Information value and efficiency measurement for risk-averse firms

This paper has three goals. First, we demonstrate that standard arguments and methods from production and duality analysis can be used to provide a comprehensive and general treatment of the value of information for a risk-averse firm with expected-utility (linear-in-probabilities) preferences and a general stochastic technology. Second, we place bounds on the value of information for a risk-averse firm and relate these bounds to characteristics of the technology and the producer’s preferences. The third and final goal is to derive the implications that information differences can have for measured efficiency differences and to relate the bounds on the value of information to those measured differences.      

Optimising a Probabilistic Model of the Development of Play in Soccer

We present a probabilistic model based on the one developed by Hernández Mendo and Anguera (Revista de Psicologíca Social, 16(1), 71–93, 2001). Here we have tried to break down the interaction contexts that the opposing teams are able to generate and transform during the game. We are aware that a given player or team does not produce consistent behaviour in similar situations. However, a degree of uncertainty is assumed to exist regarding whether the results obtained are a specific function of the analysis used. In order to carry out this research a category system which optimized that used in the previous model was developed. This system should enable the interaction between teams to be observed within the actual play of a soccer game. A lag sequential analysis was performed on the basis of a coding of the behavioural flow. After describing the behavioural patterns obtained a probabilistic model of the development of play in soccer is proposed.     

Inter-market competition for exchange traded funds

We examine how the different mix of informed and liquidity trading in the market for ETFs affects the nature of inter-market competition. We find that both the characteristics of the securities and the structures of the competing markets jointly determine the nature of inter-market competition. Given the superior execution quality on the ECNs and the low adverse selection costs in the ETF market, anonymous market such as the ECNs, attract both liquidity and informed traders. We also find that markets compete in a subset of ETFs. In addition, we find that quotebased competition is prevalent in the market for ETFs.     

Ambiguity in election games

We construct a model in which the ambiguity of candidates allows them to increase the number of voters to whom they appeal. We focus our analysis on two points that are central to obtain ambiguity in equilibrium: restrictions on the beliefs that candidates can induce in voters, and intensity of voters' preferences. The first is necessary for a pure strategy equilibrium to exist, while the second is necessary for ambiguity in equilibrium when there exists a Condorcet winner in the set of pure alternatives (e.g. the spatial model of electoral competition), and when candidates' only objective is to win the election. In this last case, an ambiguous candidate may offer voters with different preferences the hope that their most preferred alternative will be implemented. We also show that if there are sufficiently many candidates or parties, ambiguity will not be possible in equilibrium, but a larger set of possible policies increases the chance that at least one candidate will choose to be ambiguous in equilibrium. We would like to thank Alberto Alesina, Antonio Cabrales, Steve Coate, Olivier Compte, Tim Feddersen, Itzhak Gilboa, Joe Harrington, Michel Le Breton, Alessandro Lizzeri, George Mailath, Steve Matthews, Steve Morris, Ignacio Ortuno, Tom Palfrey, Larry Samuelson, Murat Sertel, Fernando Vega, Eyal Winter and an anonymous referee for helpful comments. The first author acknowledges financial support from DGICYT-PB 95-0983. This work was done while the first author was visiting the Center in Political Economy at Washington University, and visiting the Center for Basic Research in the Social Sciences at Harvard University. Their hospitality is gratefully acknowledged. The support of the second author's research by the National Science Foundation is also gratefully acknowledged.     

Schumpeter 1911: Farsighted Visions on Economic Development

This paper presents to the English-speaking reader a sample of material contained only in Schumpeter's first German edition (1911) of Theorie der wirtschaftlichen Entwicklung , material subsequently omitted from later German editions and from the English translation. The newly-translated material, presented here for the first time in English, comprises a substantial part of the second chapter, only available in a completely rewritten version, and fully half of the famous seventh chapter, which has not been previously available at all in English. This material merits attention today because it contains remarkable and farsighted visions on economic theory that may inspire current efforts to devise models of economic and social evolution. In order to better appreciate the original text, we briefly introduce the "background" to Theorie and its revisions, briefly describing the social and intellectual environment of the time. We then discuss how the entrepreneur evolved over the three editions of Theorie (from 1911 to 1934) in view of the shift in Schumpeter's personal and intellectual life and outline the most important implications raised by the first German edition of 1911. Finally, we use Schumpeter's own statements to settle the obstinate confusion on the publication year of Theorie in favour of the year 1911.     

Managerial bonding and stock liquidity: An analysis of dual-class firms

Given the decision to create a second class of stock through a dual-class structure, we propose that management is more (less) likely to create a liquid secondary market for both classes of shares the lower (higher) its willingness to tie its personal wealth to firm performance. If market makers recognize this relation, they should assign a higher likelihood to trades motivated by superior information in shares of firms that list both classes of stock and a lower likelihood for firms that list only one class of stock pursuant to recapitalization. Additionally, they should assign a lower likelihood to trades motivated by superior information in shares of IPOs that choose a dual-class structure and list only one class relative to IPOs that remain single-class. Our empirical tests based on IPOS and recaps between 1985 and 1988 provide support for these propositions.     

Ownership structure and golden parachutes: Evidence of credible commitment or incentive alignment?

Using a sample of S & P 500 firms, we find that golden parachutes are associated with concentrated external ownership, less concentrated internal ownership, and non-Delaware incorporation. We find little support that concentrated external owners use golden parachutes as credible commitment devices. The general multivariate results support the incentive alignment hypothesis, and reaffirm the view that golden parachutes are a mechanism used to align managerial and shareholder interests when there is a separation between ownership and control. (JEL G32)     

Ownership structure and post-issue operating performance of firms conducting seasoned equity offerings in Thailand

This paper investigates the post-issue operating performance of companies that conducted seasoned equity offerings (SEO) in the Stock Exchange of Thailand (SET) during the period 1991 to 1994. It is documented that SEO firms exhibited declining operating performance after the offering. Further, there is a negative relation between inside ownership concentration and postissue operating performance decline. In support of the signaling effect, the ratio of issue proceeds to pre-issue equity also negatively relates to post-issue operating performance. Further, the negative relation between issue proceeds and operating performance decline is intensified among SEO firms with high insider ownership concentration. The finding offers evidence in support of agency conflicts and information asymmetry and suggests that the two factors are operating simultaneously.