A profit-center game with incomplete information

Profit centers in a firm in multidivisional form agree in the ex ante stage upon a plan about their joint production and profit imputation. The plan is executed in the subsequent two periods of the interim stage: the setup period and the manufacturing period. In the setup period, each center has its private information, but a part of its information is revealed to the other centers through its action. Based on the information endogenously pooled this way, the centers take another round of actions in the manufacturing period. A core plan is defined as a Bayesian incentive-compatible plan of the grand coalition of profit centers, upon which no coalition can improve using its Bayesian incentive-compatible plan. A core plan is called full-information revealing if each center fully reveals its private information in the setup period. Three existence theorems for a full-information revealing core plan are established. The first two theorems impose alternative conditions on returns to scale: (1) the neoclassical convex technology, and (2) increasing returns to scale. In case (2), a stronger condition than Scarf's distributiveness is imposed on the total production set. The third theorem is based on a specific supplier-customer relationship among the divisions. Received: 13 October 1997 / Accepted: 26 July 1999     

Economics,Politics and Nations: Resistance to the Multidivisional Form in France,Germany and the United Kingdom, 1983–1993*

ABSTRACT This paper assesses economic, political and national institutional explanations for continued resistance to the multidivisional form in France, Germany and the United Kingdom during the 1980s and 1990s. It finds that the economics of different diversification strategies play a significant but changing role in the structural choices of large corporations. The political interests of personal, banking and government owners are exercised variably. There remain strong national influences on structural choices, with resistance to the multidivisional form particularly pronounced in Germany. Overall, our results call for an increased contextual sensitivity in management research while acknowledging the possibility of convergent processes in business organization, represented here by the slow progress of the multidivisional firm.     

On economies of scope in communication

A classic puzzle in the economic theory of the firm concerns the fundamental cause of decreasing returns to scale. If a plant producing product quantityX at costC can be replicated as often as desired, then the quantityrX need never cost more thanrC. Traditionally the firm is imagined to take its identity from a fixednon-replicable input, namely a ‘top manager’; as more plants or divisions are added, the communication and computation burden imposed on the top manager (who has information not possessed by the divisions) grows more than proportionately. Decreasing returns are experienced as the top manager hires more variable inputs to cope with the rising burden. Suppose it turns out, however, that when the divisions are assembled, and are given exactly the same totally independent tasks that they fulfilled when they were autonomous, then asaving can be achieved if they adopt a joint procedure for performing those tasks rather than replicating their previous separate procedures. Then the top manager's rising burden must be shown to be particularly onerous—otherwise there may actually beincreasing returns. We show that for a certain model of the information-processing procedure used by the separate divisions and by the firm, there may indeed be such an odd unexpected saving. The saving occurs with respect to the size of the language in which members of each division, or of the firm, communicate with one another, provided that language is finite. If instead the language is a continuum then the saving cannot occur, provided that the procedures used obey suitable ‘smoothness’ conditions. We show that the saving for the finite case can be ruled out in two ways: by requiring the procedures used to obey a regularity condition that is a crude analogue of the smoothness conditions we impose on the continuum procedures, or by insisting that the procedure used be a ‘deterministic’ protocol. Such a protocol prescribes a conversation among the participants, in which a participant has only one choice, whenever that participant has to make an announcement to the others. The results suggest that a variety of information-processing models will have to be studied before the traditional explanation for decreasing returns to scale is understood in a rigorous way.     

Dissecting returns of non-fungible tokens (NFTs): Evidence from CryptoPunks

We use transaction data on CryptoPunks to dissect the factors affecting the returns of non-fungible tokens (NFTs). Our results show that trading volume in the short period before a trader buys (sells) CryptoPunk relates negatively (positively) to the returns on NFTs, suggesting that when market trading volume is at a high level, NFT owners are better off on the sell side, and investors interested in NFTs should avoid joining the herd. Turnover of a token tends to harm its returns. Finally, both traders’ willingness to purchase and trading experience have a positive impact on NFT returns within short-term investment horizons.     

