Vertical merger: monopolization for downstream quasi‐rents

This paper provides a welfare analysis of vertical merger between an input monopolist and downstream firms that compete perfectly in a homogeneous product market. The distinguishing feature of the present model is that the downstream firms face capacity constraints. As a result of downstream quasi‐rents, vertical merger—the extent of merger is gauged by the capacity share of the acquired downstream firm—may either raise or lower final output. An analytical criterion for distinguishing pro‐ and anti‐competitive mergers is derived, which relies entirely on pre‐merger market quantities and the capacity share of the downstream target. A common result is that vertical merger is output‐increasing even when unaffiliated downstream rivals are completely foreclosed. Copyright © 2008 John Wiley & Sons, Ltd.     

“海归”IPO

当下,国内中小板和创业板的高估值＂光环＂是吸引一批海外IPO公司回归的主要原因,但是,这道充满诱惑的＂光环＂正面临褪色的拐点7月涨幅12.6%,8月涨幅12.5%,至9月6日,国内中小板指数已达6269点,个股平均市盈率为46倍。如夏花般灿烂的中小板诱惑着天津亚安科技电子有限公司（以下简称＂亚安科技＂）董事长叶晨,＂     

Director co-option and future market share growth

This paper examines the effect of director co-option on product market outcomes. We find that future market share growth declines as executives co-opt more of the board. Co-opted directors also inhibit the product market benefits from cash reserves. These findings hold in a variety of robustness tests, sustaining the view that director co-option reduces product market performance. Our results further show that co-option leads to lower market share gains among firms whose industry rivals intensely change products and have higher borrowing capacity. Compared to their competitors, firms with more co-opted directors also allocate less internal resources to potential product differentiation strategies, but award executives more cash-based pay. Overall, our findings support the agency theory supposition that firms with co-opted boards lose market share ex-post.     

Infrastructure provision and international market share rivalry

The paper examines a model of strategic infrastructure investment. Two oligopolistic firms compete on home and foreign product markets for market shares. The national governments support the firms in the market rivalry by providing cost reducing public infrastructure services that are financed out of taxing an input used in the production process. It is shown, that infrastructure policy can be used as an instrument for strategic trade policy. However, governments are facing the problem of balancing the burden of taxation and the benefits of infrastructures. The theoretical model also raises some critical issues with respect to the policy relevance of recent empirical infrastructure research.     

Market reaction to large bank merger announcements in oligopolies

This paper evaluates the individual and rival stock price reactions to large bank merger announcements and subsequent regulatory rejection in an oligopoly. The results show that the announcements produce significant positive abnormal returns for the merger candidates. Regulatory obstacles and denial of the proposed mergers produce significant negative returns. Analysis of the rivals’ reactions doesn’t produce consistent significant results. This suggests that the market reactions for the merging banks results are driven by expected increases in efficiencies. The rivals’ reaction is explained by the fact that the market would remain contestable after the mergers since the offered products are homogeneous.(JEL G14, G34)     

Market value,market share,and mergers: Evidence from a panel of U.S. firms

Improving shareholder value has often been cited as a merger determinant. Because mergers create larger firms and less competition, they may increase shareholder value through higher market share and stock‐market value. We investigate merger impacts on firms' stock‐market value and market share. We construct panel data from 4 different data sources on public merging and non‐merging U.S. manufacturing firms for 1980–2003. Instrumental variables and factors such as R&D, patents, and citations control for endogeneity. We find that mergers are positively correlated with stock‐market value and market share.     

X-inefficiency and market power

This paper argues that dominant firms (those firms which, according to the theory, can tolerate inefficiency) face a number of external and internal constraints which force them to act more like the competitive firm assumed in neoclassical theory.     

Market anticipation of merger activities: An empirical test

This paper empirically examines the possibility that there is leakage of information regarding a merger prior to the announcement of the first bid for the target firm. The tests for the existence of market anticipation are based on the behavior of variances implied in the premia of call options listed on the target firms' stocks. We conclude that the evidence is consistent with the hypothesis that the market anticipates an acquisition prior to the first announcement.     

Modeling regional electric power markets and market power

This paper develops a nonlinear, mathematical programming model for estimating production decisions in an open access, regional power market. Our approach allows one to estimate competitive power market equilibrium prices, which in turn offers empirical conclusions about marginal generation facilities, transmission interconnection congestion, and most importantly, load pockets and market power. Sensitivity analyses are conducted by subjecting the model to changes in production costs, peak hour demand, power imports, and transmission interconnection price assumptions. We then consider the issue of a firm's ability to exercise market power and the implications it may have on regional equilibrium power prices. The Louisiana power market is used as a case study for our work. Copyright © 2001 John Wiley & Sons, Ltd.     

Cross-sectional differences in the liquidity effects of open market share repurchases

I examine liquidity changes associated with open market share repurchases, with the focus on potential cross-sectional variations of liquidity effects. I hypothesize that a liquidity change, either a decrease or an increase, will be larger in a firm with a higher degree of pre-announcement information asymmetry. Results suggest that the null hypothesis of no liquidity change cannot be rejected. In particular, there is no evidence for cross-sectional variation of liquidity changes across firms with differing degrees of information asymmetry. Special/thanks go to Kim Woo Choong, former chairman of DAEWOO Group, and Park Chung Kil for their support.     

