Reexamining dual-class stock

Snapchat’s initial public offering, which provided shares with no voting rights, is a culmination of the growing trend of dual-class shares. It contradicts the precept of one-share, one-vote that is essential for corporate democracy. Snapchat’s action caused an uproar among influential investors. In January 2017, a coalition of the world’s biggest money managers, which together control more than $17 trillion in assets, demanded a total ban on dual-class shares. We reason that the increasing prominence of dual-class stock is explained by the confluence of three economic trends: the growing importance of intangible investments, the rise of activist investors, and the decline of staggered boards and poison pills. A dual-class structure offers immunity against proxy contests initiated by short-term investors. It enables managers to ignore capital market pressures and to avoid myopic actions such as cutting research and development, which hurt companies in the long term. Thus, a dual-class structure is optimal in certain scenarios. We put forth alternatives to dual-class structure that enable managers to maintain control while retaining focus on sustainable value creation.     

Revenue and efficiency effects of resale in first-price auctions

We study first-price auctions in a model with asymmetric, independent private values. Asymmetries lead to inefficient allocations, thereby creating a motive for resale after the auction is over. In our model, resale takes place via monopoly pricing—the winner of the auction makes a take-it-or-leave-it offer to the loser. Our goal is to compare equilibria of the first-price auction without resale (FPA) with those of the first-price auction with resale (FPAR). For the three major families of distributions for which equilibria of the FPA are available in closed form, we show that resale possibilities increase the revenue of the original seller. We also show by example that, somewhat paradoxically, resale may actually decrease efficiency.     

Shedding light on the CMO revolving door: a study of the antecedents of Chief Marketing Officer turnover

Investigating Chief Marketing Officer (CMO) tenure through a longitudinal study of the antecedents of CMO turnover, the authors find that CMO turnover increases if firms’ sales growth is poor, while profitability has a similar though smaller effect when a new CEO is appointed, highlighting marketing’s contextual role vis-à-vis performance metrics. Coupled with other results related to industry sales growth and stability that make CMO turnover less likely, these findings underscore marketing’s demand- or customer-facing role in the firm. The authors also show that some of these results are distinct to turnover among CMOs compared to other top management team (TMT) executives. While this research does show support for extant theory, its focus on the CMO within the TMT results in important contributions to the turnover literature. These include the inverted-U effect of TMT marketing experience on CMO turnover and the nuanced attenuation by CMO insider-ness of a similar relationship between CMO tenure and turnover. Overall, the results lead to important practical implications for managing CMO turnover.     

A NOTE ON THE PROPERTY RIGHTS THEORY AND THE EX ANTE VALUE OF INFORMATION

This paper examines the ex ante value of information in the property rights model where the possibility exists that an investing agent can be provided with relevant information before investments are undertaken. When contracts are incomplete, from an ex ante perspective, informing the investing agent does not necessarily increase the expected surplus resulting from a relationship between two economic agents. The paper highlights the fact that the second‐best nature of the problem that arises from contractual incompleteness can ensure this.     

A nonsymmetric responding logistic model for forecasting technological substitution

This article presents a simple model of technological substitution termed as nonsymmetric responding logistic (NSRL). Based on the theory that substitution is an imitation process, the model can accommodate different patterns of technological substitution by allowing the imitation effect to vary over time systematically. It allows the S-curve to be symmetrical as well as nonsymmetrical, with the point of inflection responding to the substitution process. Data from four medical innovations are analyzed to illustrate the generality of the model.     

Innovation diffusion: A deterministic model of space-time integration with physical analog

This paper extends a fundamental temporal diffusion model to integrate space and time dimensions of the diffusion of innovation. The analogous developments in physical sciences are compared and it is demonstrated that the proposed model may be the first step in linking the concept of catalysts in physical science diffusion processes to the role of change agents in social science systems.     

Are Open Markets Good for Foreign Investors and Emerging Nations?

Although policymakers of emerging nations routinely brand foreign capital as "hot money" and hold it responsible for the ills of their economies, this article suggests that the experience of opening up their markets to overseas investors has been largely beneficial for the host countries. Based on their own recent study, the authors report that when emerging economies open their markets, the level of stock prices tends to rise without an associated increase in volatility, and more capital becomes available for domestic investment at a lower cost. The stock markets also appear to become more efficient, thus resulting in a better allocation of resources. Furthermore, the inflow of foreign capital does not lead to higher inflation or stronger currencies, nor does the volatility of inflation or exchange rates increase. If some countries experience large capital outflows with damaging consequences, the culprit is not foreign investors, but rather policymakers' futile attempt to defy market forces and the failure of their economies to put the capital to productive uses.
The authors' analysis also suggests that, when the recent turmoil in emerging markets is set in the context of a longer-run historical perspective, nothing appears to have changed that would materially alter the prospects for investing in emerging markets. The recent market volatility and currency crises in emerging nations are by no means extraordinary—indeed, the currencies of many developing countries fall routinely. What distinguishes the Mexican and Thai currency crises from such run-of-the-mill devaluations is that both governments resisted the inevitable until market forces brought about a crash. The recent emerging market currency crises should accordingly be viewed as more or less predictable "road bumps" that can be expected when the policymakers of emerging economies gradually—and grudgingly—relinquish their power to the markets.     

Computer assisted purchasing

Today's supermarket shoppers need information on the “best” buys in terms of low prices, shopping convenience, and traveling cost. A survey of literature shows that there is no existing system which provides this information to the shoppers. In this paper we propose an urban supermarket shopping information system. First, a design program for the development of such a system is delineated. Then, two “shopper strategy models” are developed. The first model gives the best strategy to buy predetermined food items for weekly shopping. The second model is shopper activated and allows specification of food items, preference for stores and constraint on shopping time.     

Explaining tractorization in Nepal: An alternative to the ‘consequences approach’

The debate on whether or not agricultural mechanization should be subsidized in developing countries usually focuses on the employment and yield effects of mechanization. This paper takes the alternative tack that designing mechanization policy requires understanding the determinants of the mechanization choice. A model of investment and factor use is developed and applied to the land preparation decision of 99 farmers in the Terai region of Nepal. Farmers' ownership and use of tractors are accurately predicted by the hypothesis that farmers maximize expected accounting profits. Since farmers are privately efficient, tractor subsidies, which increase the wedge between the private and social shadow prices of mechanical power, will decrease economic effiency.