Information diffusion and value redistribution among transaction partners of the IPO firm

This paper examines the diffusion of information around the initial public offering (IPO) process and identifies transaction partners on which IPO firms are dependent. Using a resource payments perspective, we argue that this dependence will lead to greater cumulative abnormal stock returns for transaction partners when this information is revealed in the market (when the initial form S‐1 is filed with the SEC). Moreover, we examine the uniqueness of the resource configuration between the IPO firm and transaction partners and find that greater uniqueness is associated with higher valuation for these transaction partners. We also find that multiple dependencies (by the IPO firm) reduce the valuation effect for transaction partners, indicating that a bargaining effect reduces the potential value that any transaction partner can appropriate. Copyright © 2013 John Wiley & Sons, Ltd.     

Pricing Mortgage-Backed Securities: Integrating Optimal Call and Empirical Models of Prepayment

Residential mortgage borrowers frequently appear to behave suboptimally with respect to their mortgage prepayment options. Many borrowers fail to exercise even well-into-the-money options while others prepay when the call option is out-of-the-money. To account for these apparently suboptimal prepayments, the recent trend in mortgage-backed securities research has been away from optimal call valuation models, in which the decision to exercise is determined endoge-nously, in favor of models in which prepayment behavior is exogenously specified based on empirical estimation. This paper develops a rational model of mortgage prepayment which incorporates both types of "non-optimal" prepayment and retains endogenous call. This enables the model to disentangle and compare the separate effects of the interest rate call, impeded by transaction costs, and of non-interest-rate driven prepayment. In addition, by recognizing heterogenous borrower transaction costs, the model presents a way to account more precisely for the varying prepayment lags associated with well-into-the-money call options and to account for the phenomenon of "burnout" within a mortgage pool. The paper includes an empirical test of the unbiasedness of the integrated pricing model by comparing simulated prices from our theoretical model to observed prices on traded Fannie Mae and GNMA securities.     

Dysfunctional learning in decision processes: the case of employee reciprocity

While traditional economic models characterize individuals as boundlessly self‐interested, decades of empirical findings suggest that individuals' self‐interest motives are constrained by concurrent preferences for fairness. Individuals act on these preferences by behaving reciprocally: rewarding others perceived as behaving fairly and punishing others perceived as behaving unfairly. Successful firms must learn to navigate environments characterized by the reciprocity of their transaction partners. This paper investigates firms' judgments about employee reciprocity and posits a dysfunctional learning process whereby firms that overestimate employee reciprocity learn to correct their beliefs through feedback, while those that underestimate employee reciprocity do not. The result, demonstrated through computer simulation, is a systematic bias toward an overemphasis on employee self‐interest, and a resulting inefficiency in wage choices that hurts firm profitability. Copyright © 2011 John Wiley & Sons, Ltd.     

The Kigyo Keiretsu Organization and Opportunism in the Japanese Automobile Manufacturing Industry

This paper contends that the distinguishing feature of the subcontracting system for the manufacture and distribution of auto-parts in the Japanese automobile manufacturing industry can be explained by the opportunism hypothesis of transaction cost theory. Opportunism may arise when the parts-supplier uses its information advantage to obtain more favorable contract terms with the manufacturer. It is argued that in response to this kind of informational opportunism, the automobile manufacturer institutes a special form of vertical arrangement, called the kigyo keiretsu group. The kigyo keiretsu group consist of an association of vertically related parts-makers held together by a high degree of sales and technological interdependence, by partial stock ownership, by interlocking boards of directors and by long-term contract. This study raises the possibility of mitigating opportunism among the kigyo keiretsu group firms throughout the core automaker's shareholdings of its parts-supplier.     

Empirical Evidence on Shareholder Value and the Sale-Leaseback of Corporate Real Estate

This study examines the valuation effect of the sale-leaseback of corporate real estate on the stock prices of the selling and purchasing firms. The issue tested is whether the sale-leaseback transaction offers a net benefit to the corporate seller/lessee or purchaser/lessor. The empirical evidence suggests that the sale-leaseback of corporate real estate has substantial benefits for the seller/lessee common stockholders. Additionally, the sale-leaseback transaction produces an insignificant loss for the corporate purchaser/lessor.     