On the impact of managerial bonus systems on firm profit and market competition: the cases of pure profit,sales, market share and relative profits compared

By designing remuneration schemes based on a bonus rewarding specific firm‐level outcomes, the owners/shareholders of a firm can manipulate the behavior of their managers. In practice, different bonus anchors take center stage: some are profit‐based, others use sales as the key yardstick and still different ones focus on relative performance vis‐à‐vis a peer group. In this paper, we focus on the impact of remuneration schemes on firm‐level profitability. The profit effect is investigated for (all possible combinations of) four bonus systems using delegation games. In the context of a linear Cournot model for two or three firms, we model a two‐ or three‐stage decision structure where, in the first stage (or first two stages), an owner decides on the bonus system for his manager and where, in the final stage, the manager takes the daily output decision for her firm. It appears that the bonus system based on relative (profits) performance is superior throughout. Copyright © 2008 John Wiley & Sons, Ltd.     

Valuing intangible assets with a nested logit market share model

This paper develops an econometric method for valuing intangible assets using nested logit market share assumptions. Specifically, a method is developed to measure the value to a license holder of owning a branded consumer product. While it is well known that brands confer values to their owners, existing methods for establishing a brand's value via comparable, profit, or income methods are often fraught with imprecision or are frequently based on untested assumptions. An economic approach to brand valuation is developed in which the demand for branded goods is estimated and compared to the demand for comparable unbranded goods including both private label and generic commodities. The economic analysis relies on oligopoly pricing models and certain assumptions regarding the opportunity use of the brand holder's fixed investment. This paper extends the multinomial logit structure of preferences assumed in Dubin [1998a. The Demand for Branded and Unbranded Products—An Econometric Method for Valuing Intangible Assets. Studies in Consumer Demand—Econometric Methods Applied to Market Data. Kluwer Academic Publishers, Massachusetts, Boston, pp. 77–127] and derives trademark valuation fractions with a nested logit market share model. The market share demand model in Dubin [1998a. The Demand for Branded and Unbranded Products—An Econometric method for Valuing Intangible Assets. Studies in Consumer Demand—Econometric Methods Applied to Market Data. Kluwer Academic Publishers, Massachusetts, Boston, pp. 77–127] is re-estimated under nested logit assumptions and results for the trademark fraction are compared.     

Causal market share models in marketing: Neither forecasting nor understanding?

The results obtained by Brodie and de Kluyver are likely to be specific to aggregate bimonthly data. Aggregation eliminates useful sources of variation, and causes researchers to specify models with unrealistic constraints. Brand management needs to know the effects of marketing programs, which are obtainable from an analysis of store-level weekly data. Flexible models need to be specified and tested for this purpose.     

Economies of scale and market power in policing

The objective of this paper is to use a simultaneous equations method for estimating police production and demand to determine whether or not there are economies of scale in policing. In addition, the effect of market power on productivity, using the Herfindahl–Hirschmann Index, is to be measured. The estimation yields the result that there are diseconomies of scale with respect to the amount of crime beyond about 22 000 people in the policing jurisdiction and diseconomies of scale in numbers of police beyond about 36 000 people. Efficiency is also reduced where there is greater market power. This is conjectured to be the public sector equivalent of taking market power profits. Copyright © 2005 John Wiley & Sons, Ltd.     

Forecasting category sales and market share for wireless telephone subscribers: a combined approach

The ability to forecast market share remains a challenge for many managers especially in dynamic markets, such as the telecommunications sector. In order to accommodate the unique dynamic characteristics of the telecommunications market, we use a multi-component model, called MSHARE. Our method involves a two-phase process. The first phase consists of three components: a projection method, a ring down survey methodology and a purchase intentions survey. The predictions from these components are combined to forecast category sales for the wireless subscribers market. In the second phase, market shares for the various brands are generated using the forecast of the number of subscribers that are obtained in Phase 1 and the share predictions from the ring down methodology. The proposed methodology produces the minimum Relative Absolute Error for each market as compared to the forecasts from each individual component in the first phase. The value of the proposed model is illustrated by its application to a real world scenario. The managerial implications of the proposed model are also discussed.     

The informational content of credit rating announcements for share prices in a small market

The informational value of credit ratings is a subject of continuing debate. This research examines whether reaction to small market credit rating announcements is different from large markets, due to limited information, liquidity premia, and analyst neglect factors. Unlike U.S. and Australian studies that find a significant reaction to only bad news, a significant positive reaction to both positive placements and upgrades is found in the New Zealand market. Further, significant market reaction largely accrues to firms not cross-listed in U.S. markets. This evidence suggests credit rating agencies act as substitute information providers for firms followed by relatively few analysts. A substantial portion of this research was completed while author Meyer was affiliated with Massey University, Albany Campus, Auckland, New Zealand.     

Import competition and market power: Canadian evidence

This study estimates price–marginal cost mark-ups for Canadian manufacturing industries during the 1970s in order to assess the impact of import competition on domestic market power. The results are mixed. Based on the analysis, there is no consistent evidence that imports reduced the mark-ups of Canadian firms during that period.