双重上市股票更有投资价值吗？——基于H+A股与A股的对比分析…朱宏泉，应潇潇

通过对比先在H股上市、后回到A股上市的股票（简记为H+A股）与仅在A股上市的股票上市首日收益率、上市后短期和长期收益的差异,探讨两类股票的投资价值。结果显示：相较于A股股票,H+A股上市首日收益更高,但上市后的短期收益和长期收益更低。究其原因,H+A股更高的上市首日收益与其发行定价低相关,短期和长期市场收益低既与公司的业绩不好相关,也与投资者的不认可相关,表明相较于仅在A股上市的股票,H+A股更不具备投资价值。     

The dynamic investment and exit decisions of venture capitals

This study develops a continuous time model to examine a complete two-stage decision process for venture capitals (VCs), including investment in the private market at Stage 1 and exit through IPO in the public market at Stage 2. Optimal timings, investment terms, and exit decisions are investigated using the real options game theory under two cases: the same required returns in the public and private markets and a higher required return in the private market than in the public market. Our results indicate that the same required returns in the public and private markets generate an optimal investment decision at Stage 1 without relation to the exit decision in Stage 2. However, when the required return in the private market is higher than that in the public market, the exit decision will influence the investment decision. The size of the initial capital, ownership structure, growth rate and risk of industry, required returns in public and private capital markets, extent of lock-up period price pressure, and transaction costs of financing are important factors influencing the equilibrium results.     

政府竞争:行政区经济运行中的地方政府行为分析

从政府竞争的角度,为行政区经济形成构建了一个政府行为分析框架.通过对政府竞争和博弈三个层面的考察,揭示区域经济发展中的各层级政府间互动关系,对行政区经济形成的深层次原因提供较为系统的解释.     

Investment banks advising takeover targets

Should takeover target firms hire top-tier investment bank advisors? For a sample of mergers and acquisitions between publicly traded U.S. acquirers and targets, in deals in which targets hire top-tier banks, targets earn higher premiums and abnormal returns; the probability of stock payment is lower, especially when bidder stock is potentially overvalued; acquirers, however, do not necessarily earn lower abnormal returns, and combined returns are higher. Controlling for self-selection does not erode, but, in some cases even strengthens the results. The evidence suggests that top-tier investment banks advising targets benefit shareholders of client firms by making better deals, instead of simply bargaining against the acquirers. The findings shed light on the role of advisor incentives when linking advisor quality and shareholder wealth.     

Demographics and the long-horizon returns of dividend-yield strategies

This paper investigates the relationship between demographic changes and the long-run returns of dividend-yield investment strategies. We hypothesise that in a world where components of wealth are mentally treated as being non-fungible, the preference for high dividend-paying stocks by older investors means that the excess returns of high dividend-yielding stocks, relative to other stocks, should be positively related to demographic clientele variation. In particular, we find that, consistent with the behavioural life-cycle hypothesis, long-run returns of dividend-yield investment strategies are positively driven by changes in the proportion of the older population. Our results are robust when controlled for the Fama–French factors, inflation rate, consumption growth rate, interest rates, tax clienteles, time trend and alternative definitions of both dividend-yield strategies and demographic variation.     

THE ADOPTION OF THE MULTIDIVISIONAL FORM OF ORGANIZATION: A CONTINGENCY MODEL*

This article examines the proposition that the multidivisional structure is determined by both power and efficiency imperatives. It is theorized that combining the coalitional power and information-processing perspectives of organizational choice enables us to explain and predict organizational form. The theory is tested on 291 Fortune 500 firms. The results largely confirm theoretical expectations. It is submitted that the multidivisional paradigm illustrates the central premises of the article: (1) a synthesis of efficiency and power perspectives is a viable research programme; and (2) theoretical pluralism increases empirical content and should be valued by those concerned with progress in the emerging field of strategic management.     