Seller reputation: From word-of-mouth to centralized feedback

Reputation is one of the most important incentives for trade and cooperation. Using the complete selling history of 125,135 sellers on Eachnet.com (an eBay equivalent in China), we show that sellers with a longer successful selling record enjoyed more repeat business, reached more buyer regions, sold in more product categories, and had a higher completion rate even before Eachnet introduced a centralized feedback system. Since the centralized feedback system, the difference between reputable and non-reputable sellers has decreased in terms of repeat business but enlarged in terms of market expansion. These findings suggest that while reputation can facilitate trade through buyer experience and word-of-mouth, it is not as effective as centralized feedback. Our study also shows that, although completion rate and transaction price are the two outcomes most often examined in the literature, seller reputation is important for buyer clientele, market reach, business scope and market survival.     

Optimal Pricing Strategy in the Case of Price Dispersion: New Evidence from the Tokyo Housing Market

We adopt a multistage search model, in which the home seller's reservation price is determined by her or his opportunity cost, search cost, discount rate and additional market parameters. The model indicates that a greater dispersion in offer prices leads to higher reservation and optimal asking prices. A unique dataset from the Tokyo condominium resale market enables us to test those modeled hypotheses. Empirical results indicate that a one percentage point increase in the standard deviation of submarket transaction prices results in a two‐tenths of a percent increase in the initial asking price and in the final transaction price. Increases in the dispersion of market prices enhance the probabilities of a successful transaction and/or an accelerated sale.     

Decision‐making in the pharmaceutical industry: analysis of entrepreneurial risk and attitude using uncertain information

The main purpose of this study was to investigate judgments made by employees from the pharmaceutical industry and allied health‐care sectors in a set of four different drug discovery and development cases derived from real scenarios. Each case study related to go/no‐go decisions taken from various steps in drug discovery through preclinical and clinical development (investigational new drug) on to market introduction (new drug application) and treatment of the target population. Using a web‐based questionnaire, 52 respondents made five sets of judgment within each drug case whether to continue or halt further project development. For each case, additional details of the developmental scenario were disclosed to the respondent after completion of each judgment response. We also assessed to what extent the individual judgments given by the respondents were influenced by work experience and functional role, education, or their perceived entrepreneurial character. Our study demonstrates that health‐care employees differ substantially in their individual intuitive judgments of benefit and risk in go/no‐go decisions during the drug discovery and development process. This lack of coherence and wide variability with respect to the drug development cases selected may reflect judgment in the real world. Such judgments are usually taken from incomplete information, and individual decision‐making rules vary substantially between experts in the field. Further knowledge about this inherent human functional judgment variability may be helpful to form a better understanding of individual decision‐making in relation to inherent uncertainties. Additional research may also clarify how personal experience within drug discovery and development influences judgment and help to optimize decision outcomes in the drug development sector. Importantly, a deeper insight of the fundamentals and rules that shape individual and group decision‐making of everyday drug discovery and development may help to optimize the decision processes in the pharmaceutical industry.     

Optimal Comparable Selection and Weighting in Real Property Valuation

This paper formalizes certain aspects of the sales comparison approach to valuation that heretofore have been quite ad hoc. Specifically, it applies statistical theory to decisions about how many comparables to select, what the criteria for comparable selection should be, and how the proper weights for each adjusted value estimate can be determined such that the final value estimate is both unbiased and of minimum variance. Several results are derived that run counter to conventional practice; for example, it may not always be optimal to consider first the "best" comparables because of a lack of independence among their adjusted value estimates. Furthermore, it is always desirable to consider more comparables (regardless of how "bad") so long as their adjusted value estimates are optimally weighted in the final value estimate. Finally, weights usually selected for "inferior" comparables are typically too small. A final exercise empirically applies the methodology to a sample of sales.     

SELLING ONLINE VERSUS LIVE*

A seller choosing between auctioning online and live faces a tradeoff: lower transaction costs online against more rents left with the bidders. We model this tradeoff, and apply the theory to auctions of art. The crucial parameter for whether the seller does better online than live is not the expected price but the valuation uncertainty.     

