The New Game in Town: Competitive Effects of IPOs

We analyze the effect of initial public offerings (IPOs) on industry competitors and provide evidence that companies experience negative stock price reactions to completed IPOs in their industry and positive stock price reactions to their withdrawal. Following a successful IPO in their industry, they show significant deterioration in their operating performance. These results are consistent with the existence of IPO‐related competitive advantages through the loosening of financial constraints, financial intermediary certification, and the presence of knowledge capital. These aspects of competitiveness are significant in explaining the cross‐section of underperformance as well as survival probabilities for competing firms.     

Reconceptualizing competitive dynamics: A multidimensional framework

Competitive dynamics research, despite progress, lacks a conceptual framework that can extend the field's reach to address today's environment. Increasing stakeholder power and globalization are but two of the organizational and economic forces compelling a broader conceptualization of competition. Our framework expands competitive dynamics along five dimensions—aims of competition, mode of competing, roster of actors, action toolkit, and time horizon of interaction—that prove useful for contrasting the rivalrous and competitive‐cooperative modes and a new approach we call relational competition. We draw conjectures about the moderators, such as industry and culture, that determine the appropriateness of these forms of interaction, and conclude by relating our method to three discrete perspectives: the configurational, transaction cost, and stakeholder views. Copyright © 2014 John Wiley & Sons, Ltd.     

Localization and overseas R&D activity: the case of Taiwanese multinational enterprises in China

This study investigates the determinants of overseas research and development (R&D) and the influences of various aspects of localization on affiliates' R&D intensity. Using a dataset of Taiwanese multinational enterprises (MNEs) in China, the empirical estimations find that MNEs with a larger firm size, more R&D expenditure, and a higher outward foreign direct investments intensity tend to undertake R&D. Host regions' characteristics, particularly market size and R&D resources, do matter for attracting MNEs to conduct R&D locally. Crucially, affiliates' R&D intensity is related to the degree of localization. The degree of market localization and localization of the R&D network has a positive association with affiliates' R&D intensity. From the perspective of R&D policy, a country with healthy R&D infrastructures helps attract the establishment of R&D labs of MNEs.     

Global and political strategies in deregulated industries: the asymmetric behaviors of former monopolies

In deregulated industries former monopolies often adopt asymmetric behaviors: these firms impede the entry of foreign competitors in their home market, especially using defensive political strategies, and, at the same time, aggressively develop international strategies in foreign markets. To account for this behavior, I develop a game theoretic model involving three players: the former monopoly, its home government, and the host government of the country into which the firm wants to enter. I show first that there are in fact different asymmetric strategies that former monopolies can use in such a setting, and that a global strategy cannot always be implemented by those firms because of cooperation issues between the two governments. I also study the conditions under which these issues can be solved and show that this can happen only when the firm develops a political strategy that integrates both defensive and offensive activities. Overall, this paper therefore argues that asymmetric strategies are not always adopted to maintain monopoly rents but are also dictated by the nature of the international relationships between the governments involved. Copyright © 2003 John Wiley & Sons, Ltd.     

An empirical investigation of the welfare effects of banning wholesale price discrimination

Economic theory does not provide sharp predictions on the welfare effects of banning wholesale price discrimination: if downstream cost differences exist, then discrimination shifts production inefficiently, toward high‐cost retailers, so a ban increases welfare; if differences in price elasticity of demand across retailers exist, discrimination may increase welfare if quantity sold increases, so a ban reduces welfare. Using retail prices and quantities of coffee brands sold by German retailers, I estimate a model of demand and supply and separate cost and demand differences. Simulating a ban on wholesale price discrimination has positive welfare effects in this market, and less if downstream cost differences shrink, or with less competition.     

Towards the Development of a Tax System Complexity Index

Reducing tax system complexity is a common goal amongst policymakers; yet there is no commonly agreed definition of complexity. This paper seeks to fill this gap, by proposing the construction of an index of tax system complexity, conceived as a summary indicator of the overall complexity of a tax system at a particular point in time. If adopted, such an index would not only enable assessment of the changing level of a country's tax system complexity over time, but may also facilitate comparisons of the relative complexity of different countries' tax systems in future.     

Marriage between credit cards and the Internet: Buying is just a click away!

This paper examines whether Internet access positively affects credit card balances. To that end, we compare the 2010 and 2013 Surveys of Consumer Finances, analyze the consistency of the results over time, and provide the rationale for any resulting differences. Using the censored techniques, our results indicate that Internet access has a positive effect on credit card balances, which suggests that consumers with Internet access are prone to higher balances compared to those without. The probability of carrying positive balances was larger in 2010 compared to 2013. Overall, the results suggest that, while the financial crisis might have contributed to higher balances in 2010, the economic recovery afterward seems to have eased the burden of credit card debt.     

Enterprise Risk Management and the Cost of Capital

Enterprise risk management (ERM) is a process that manages all risks in an integrated, holistic fashion by controlling and coordinating any offsetting risks across the enterprise. This research investigates whether the adoption of the ERM approach affects firms' cost of equity capital. We restrict our analysis to the U.S. insurance industry to control for unobservable differences in business models and risk exposures across industries. We simultaneously model firms' adoption of ERM and the effect of ERM on the cost of capital. We find that ERM adoption significantly reduces firm's cost of capital. Our results suggest that cost of capital benefits are one answer to the question how ERM can create value.     

DIFFERENTIAL RISK‐TAKING IMPLICATIONS OF PERFORMANCE INCENTIVES FROM STOCK AND STOCK OPTION HOLDINGS

We study the risk‐taking implications of managerial pay‐for‐performance incentives (delta) arising from stock and stock options separately in the United States between 1992 and 2017. The current literature assumes that each unit of delta has an equal incentive effect on firm performance. Instead, we show that the risk‐reducing effect of performance incentives is more pronounced for executives whose delta comes mostly from stock holdings relative to option holdings. Accordingly, we propose a new measure that takes into account the magnitude of delta from option holdings relative to delta from stock holdings (source ratio). Our results show that risk taking increases as this ratio increases.