Better Safe than Sorry: Subsidiary Performance Feedback and Internal Governance in Multiunit Firms


Journal of Management

novembre 2017, vol. 43, n°8, pp.2526-2554

Départements : Stratégie et Politique d’Entreprise, GREGHEC (CNRS)

Dirigé par: Special Issue: Resource Allocation and Strategy

Mots clés : autonomy, governance, incentives, organization design, performance feedback, resource allocation, structural adaptation

This paper explores the link between subsidiary performance feedback and internal governance mechanisms in multiunit firms. A central premise of performance feedback models is that performance below aspirations is associated with increased risk tolerance and thereby with a higher likelihood of taking excessive risks in resource allocation decisions. Building on this observation, we contend that the headquarters of multiunit firms take this association into account in the design of internal (i.e., headquarters-subsidiary) governance mechanisms. Accordingly, a subsidiary’s performance-aspiration gap (below aspirations) is positively associated with the headquarters’ oversight of its resource allocation decisions and negatively associated with the provision of incentive schemes that promote risk taking. Regression results, using data on subsidiaries in France between 1998 and 2004, support our hypotheses and show that subsidiaries performing below historical and social aspirations are less likely to be given discretion in investment decisions and incentivized by cash bonuses. In the supplementary analyses we also provide suggestive evidence that subsidiary performance problems in multiunit firms trigger structural adaptation in the internal governance mechanisms in pursuit of regaining fit

Better together: using meta-analysis to explore complementarities between ecological and institutional theories of organization


Organization Studies

novembre 2017, vol. 38, n°11, pp.1573-1601

Départements : Management et Ressources Humaines, GREGHEC (CNRS)

While sharing intellectual ancestry, organizational ecology and institutionalism are rarely used conjointly to explain population dynamics. A rapprochement would nevertheless be fruitful, as the parsimonious models developed by ecologists are better able to explain organizational founding and failure when enriched with institutional variables. We present a meta-analysis of density dependence theory, which predicts a non-monotonic relationship between population density and organizational vital events. We show that ecology and institutionalism are ‘better together’ by extending this ecological framework in four institutionalism-inspired ways. First, we show that the effects of density on organizational vital rates are moderated by two conceptions of time: ecological ‘clocks’ and institutional ‘eras’. Second, we argue that the socio-political legitimacy of organizational forms, a concept with strong institutional roots, exacerbates density-related founding while attenuating failure. Third, we illustrate how the emergence of prototypical categories in organizational fields can increase the magnitude of density effects. Fourth, we highlight how these socio-political legitimacy and categorization effects are conditioned by ecological clock time. We close by proposing a concise agenda for future research, aimed at finding a better balance between the generality and explanatory power of our most trusted organizational theories. © 2017, © The Author(s) 2017

Beyond the Target Customer: Social Effects of CRM Campaigns


Journal of Marketing Research

juin 2017, vol. 54, n°3, pp.347-363

Départements : Marketing, GREGHEC (CNRS)

Mots clés : Customer Relationship Management (CRM), Field experiments, Targeting, Churn, Retention, Mobile

Customer Relationship Management (CRM) campaigns have traditionally focused on maximizing the profitability of the targeted customers. We demonstrate that, in business settings that are characterized by network externalities, a CRM campaign that is aimed at changing the behavior of specific customers propagates through the social network, thereby also affecting the behavior of non-targeted customers. Using a randomized field experiment involving nearly 6,000 customers of a mobile telecommunications provider, we find that the social connections of targeted customers increase their consumption and are less likely to churn due to a campaign that was neither targeted at them nor offered them any direct incentives. We estimate a social multiplier of 1.28. That is, the effect of the campaign on first-degree connections of targeted customers is 28% of the effect of the campaign on the targeted customers. By further leveraging the randomized experimental design we show that, consistent with a network externality account, the increase in activity among the non-targeted but connected customers is driven by the increase in communication between the targeted customers and their connections, making the local network of the non-targeted customers more valuable. Our findings suggest that in targeting CRM marketing campaigns, firms should consider not only the profitability of the targeted customer, but also the potential spillover of the campaign to non-targeted but connected customers

Blockholder Exit Threats in the Presence of Private Benefits of Control

Ole-Kristian HOPE, H. WU, Wuyang ZHAO

Review of Accounting Studies

juin 2017, vol. 22, n°2, pp.873-902

Départements : Comptabilité et Contrôle de Gestion

Mots clés : Exit-Threat Theory, Private Benefits of Control, Liquidity, China, Split-Share Structure Reform, Operating Performance, Quasi-Experiment