Optimal wage contracts under asymmetric information and moral hazard when investment decisions are delegated

I derive an optimal wage contract when risky investment decisions are delegated by riskaverse owners/investors to risk-neutral agents. The owners/investors do not know the probability distribution over the returns of any investment made by an agent. They know only the mean and the variance, and the upper and lower bounds of the return realizations of the different positive net present value (NPV) investment opportunities that can be discovered by their agents. They observe only the returns realized at the end of the period. Moral hazard with respect to investments made by agents, who are protected by limited liability, is also possible: an agent can falsely claim to have invested in one type of positive NPV investment opportunity and invest in another, or the agent can falsely claim to have invested in a positive NPV investment and invest in a negative NPV investment. I show that an optimal wage contract is simple under such conditions of severe asymmetric information and moral hazard. (JEL G20, G31)     

Measuring the Returns to Networking and the Accumulation of Social Capital: Any Evidence of Bonding,Bridging, or Linking?

This article presents analyses of individual investment in social capital using both the British Household Panel Survey (BHPS) and the UK Time Use Survey (2000) (UKTUS). We suggest a general theoretical framework that could possibly explain individual investment in various forms of social networking. Measures of social capital are then constructed in an attempt to capture the extent of individual investment in bonding, bridging, and linking networks. These measures, together with other socioeconomic indicators, are used as explanatory factors in wage equations, estimated using ordered probit, OLS, and instrumental variable approaches. We are unable to identify any consistent returns from investment in bonding and bridging networks. In contrast, the evidence suggests that any returns to investment in the development of linking social capital simply derive from the positive signals that group membership may transmit to potential employers. Our results underline the contrast between studies that consider social capital as an attribute of communities, as opposed to individuals, in that we find a negative return to social activity at the level of the individual.     

Election outcomes and financial market returns in Canada

This paper investigates the relationship between federal election outcomes and expected returns and volatilities in the Canadian money, bond, equity and currency markets from 1951 to 2006. There is little evidence that investment opportunities are different in minority versus majority parliaments and only money market returns differ in Conservative versus Liberal governments. The equity market performs better in the late part of the electoral cycle than in the first two years. Furthermore, the Canadian equity investment opportunities are better in Democratic versus Republican administrations and in the late versus early parts of the presidential electoral cycle. The Canadian dollar is also affected by American election outcomes. No apparent variation in risk or expected state of the economy accounts for the differences in returns.     

The role of university-based industrial extension services in the business performance of small manufacturing firms: case-study evidence from Western New York

This paper investigates the role of university-based industrial extension services in the business performance of small manufacturing firms in an economically declining region of the United States (Western New York). The outreach initiatives of a specific University at Buffalo (UB) programme are described. Particular attention is given to the activities of UB's Centre for Industrial Effectiveness (CIE), an outreach unit with a mandate to improve the product and/or process development efforts of local manufacturing firms. Our data suggest positive returns on investment for firms that have sought technical support under CIE programmes. A key finding is that CIE's services typically entail the transmission of well-established procedures rather than radically new ways of doing things. A further finding is that firms that have used CIE to develop improved products have experienced stronger investment returns than their counterparts that have focused upon process development (although the returns are positive in both instances). More broadly, our data suggest positive correlations between levels of project investment and a variety of commercial outcomes, including sales growth, job-retention, and unit-cost reduction. The implications of these results for regional economic development policy are discussed. The paper also reviews some of the weaknesses that curtail the effectiveness of university-based centres such as CIE.     

REAL OPTIONS AND THE CROSS‐SECTION OF EXPECTED STOCK RETURNS

This paper surveys the theoretical literature investigating the effect of firms’ investment flexibility on the cross‐section of expected stock returns. Real options analysis derives firms’ value‐maximizing investment policies as functions of exogenous fundamental drivers of profitability and calculates firms’ market values as functions of the same variables. These functions yield the relationship between expected stock returns and firm fundamentals. Several plausible explanations for the value premium – the high average stock returns earned by firms with high book‐to‐market ratios – emerge from this literature.     

