Value Creation and Value Capture under Moral Hazard: Exploring the Micro-Foundations of Buyer-Supplier Relationships


Strategic Management Journal

août 2015, vol. 36, n°8, pp.1146-1163

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

Mots clés : Value-based strategy, Organizational incentives, Agency theory, Rivalry, Moral hazard

We combine the formalism of a principal–agent framework with a value-based analysis in order to investigate the micro-foundations of business partner selection and the division of value in contracting relationships. In particular, we study how the key contracting parameters such as efficiency, transactional integrity, incentive alignment, and gaming affect outcomes when buyers face competing suppliers. We show that integrity and efficiency increase value creation and capture for all parties and are complements. While incentive gaming is unambiguously bad for value creation, and reduces buyers' value capture, it can benefit some suppliers. For alignment, we find that neither party has an incentive to use fully aligned performance measures that maximize total value creation. We conclude by analyzing buyers' and suppliers' incentives to invest in integrity

Vulnerable banks


Journal of Financial Economics

mars 2015, vol. 115, n°3, pp.471-482

Départements : Finance

Mots clés : Banks, Systemic risk, Fire sales, Price pressure, Contagion

We present a model in which fire sales propagate shocks across bank balance sheets. When a bank experiences a negative shock to its equity, a natural way to return to target leverage is to sell assets. If potential buyers are limited, then asset sales depress prices, in which case one bank¿s sales impact other banks with common exposures. We show how this contagion effect adds up across the banking sector, and how it can be estimated empirically using balance sheet data. We compute bank exposures to system-wide deleveraging, as well as the spillovers induced by individual banks. Applying the model to European banks, we evaluate a variety of interventions to reduce their vulnerability to fire sales during the sovereign debt crisis

What is beneath the surface? Option pricing with multifrequency latent states


Journal of Econometrics

août 2015, vol. 187, n°2, pp.498-511

Départements : Finance, GREGHEC (CNRS)

Mots clés : Markov-switching multifractal, Particle filter, Regime-switching, Stochastic volatility, Jump-risk premium, Option pricing

We introduce a tractable class of multi-factor price processes with regime-switching stochastic volatility and jumps, which flexibly adapt to changing market conditions and permit fast option pricing. A small set of structural parameters, whose dimension is invariant to the number of factors, fully specifies the joint dynamics of the underlying asset and options implied volatility surface. We develop a novel particle filter for efficiently extracting the latent state from joint S&P 500 returns and options data. The model outperforms standard benchmarks in- and out-of-sample, and remains robust even in the wake of seemingly large discontinuities such as the recent financial crisis.

Wrong-way driving crashes on French divided roads


Accident Analysis and Prevention

février 2015, vol. 75, pp.69-76

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

Mots clés : Wrong-way driving, Logistic regression, Elderly driver, Drunk driving

Context: The objective of divided roads is to increase users’ safety by posting unidirectional traffic flows. It happens however that drivers proceed in the wrong direction, endangering themselves as well as other users. The crashes caused by wrong-way drivers are generally spotlighted by the media and call for public intervention.Objectives: This paper proposes a characterization of wrong-way driving crashes occurring on French divided road on the 2008–2012 period. The objective is to identify the factors that delineate between wrong-way driving crashes and other crashes.Method: Building on the national injury road crash database, 266 crashes involving a wrong-way driver were identified. Their characteristics (related to timing, location, vehicle and driver) are compared to those of the 22,120 other crashes that occurred on the same roads over the same period. The comparison relies on descriptive statistics, completed by a logistic regression.Results: Wrong-way driving crashes are rare but severe. They are more likely to occur during night hours and on non-freeway roads than other crashes.Wrong-way drivers are older, more likely to be intoxicated, to be locals, to drive older vehicles, mainly passenger cars without passengers, than other drivers.Perspectives: The differences observed across networks can help prioritizing public intervention. Most of the identified WW-driving factors deal with cognitive impairment. Therefore, the specific countermeasures such as alternative road signs should be designed for and tested on cognitively impaired drivers. Nevertheless, WW-driving factors are also risk factors for other types of crashes (e.g. elderly driving, drunk driving and age of the vehicle). This suggests that, instead of (or in addition to) developing WW-driving specific countermeasures, managing these risk factors would help reducing a larger number of crashes