Exit theory predicts a governance role of outside blockholders’ exit threats; but this role could be ineffective if managers’ potential private benefits exceed their loss in stock-price declines caused by outside blockholders’ exit. We test this prediction using the Split-Share Structure Reform (SSSR) in China, which provided a large, exogenous, and permanent shock to the cost for outside blockholders to exit. Using a difference-in-differences design combined with propensity-score matching, we find that firms whose outside blockholders experience an increase in exit threats have a greater improvement in performance than those whose outside blockholders experience no increase. Moreover, the governance effect of exit threats is ineffective in the group of firms with the highest concern for private benefits of control. Finally, a battery of theory-motivated tests show that the documented effects are unlikely explained by outside blockholder intervention or some well-known intended effects of SSSR

Bref addendum sur la « conception expérimentale de la rationalité »


Revue Economique

avril 2017, vol. 68, pp.701-703

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Un article précédent défendait, en l’attribuant à Allais et à ses successeursMacCrimmon et Larsson, une conception inédite qui recommanderait d’étudiersur des données de comportement non seulement la conformité des individusaux règles normatives, mais encore la normativité même de ces règles. Cet article a suscité de la part de Dorian Jullien des commentaires auxquels nous répondons ici

Catching Falling Knives: Speculating on Liquidity Shocks


Management Science

août 2017, vol. 63, n°8, pp.2573-2591

Départements : Finance, GREGHEC (CNRS)

Mots clés : supply information • nonfundamental uncertainty • market crashes • arbitrage • high-frequency trading

Many market participants invest resources to acquire information about liquidity rather than fundamentals. I show that agents using such information can reduce the magnitude of short-lived pricing errors by trading against liquidity shocks. However, the short-run stabilizing effect of this behavior also makes it more difficult to identify liquidity shocks, a signal-jamming effect that slows down price discovery in the long run. As more agents invest in nonfundamental information, market prices become more resilient to liquidity shocks but also recover more slowly from temporary price deviations.

Characterizations of Smooth Ambiguity Based on Continuous and Discrete Data


Mathematics of Operations Research

février 2017, vol. 42, n°1, pp.167-178

Départements : Economie et Sciences de la décision

Mots clés : smooth ambiguity; variational preferences; revealed preference; completely monotone functions; Afriat inequalities; moment problem

In the Anscombe-Aumann setup, we provide conditions for a collection of observations to be consistent with a well-known class of smooth ambiguity preferences (Klibanoff P, Marinacci M, Mukerji S (2005) A smooth model of decision making under ambiguity. Econometrica 73(6):1849–1892.). Each observation is assumed to take the form of an equivalence between an uncertain act and a certain outcome. We provide three results that describe these conditions for data sets of different cardinality. Our findings uncover surprising links between the smooth ambiguity model and classic mathematical results in complex and functional analysis.

Climate Change Assessments: Confidence, Probability, and Decision


Philosophy of Science

juillet 2017, vol. 84, n°3, pp.500-522

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

The Intergovernmental Panel on Climate Change has developed a novel framework for assessing and communicating uncertainty in the findings published in its periodic assessment reports. But how should these uncertainty assessments inform decisions? We take a formal decision-making perspective to investigate how scientific input formulated in the IPCC’s novel framework might inform decisions in a principled way through a normative decision model



Journal of Financial and Quantitative Analysis

septembre 2017, vol. 52, n°5, pp.2183–2215

Départements : Finance, GREGHEC (CNRS)

Mots clés : Collateral, Counterparty Risk, Derivatives Markets, Extreme Dependence

We present CoMargin, a new methodology to estimate collateral requirements in derivatives central counterparties (CCPs). CoMargin depends on both the tail risk of a given market participant and its interdependence with other participants. Our approach internalizes trading externalities and enhances the stability of CCPs, thus, reducing systemic risk concerns. We assess our methodology using proprietary data from the Canadian Derivatives Clearing Corporation that includes daily observations of the actual trading positions of all of its members from 2003 to 2011. We show that CoMargin outperforms existing margining systems by stabilizing the probability and minimizing the shortfall of simultaneous margin-exceeding losses

Consequences of the Abandonment of Mandatory Joint Audit: An Empirical Study of Audit Costs and Audit Quality Effects


European Accounting Review

2017, vol. 26, n°2, pp.311-339

Départements : Comptabilité et Contrôle de Gestion

Mots clés : Joint audit, Audit cost, Audit quality, Audit market, Denmark

This paper focuses on the unique Danish setting in examining the consequences of abandoning a mandatory joint audit regime. We study the effects on audit costs (measured by audit fees) and audit quality (measured by abnormal accruals) of the abandonment of the mandatory joint audit in Denmark in 2005. We perform our analysis on non-financial listed Danish companies for the 2002–2010 period. Our results show that a joint audit is associated with higher fees, but that the association between joint audit and abnormal accruals is insignificant. This suggests that the higher audit fees cannot be explained by higher audit quality. Our results are robust to alternative measurements of fees and audit quality. Additional analyses show that the fee premium related to a joint audit decreases over time and that the Big 4 concentration in our sample has increased since the switch from mandatory to voluntary joint audit. Our results are consistent with the motivations driving the regulatory change in Denmark and are of interest to regulators and actors in the audit market