Does Store Brand Patronage Improve Store Patronage?

Review of Industrial Organization - We investigate the relationship between a household's store brandpatronage and store patronage through its impact on store revenuesand profits. The nature of...     

Career Concerns and Resource Allocation in Conglomerates

We investigate resource allocation decisions in conglomerateswhen managers are motivated by career concerns. When divisionalcash flows are differentially informative about managerial ability,we show that it is in the managers' interest to overallocateunobservable intangible resources to the more informative divisions.Anticipating this bias, it is optimal for the firm's ownersto also overallocate observable capital to the more informativedivisions. The model provides rationale for corporate socialismand corporate hedging. It also highlights a cost of segmentreporting and tracking stocks, namely, that they allow managersto distort their perceived ability at the expense of investors.     

The antecedents of tourists’ gaming spend: does the brand prestige matter?

This study endeavors to empirically analyse the influential effect among brand prestige, service quality, casino visitor satisfaction and spend. Data from 304 tourists who had travelled to Macau and had participated in gambling activities were used and structural equation modelling and multi-group analysis were employed in hypotheses testing. The findings demonstrated that both brand prestige and perceived service quality are determinants of satisfaction and gaming spend, and that brand prestige also affects service quality positively. Furthermore, past experience moderates the service quality and visitors’ satisfaction relationship, also service quality and visitors’ gaming spend relationship.     

Bargaining and brinkmanship : Capital structure choice by regulated firms

A bargaining model of regulation is developed. It is shown that regulated firms can improve their bargaining positions and induce the regulator to set higher prices for firm output by choosing more debt. Firms, in choosing an optimal level of debt, trade off this bargaining advantage against expected bankruptcy costs. The model predicts that firms would tend to choose higher levels of debt in harsher regulatory environments. This prediction is shown to be consistent with cross-sectional evidence for U.S. electric utilities for the sample period 1972–1983.     

The risky business of hiring stars

With the battle for the best and brightest people heating up again, you're most likely out there looking for first-rate talent in the ranks of your competitors. Chances are, you're sold on the idea of recruiting from outside your organization, since developing people within the firm takes time and money. But the authors, who have tracked the careers of high-flying CEOs, researchers, software developers, and leading professionals, argue that top performers quickly fade after leaving one company for another. To study this phenomenon in greater detail, the authors analyzed the ups and downs of more than 1,000 star stock analysts, a well-defined group for which there are abundant data. The results were striking. After a star moves, not only does her performance plunge, but so does the effectiveness of the group she joins--and the market value of her new company. Moreover, transplanted stars don't stay with their new organizations for long, despite the astronomical salaries firms pay to lure them from rivals. Most companies that hire stars overlook the fact that an executive's performance is not entirely transferable because his personal competencies inevitably include company-specific skills. When the star leaves the old company for the new, he cannot take with him many of the resources that contributed to his achievements. As a result, he is unable to repeat his performance in another company--at least not until he learns to work the new system, which could take years. The authors conclude that companies cannot gain a competitive advantage or successfully grow by hiring stars from outside. Instead, they should focus on cultivating talent from within and do everything possible to retain the stars they create. Firms shouldn't fight the star wars, because winning could be the worst thing that happens to them.     

When Shopbots Meet Emails: Implications for Price Competition on the Internet

Quantitative Marketing and Economics - The Internet has dramatically reduced search costs for customers by using such technologies as shopbots. Email based targeting is relatively inexpensive; the...     

CEO tenure and the performance-turnover relation

In a broad cross-section of US firms, we document that the likelihood of a CEO’s performance-related dismissal declines in his tenure. This finding is consistent with both firm performance revealing information about a CEO’s uncertain executive ability and CEO tenure reflecting weak firm governance choices that reduce the likelihood of performance-related dismissal. In a sample of CEOs who begin their appointment during our sample period, we find evidence more broadly in favor of the former explanation. Specifically, we find that (1) CEO survival is associated with superior firm performance, (2) this relation is unaffected by firm governance choices, (3) the intensity with which a firm monitors its CEO declines over his tenure, and (4) firms’ monitoring intensity increases following CEO turnover. Collectively, our results suggest that periodic performance reports increasingly resolve uncertainty regarding executive ability, thereby lowering firm owners’ demand for monitoring their CEO over his tenure.     

DO INSTITUTIONS PREFER HIGH‐VALUE ACQUIRERS? AN ANALYSIS OF TRADING IN STOCK‐FINANCED ACQUISITIONS

If owners of target shares in a stock‐for‐stock merger perceive the acquirer as overvalued, they should sell their holdings more aggressively to profit before such overvaluation dissipates. We study institutional owners of targets and find that slightly more than half liquidate their shares in stock mergers, consistent with high institutional‐share turnover rates found in the prior literature. However, share retention is higher when valuation measures suggest greater acquirer overvaluation, regardless of whether institutional owners generally prefer growth or value stock. Institutions that prefer large‐cap, growth stock are most enthusiastic about bids from large, high‐valuation acquirers, and substantially increase their stakes in such deals.     

On the natural selection rule in general linear models

We consider a problem of selecting the best treatment in a general linear model. We look at the properties of the natural selection rule. It is shown that the natural selection rule is minimax under to “0–1” loss function and it is a Bayes rule under a monotone permutation invariant loss function with respect to a permutation invariant prior for every variance balanced design. Some other condition on the design matrix is given so that a Bayes rule with respect to a normal prior will be of simple structure.     

Tender Offers, Proxy Contests, and Large-Shareholder Activism

The paper analyzes tender offers and proxy contests as alternative means of resolving corporate governance conflicts between dissidents and incumbent management. We show that when a dissident shareholder is sufficiently confident about the potential benefits from changing corporate policy, he will seek majority control by making a tender offer rather than initiating a proxy contest. When the dissident is relatively uninformed, however, he may opt for a proxy contest, thereby utilizing the information of other shareholders to implement the better policy. Consistent with empirical evidence, the model predicts that announcements of tender offers will tend to be associated with larger positive stockprice reactions than announcements of proxy contests. The model is easily extended to allow for promanagement bias in proxy voting by institutional investors. Empirical observations that have been viewed as evidence of such promanagement bias are shown to be quite consistent with the absence of such bias. Policy issues are discussed as well. An interesting result is that even policies targeted at reducing the costs of conducting proxy contests may have ambiguous social consequences, given the possibility of substitution between tender offers and proxy contests.