可能被误读了的中联重科

一家经营状况良好的企业缘何出售自己的优质资产？是竞争白热化下的断臂求胜,还是公司利益的暗箱输送,亦或是另有图谋？ 2011年3月23日,中联重科发布公告称,公司拟通过在湖南省联合产权交易所挂牌交易的方式出售其全资子公司长沙中联重科环卫机械有限公司80%的股权,挂牌底价为32亿元。     

Price Dispersion in Mortgage Markets

Using transaction‐level data on Canadian mortgage contracts, we document an increase in the average discount negotiated off the posted price and in rate dispersion. Our aim is to identify the beneficiaries of discounting and to test whether dispersion is caused by price discrimination. The standard explanation for dispersion in credit markets is risk‐based pricing. Our contracts are guaranteed by government‐backed insurance, so risk cannot be the main factor. We find that lenders set prices that reflect consumer bargaining leverage, not just costs. The presence of dispersion implies a lack of competition, but our results show this to be consumer specific.     

Towards effective group work assessment: even what you don’t see can bias you

In project-based learning (PBL) courses, which are common in design and technology education, instructors regard both the process and the final product to be important. However, conducting an accurate assessment for process feedback is not an easy task because instructors of PBL courses often have to make judgments based on a limited view of group work. In this paper, we provide explanations about how in practice instructors actually exhibit cognitive biases and judgments made using incomplete information in the context of an engineering design education classroom. More specifically, we hypothesize that instructors would be susceptible to human errors that are well known in social psychology, the halo effect and the fundamental attribution error, because they have a limited view of group work when they facilitate distributed and remote groups. Through this study, we present two main contributions, namely (1) insights based on classroom data about limitations of current instructor assessment practices, (2) an illustration of using principles from social psychology as a lens for exploring important design questions for designing tools that monitor support oversight of group work. In addition to the study, we illustrate how the findings from our classroom study can be used for effective group assessments.     

A Dynamic Model of Auctions with Buy‐It‐Now: Theory and Evidence

In the ascending‐price auctions with Yahoo!‐type buy‐it‐now (BIN), we characterize and derive the closed‐form solution for the optimal bidding strategy of the bidders and the optimal BIN price of the seller when they are both risk‐averse. The seller is shown to be strictly better off with the BIN option, while the bidders are better off only when their valuation is high enough. The theory also implies that the expected transaction price is higher in an auction with an optimal BIN price than one without a BIN option. This prediction is confirmed by our data collected from Taiwan's Yahoo! auctions.     

On lemons and indigestibility: resource assembly through joint ventures

We revisit the relationship between two theoretical perspectives on joint ventures—the asymmetric information view and the indigestibility view. The former emphasizes the ex ante valuation challenges firms confront in combining resources, while the latter attends to ex post transaction costs arising from the extraction and integration of indivisible resources. We argue that these two views are complementary, rather than competing, in explaining the usefulness of joint ventures. We also suggest that the perspectives are overlapping inasmuch as resource indivisibility contributes to asymmetric information. Copyright © 2000 John Wiley & Sons, Ltd.     

Loss Aversion and Anchoring in Commercial Real Estate Pricing: Empirical Evidence and Price Index Implications

Loss aversion behavior plays a major role in the pricing of commercial properties, and it varies both across the type of market participants and across the cycle. We find that sophisticated and more experienced investors are at least as loss averse as their counterparts and that loss aversion operated most strongly during the cycle peak in 2007. We also document a possible anchoring effect of the asking price in influencing buyer valuation and subsequent transaction price. We demonstrate the importance of behavioral phenomena in constructing hedonic price indices, and we find that the impact of loss aversion is attenuated at the aggregate market level. This suggests that the pricing and volume cycle during 2001–2009 was little affected by loss aversion.     

