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

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

Richard Bradley, Casey Helgeson, B. HILL

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

Developing knowledge from entrepreneurial actions – toward a taxonomy


Journal of Small Business and Enterprise Development

2017, vol. 24, n°4, pp.793-813

Départements : Information Systems and Operations Management, GREGHEC (CNRS)

Mots clés : Experiential learning, Qualitative method, Knowledge development, Entrepreneurial learning

Purpose – The purpose of this paper is to enrich our understanding of entrepreneurs’ daily deeds, tasks and activities. The research investigates the ways in which entrepreneurs seize opportunities and gain knowledge from the start to the expansion of their ventures.Design/methodology/approach – Two case studies were developed based on a longitudinal fine-grained analysis of two ventures over two years. Entrepreneurs’ success and learning were modeled in line with grounded theory methodology. Data were collected from both primary and secondary sources in the form of semi-structured interviews and archival documentation.Findings – The authors develop an original conceptual framework that consists of ten entrepreneurial learning opportunities and four knowledge development modes. There are ten generic types of actions that entrepreneurs take. There are then four distinctive ways to transform these experiences into knowledge. The model is assessed in absolute terms and relatively to existing taxonomies.Research limitations/implications – The findings question the premises on which entrepreneurial learning research traditionally relies. Opportunities can be open-ended rather than purely instrumental. Similarly, knowledge can be emerging as much as it can be espoused. This opens-up space for further research.Practical implications – For practitioners, the findings suggest new ways for making sense of the daily experience of their entrepreneurial endeavor. The learning modes suggested can be used by coaches and mentors when helping entrepreneurs in their venture.Originality/value – The research provides empirical evidence of what entrepreneurs do. This may help cast traditional debates about what there is to do (logical necessity) and what there is to know (a priori knowledge) in a new light.

Dynamic Dependence and Diversification in Corporate Credit


Review of Finance

2017, pp.1-40

Départements : Finance, GREGHEC (CNRS)

Mots clés : Credit risk, Default risk, CDS, Dynamic dependence, Copula

We characterize dependence in corporate credit and equity returns for 215 firms using a new class of large-scale dynamic copula models. Copula dependence and especially tail dependence are highly variable and persistent, increase significantly in the financial crisis, and have remained high since. The most drastic increases in credit dependence occur in July/August of 2007 and in August of 2011 and the decrease in diversification potential caused by the increases in dependence and tail dependence is large. Credit default swap correlation dynamics are important determinants of credit spreads

Effects of inter-group status on the pursuit of intra-group status

J. W. CHANG, Rosalind CHOW, Anita WOOLLEY

Organizational Behavior and Human Decision Processes

mars 2017, vol. 139, pp.1–17

Départements : Management et Ressources Humaines, GREGHEC (CNRS)

Mots clés : Inter-group status; Intra-group status; Cooperation; Competition

This research examines how the status of one’s group influences intra-group behavior and collective outcomes. Two experiments provide evidence that, compared to members of low-status groups, members of high-status groups are more concerned about their intra-group standing, which in turn can increase both the likelihood of competitive and cooperative intra-group behavior. However, whether the desire for intra-group standing manifests via competitive versus cooperative behavior depends on the relevance of the task to the group’s inter-group standing. When the task is not clearly relevant to the group’s status, members of high-status groups are more likely to engage in competitive behavior out of a desire to manage their intra-group status, which, in turn, leads to less desirable collective outcomes. However, when the group’s status is at stake, members of high-status groups seek intra-group status via cooperative behavior, leading to better collective outcomes.

Estimating Value Creation from Revealed Preferences: Application to Value-Based Strategies


Strategic Management Journal

octobre 2017, vol. 38, pp.1964-1985

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

Mots clés : buyer–supplier relationships; client-speciceconomies of scope; cooperative game theory; revealedpreferences; value-based strategy

We develop and apply a new set of empirical tools consistent with the tenets of value-based business strategies, leveraging the principle that “no good deal comes undone” and the methods of revealed preferences to empirically estimate drivers of value creation. We demonstrate how to use these tools in an analysis of value creation in buyer–supplier relationships in the UK corporate legal market. We show how the method can uncover evidence of subtle mechanisms that traditional methods cannot easily distinguish from each other. Furthermore, we show how these estimates can be used as parameters of biform games for out-of-sample analyses of strategic decisions. With readily available data on relationships between firms, this approach can be applied to many other contexts of interest to strategy researchers

Evaluative Infrastructures: Accounting for distributed network production


Accounting Organizations and Society

juillet 2017, vol. 60, n°7, pp.79-95

Départements : Comptabilité et Contrôle de Gestion

Mots clés : AccountingHierarchical consciousnessEvaluationInfrastructurePlatform organization!

Platform organizations such as Uber, eBay and Airbnb represent a growing disruptive phenomenon in contemporary capitalism, transforming economic organization, the nature of work, and the distribution of wealth. This paper investigates the accounting practices that underpin this new form of organizing, and in doing so confronts a significant challenge within the accounting literature: the need to escape what Hopwood (1996) describes as its “hierarchical consciousness”. In order to do so, this paper develops the concept of evaluative infrastructure which describes accounting practices that enable platform based organization. They are evaluative because they deploy a plethora of interacting devices, including rankings, ratings, reviews, and audits to establish orders of worth. They are infrastructures because they provide the invisible yet essential mechanisms for the flow of economic activity and exchange on platforms. Illustrating the concept of evaluative infrastructure with the example of eBay, the paper's contribution is to (1) provide an analytical vocabulary to capture the accounting practices underpinning platforms as new organizational forms, and in so doing (2) extend accounting scholars' analytical focus from hierarchical settings towards heterarchies. Conceptually, this shift from management accounting to evaluative infrastructures entails a focus on relationality (evaluative infrastructures do not represent or reference but relate things, people and ideas with each other); generativity (evaluative infrastructures do not territorialize objects but disclose new worlds); and new forms of control (evaluative infrastructures are not centres of calculation; rather, control is radically distributed, whilst power remains centralized).

Fair and Equitable Treatment in Investor-State Dispute Settlement: A New Interpretative Framework


Journal of Business Law

2017, vol. 8, pp.632-650

Départements : Droit et fiscalité, GREGHEC (CNRS)

The fair and equitable treatment (FET) standard has become the cornerstone of investor-state dispute settlement, and one of the most disputed notions in international business law. With investors facing increasing uncertainty, and states moving closer to denouncing treaties they see as limiting their sovereign right to regulate, FET has come to pose a significant risk to the entire investor-state dispute resolution system. This paper outlines an alternative way to consider FET, by acknowledging its thick and indeterminate character as a legal standard. It argues that previous traditional taxonomies have inherent limitations, and that practitioners should instead seek to understand the FET standard through the lens of the rule of law. The paper offers an analysis of the jurisprudence of the International Centre for the Settlement of Investment Disputes (ICSID) to show that three principles of the rule of law – due process, legal certainty, and the prohibition of arbitrariness – constitute an operational and certain, yet flexible framework of interpretation for the application of the FET standard