An analysis of private versus public firm valuations and the contribution of financial experts

This study investigates differences in expert valuations of private versus public firms conducted for transactions outside the exchange. First, we provide evidence for extreme reliance of the experts on private firms' reported earnings, despite a possible manipulation of these earnings. In contrast, experts valuing public firms seem to rely on other, non-financial statement information sources, even if the quality of pre-acquisition earnings is higher in these firms. Second, we present evidence that the contribution of experts to investors in private firms is questionable at best. Our findings indicate that a private firm valuation performed by a potential investor based on available information provides results similar to those of the expert. Third, we show that inconclusive results regarding the existence of a discount in private firm valuations may be explained by experts' compliance with the interests of the commissioner of the valuation. This finding provides at least a partial explanation for the private company discount, one that adds to prior standard explanations (e.g., liquidity) offered in the finance literature.     

Collective contests for commons and club goods

This paper focuses on collective contests for commons and club goods. Our main objective is to examine in this context the effect of group size on its performance. The main results specify conditions for the existence (non-existence) of the group-size paradox, namely, the situation where a larger group is less (more) effective in pursuing its interest because of (despite) the combined effect of the incentives that result in the free-riding problem and the tragedy of the commons. The paper also explains under what circumstances there exists a bias towards excessive or inadequate winning group size. Finally, it examines the effect of restricted excludability of the commons good within the winning group on the relationship between group-size and its winning probability.     

INTERNATIONAL TRANSFER OF PRICING INFORMATION BETWEEN DUALLY LISTED STOCKS

International multiple listing offers a unique opportunity to study the efficiency of information transmission across national markets. The knowledge gained from observing a stock of the same company priced in multiple markets differs from what may be gained from observing relations across markets of aggregate price indices. We investigate five companies based in Israel whose stocks are listed on both the Tel Aviv Stock Exchange and NASDAQ. Our empirical tests of causality in price changes use the side-by-side Box-Jenkins ARIMA models and the Sims VAR model. Overall, the results show that price causality in dually listed stocks is unidirectional from the domestic market to the foreign market.     

How good are supply function equilibrium models: an empirical analysis of the ERCOT balancing market

We present an empirical analysis of a supply function equilibrium model in the Texas spot electricity market. We derive conditions for optimal bidding behavior in a spot market with ex ante bilaterally contracted sales. By estimating costs, we are able to derive a set of ex post-and ex ante-optimal supply functions and use a non-parametric behavioral model to compare our theoretically optimal supply functions to actual offers made. Our results show that with the exception of the largest generators, firms make offers with markups and markdowns far in excess of what a model of profit-maximizing behavior suggests.     

Career attitudes and success of managers: the impact of chance event,protean, and traditional careers

We propose a career model that focuses on the antecedents of career success for managers and professionals within organizations. The model includes constructs rarely represented in the literature, and is based on conservation of resources theory. Testing our model with a sample of 545 managers, we found significant effect of positive and negative social capital, perception of organizational politics, professional vitality, and protean career attitude on internal and external career success, mediated by organizational commitment and met expectations, and moderated by chance event effect. This original contribution includes incorporating new constructs and concentrates upon factors enabling support for successful careers.     

Withdrawal Behaviors Syndrome: An Ethical Perspective

This study aimed to elucidate the withdrawal behaviors syndrome (lateness, absence, and intent to leave work) among nurses by examining interrelations between these behaviors and the mediating effect of organizational commitment upon ethical perceptions (caring climate, formal climate, and distributive justice) and withdrawal behaviors. Two-hundred and one nurses from one hospital in northern Israel participated. Data collection was based on questionnaires and hospital records using a two-phase design. The analyses are based on Hierarchical Multiple Regressions and on Structural Equation Modeling with AMOS. Affective commitment was found to mediate the relationship between different dimensions of nurses’ ethical perceptions (caring climate, formal climate, and distributive justice) and their intent to leave work. Lateness was found to be positively related to absence frequency which was found negatively related to intent to leave. Males were late more frequently than females, while seniority was related only to absence frequency. The findings indicated that each withdrawal behavior exhibits unique relationships. The results may help policy makers to focus on improving the ethical environment in order to increase nurses’ commitment and reduce their intent to leave. Improving the ethical environment may be achieved through ethical education for nurses which may promote ethical considerations becoming an integral part of nurses’ work.     

Measuring investor sentiment with mutual fund flows

We investigate a proxy for monthly shifts between bond funds and equity funds in the USA: aggregate net exchanges of equity funds. This measure (which is negatively related to changes in VIX) is positively contemporaneously correlated with aggregate stock market excess returns: One standard deviation of net exchanges is related to 1.95% of market excess return. Our main new finding is that 85% (all) of the contemporaneous relation is reversed within four (ten) months. The effect is stronger in smaller stocks and in growth stocks. These findings support the notion of “noise” in aggregate market prices induced by investor sentiment.     

Generating search directions in multiobjective linear programming using the analytic hierarchy process

The algorithm presented in this paper describes an interactive approach for generating search directions in multiobjective linear programming problems (MOLP). The approach is based on using the AHP to assign priorities to vertices adjacent to those that are in the basis, as generated by the simplex method. Using these priorities, an approximate gradient is found that is used to weigh the objective functions during the next iteration. The novel feature of the algorithm is that the decision-maker (DM) is not required to provide interactive inputs to implicit preference questions concerning his objectives, but instead considers explicit evaluation of adjacent possible improvements to generate the next step in his most preferred direction.     

Harvesting to Extinction: Is It Socially Rational?

This paper presents a critique of the neoclassical view of the optimal use of renewable resources and offers an alternative view based on the method of classical thermodynamics. The presentation is forwarded via the issue of harvesting to extinction. Based on simple models, the traditional theory suggests that society would benefit from wiping out any renewable resource whose intrinsic growth rate, though positive, is smaller than the social rate of time preference. The latter is the rate society is using to discount its future benefits and costs. To bypass this ecologically implausible outcome, the simplistic assumptions have been modified in various ways. For example, either the costs or the benefits of harvesting have been made to depend on the stock of the resource as well as on the yield. The modifications offered make society less prone to wipe out resources intentionally, but they still disregard a more fundamental difficulty: The traditional theory is not consistent with the second law of thermodynamics; it describes a process that defies the second law, which no known system is able to be undergoing. No doubt, the theory should be challenged first and foremost on this ground, but none of the offered modifications is capable of annulling this inconsistency. A deeper change is needed because the social values of the resource as perceived by a society that behaves in manners consistent with the second law and as defined by the traditional theory necessarily differ. The paper identifies the socially consistent value and shows that harvesting to extinction is never optimal socially. Were society to follow the socially inconsistent value, it would always underestimate the importance of self-sustained resources. However, the unlikely refutability of the second law turns this possibility and the socially favored extinctions into arguable outcomes of an untenable theory rather than undesirable outcomes of a sound theory. Potentially growing renewable resources are wiped out in real life for various reasons, but when they are preyed to extinction, their unfortunate fate is an outcome of the dynamics of a socially unregulated system rather than a social objective coming to fruition. This revised version was published online in July 2006 with corrections to the Cover Date.     

Production theory with profit-constrained revenue-maximization: The duality approach

This paper derives a general version of Baumol's production theory, where the main behavioral assumption is ‘revenue maximization subject to a profit constraint’ instead of ‘profit maximization’. This theory turns out to be analogous to the neoclassical (competitive) production and consumption theories. Employing the fruitful duality approach it is presented here in a unified and very economical form that provides a complete and general analysis of the comparative static behavior of Baumol's firm.