大型企业市场链管理模式研究

市场链是大型企业业务组织单元和经营规模扩张到一定程度,其组织管理的边际交易成本超过了边际规模效率时而生成的一种新的管理模式。与一般的企业内部市场化不同,市场链是一种贯穿于企业运营全过程的整体性、流程式交易机制,它将企业内部不同部门、上下流程、上下工序和岗位之间的业务关系,构造成为通过内部市场价格机制调节的相互咬合、无缝链接、环环相扣的扁平化链状交易流程,以此实现对每一个利益主体的有效激励与约束,达到企业运营效应的整体优化。企业内部市场链是基于一体化业务流程的连续性、关联性而建立起来的在固定对象之间展开的确定性、重复性、高度专用性特质交易,按照高度专用性交易的强度,可以将市场链交易关系划分为不同类型,从而形成市场链的特质交易结构。与不同交易关系类型相适应的契约结构安排以及保障措施,不断地巩固和强化着市场链流程的特质交易关系。市场链管理模式有效克服了在信息不对称情形下企业基层组织和个人的动力不足与机会主义行为,极大地降低了企业内部的交易费用,从而能够强有力地推动大型企业超越"规模陷阱"、在持续发展中提高管理与运营效率。     

A Test of Weak-Form Efficiency in Residential Real Estate Returns

This paper tests weak-form efficiency of residential real estate returns for the city of Memphis, Tennessee. The database for the study is comprised of the population of all sales of single-unit residential property over a fifteen-year period, 1970–1984. The city was divided into ten submarkets based on Memphis City Planning Commission planning districts. An analysis of variance procedure was utilized to stabilize the variance both within and across submarkets and nonmarket financing was partially controlled by eliminating transactions with loan-to-value ratios greater than 95%. The remaining transactions were then used to generate a mean return series. The advantage of the mean over the single transaction series used by Gau is that it represents the most likely outcome for the investor trying to duplicate investment performance since "property unique" features would be expected to cancel. Seven of the ten submarkets exhibited time patterns; however, after adjusting for transaction costs, all ten submarkets were determined weak-form efficient for the period 1970–1984. This was not true for the short horizon holding period, 1970–1975. In four sub-markets an asymmetric version of Alexander's filter rule was able to outperform a buy-and-hold, even for round- trip transaction costs as high as 10%.     

Illiquidity and Pricing Biases in the Real Estate Market

This article addresses the micro-analytic foundations of illiquidity and price dynamics in the real estate market by integrating modern portfolio theory with models describing the real estate transaction process. Based on the notion that real estate is a heterogeneous good that is traded in decentralized markets and that transactions in these markets are often characterized by costly searches, we argue that the most important aspects defining real estate illiquidity in both residential and commercial markets are the time required for sale and the uncertainty of the marketing period. These aspects provide two sources of bias in the commonly adopted methods of real estate valuation, which are based solely on the prices of sold properties and implicitly assume immediate execution. We demonstrate that estimated returns must be biased upward and risks downward. These biases can be significant, especially when the marketing period is highly uncertain relative to the holding period. We also find that real estate risk is closely related to investors' time horizons, specifically that real estate risk decreases when the holding period increases. These results are consistent with the conventional wisdom that real estate is more favorable to long-term investors than to short-term investors. They also provide a theoretical foundation for the recent econometric literature, which finds evidence of smoothing of real estate returns. Our findings help explain the apparent risk-premium puzzle in real estate—that is, that ex post returns appear too high, given their apparent low volatility—and can lead to the formal derivation of adjustments that can define real estate's proper role in the mixed-asset portfolio.     

Responding to Japan's deregulation of beef imports: A multifaceted challenge for Canadian export managers

While governments may expect benefits to arise from trade liberalisation, those benefits may not be forthcoming if there are considerable increases in the costs faced by exporting firms in the period following liberalisation. The challenge for export managers is to identify the important transaction costs and to find the vertical coordination mechanism which minimises transaction costs given the new importing regime. As of April 1 1991 Japan's beef importing system completed a major phase of liberalisation. A mutually beneficial increase in Canada-Japanese trade will, however, require a complex and multifaceted response from the Canadian beef industry.The Scottish Agricultural College receives financial support from the Scottish Office, Agriculture and Fisheries Department.