptions on social networks. I use a unique data set from a provincial capital city in China, in a span of over four years starting from iPhone's first introduction to mainland China. I construct a social network using six month's call transactions between iPhone adopters and all other users on a carrier's network. Strength of social ties is measured by duration of calls. Based on the network structure, I test whether an individual's adoption decision is influenced by his friends' adoptions. A fixed-effect model shows that, on average, a friend's adoption increases one's adoption probability in next month by 0.89%, and the marginal effect decreases in the size of his current neighboring adopters. To further control for potential time-varying correlated unobservables, I instrument adoptions of one's friends by their birthdays, based on the fact that consumers are more likely to adopt iPhones on birthdays. The IV estimation shows a slightly smaller peer effect at 0.75%. I also investigate how network structures modulate the magnitude of peer influence. My results show that peer effect is stronger when the influencer has more friends or has a stronger relationship with the influence. In the third essay, I study the problem of coordination of operations and marketing decisions for new product introductions. In the industry with radical technology push or rapidly changing customer preference, it is firms' common wisdom to introduce high-end product first, and follow by low-end product line extensions. A key decision in this "down-market stretch" strategy is the introduction time. High inventory cost is pervasive in such industries, but its impact has long been ignored during the presale planning stage. This essay takes a first step towards filling this gap. I propose an integrated inventory (supply) and diffusion (demand) framework, and analyze how inventory cost influences the introduction timing of product line extensions, considering substitution effect among successive generations. I show that under low inventory cost or frequent replenishment ordering policy, the optimal introduction time indeed follows the well-known "Now" or "Never" rule. However, sequential introduction becomes optimal as the inventory holding gets more substantial or the product life cycle gets shorter. The optimal introduction timing can increase or decrease with the inventory cost depending on the marketplace setting, requiring a careful analysis.
Author: Bahman Fathi Ajirloo
Author: Bahman Fathi Ajirloo
Author: Luca Savorelli
Author: John Joohahn Moon
Author: Zheng Wang
Author: Pier-André Bouchard St Amant
Author: R David Ratigan
Author: Jan Philipp Bender
Author: Qi Wu
Author: Andreas Fagereng
Author: Te Ke