Foreign direct investment and financial markets influences: Results from the United States

This paper investigates the linkages among Foreign Direct Investment (FDI-greenfield and mergers and acquisitions (M&A)) decisions and equity market returns and volatilities. The central premise is that FDI decisions by Multinational Enterprises (MNE) are influenced, among other factors, by risk and uncertainty indicated by equity market returns and volatilities in the destination (host) countries. This is because of the events on the stock markets in general, and their volatilities, in particular, signal the vitality of the investment climate of the target country. Including capital market variables among the determinants of FDI is important for assessing the cost of capital and for evaluating direct investment and asset allocation decisions.Secondary time-series data (quarterly) were used on incoming US FDI from 1994 to 2018 along with data on independent variables such as exchange rates, inflation, market size, equity market returns, and equity market volatilities. Thus, the paper endeavors to contribute to the International Business literature by highlighting the role played of equity returns and volatilities in FDI decisions and therewith attempts to integrate finance (capital markets) with International Business/Strategic Decision making. Several different regression specifications (OLS, Fixed, and random-effects and VAR) were utilized to analyze the data, and capital market variables (stock returns and volatilities) were found to influence the location of production facilities by a multinational enterprise (MNE). In other words, the share of production capacity optimally located abroad, as well as M&A decisions, are influenced by capital market returns and volatilities.     

Research Investment and the Economic Returns To Chinese Agricultural Research

This article measureseconomic returns to research investment in Chinese agricultureusing the production function approach. A stock-of-knowledgevariable constructed from the past research investment is directlyincluded in the production function as an explanatory variablein the production function. Improved rural infrastructure, irrigation,and education are also included as explanatory variables to avoidthe upward bias in the estimates of returns to agricultural research.A two-way variable coefficients technique is used in the estimationto reduce estimation biases due to the remaining measurementand omitted variables problems. Sensitivity analyses are conductedto test the effects of various lag structures on the return estimates.The results show that rates of return to research investmentin Chinese agriculture are high, ranging from 36% to 90% in1997, and the rates are increasing over time.     

CAPM模型在上海股票市场的有效性检验

根据资本资产定价模型(CAPM),从上海A股市场随机抽取100支股票,计算它们的收益率,选择上证综合指数为市场组合的市场指数,并利用双层回归分析方法对2007年1月1日至2011年12月31日这段时间的100支股票进行实证检验。虽然很多国外研究表明,CAPM模型在一定程度上能够解释市场收益,并在资产估价、资本预算、投资风险分析方面已经得到了广泛应用,同时也有利于投资者构建最优的证券投资组合,但本文实证研究结果发现,CAPM模型并不适合中国的股票市场,股票预期收益率和系统风险之间不仅不存在正相关的关系,而且也不存在线性关系,除了系统风险外,非系统风险在解释股票收益上也具有一定的作用。     

民营资本在基础设施项目领域的投融资浅析

民营资本在沿海地区投资基础设施项目主动性和投资规模在不断增长,但其项目投资模式和投资料效益分析较少,导致民营资本投资出现喜忧参半的局面。为确保其正确投资方式及效益,文中对民营资本投资基础设施投资模式进行分析、并对财务指标的分类进行比较,并提出相关建议,期望有助其投资行为的良性发展。     

DIVISIONALIZATION,DECENTRALIZATION AND PERFORMANCE OF LARGE UNITED KINGDOM COMPANIES 1

Questionnaire survey data from 144 large U.K. firms are used to describe and discuss the nature of organization design in major companies. It was found that the majority of firms were multidivisional. However a considerable variation in internal operating procedures was found which emphasized that many multidivisional companies do not behave in the way that the strategy/structure literature predicts. Empirical testing of the relation between structure and financial performance also emphasizes that divisionalization is not necessarily the key to a superior profit performance. Rather it would appear that organizational procedures need to be reconsidered in the light of recent divisional structures established in many companies. It is argued that a powerful divisional head office may weaken overall performance and that instead greater attention should be paid to the opportunity to decentralize operating decisions to the individual business units within each division.