Asymmetric Information, Market Power, and the Underpricing of New Stock Issues in Germany, 1882–1892

2010 ◽  
Vol 70 (3) ◽  
pp. 630-656 ◽  
Author(s):  
Caroline Fohlin
Keyword(s):  
Asymmetric Information ◽  
Market Power ◽  
Market Share ◽  
Agency Problems ◽  
Information Market ◽  
Nonfinancial Firms

Investors in new stock issues in Germany in the 1880s experienced low spreads between the price they paid for stock and the price at which they could sell the stock in the market. Stock issuing companies paid substantial fees to underwriting banks, and these costs increased with the underwriter's market share. Bank's faced lower issuing costs than did nonfinancial firms. These patterns are consistent with a situation in which underwriters exploited their access to better information (agency problems) and had market power, but do not support the supposed lemons problems that motivated the imposition of stringent regulations in 1896.

AGENCY PROBLEM DALAM PENERAPAN PEMBIAYAAN AKAD MUDHARABAH PADA PERBANKAN SYARIAH

ALQALAM ◽  
2016 ◽  
Vol 33 (1) ◽  
pp. 46
Author(s):  
Aswadi Lubis
Keyword(s):  
High Risk ◽  
Asymmetric Information ◽  
Human Resources ◽  
Moral Hazard ◽  
Adverse Selection ◽  
Agency Problem ◽  
Agency Problems ◽  
Islamic Banking ◽  
The Public

The purpose of writing this article is to describe the agency problems that arise in the application of the financing with mudharabah on Islamic banking. In this article the author describes the use of the theory of financing, asymetri information, agency problems inside of financing. The conclusion of this article is that the financing is asymmetric information problems will arise, both adverse selection and moral hazard. The high risk of prospective managers (mudharib) for their moral hazard and lack of readiness of human resources in Islamic banking is among the factors that make the composition of the distribution of funds to the public more in the form of financing. The limitations that can be done to optimize this financing is among other things; owners of capital supervision (monitoring) and the customers themselves place restrictions on its actions (bonding).

EXPRESS: Investigating the Effects of Excise Taxes, Public Usage Restrictions, and Anti-Smoking Ads across Cigarette Brands

2021 ◽  
pp. 002224292199456
Author(s):  
Yanwen Wang ◽  
Michael Lewis ◽  
Vishal Singh
Keyword(s):  
Market Power ◽  
Market Share ◽  
Brand Choice ◽  
Continuous Model ◽  
Marketing Strategies ◽  
Brand Strength ◽  
Excise Taxes ◽  
Cigarette Tax ◽  
Pass Through ◽  
The Impact

The prevalence of strong brands such as Coca-Cola, McDonald’s, Budweiser, and Marlboro in “vice” categories has important implications for regulators and consumers. While researchers in multiple disciplines have studied the effectiveness of anti-tobacco counter-marketing strategies, little attention has been given to how brand strength may moderate the efficacy of tactics such as excise taxes, usage restrictions, and educational advertising campaigns. In this research, we use a multiple discrete-continuous model to study the impact of anti-smoking techniques on smokers’ choices of brands and quantities. Our results suggest that while cigarette excise taxes decrease smoking rates, these taxes also result in a shift in market share towards stronger brands. Market leaders may be less affected by tax policies because their market power allows strong brands such as Marlboro to absorb rather than pass through increased taxes. In contrast, smoke-free restrictions cause a shift away from stronger brands. In terms of anti-smoking advertising we find minimal effects on brand choice and consumption. The findings highlight the importance of considering brand asymmetries when designing a policy portfolio cigarette tax hikes, smoke-free restrictions, and anti-smoking advertising campaigns.

1. Competition policy and economics

2021 ◽  
pp. 1-48
Author(s):  
Richard Whish ◽  
David Bailey
Keyword(s):  
Market Power ◽  
Market Share ◽  
Competition Policy ◽  
Competition Law ◽  
Market Definition ◽  
Economic Context ◽  
Market Shares ◽  
Competition Laws ◽  
Competition Process

This chapter provides an overview of competition law and its economic context. Section 2 describes the practices that competition laws attempt to control in order to protect the competition process. Section 3 examines the theory of competition and gives an introductory account of why the effective enforcement of competition law is thought to be beneficial. Section 4 considers the goals of competition law. Section 5 introduces two key economic concepts, market definition and market power, that are important to a better understanding of competition policy. The chapter concludes with a table of market share figures that are significant in the application of EU and UK competition law, while reminding the reader that market shares are only ever a proxy for market power and can never be determinative of market power in themselves.

scholarly journals Classroom Games: A Market for Lemons

1999 ◽  
Vol 13 (1) ◽  
pp. 205-214 ◽  
Author(s):  
Charles A Holt ◽  
Roger Sherman
Keyword(s):  
Asymmetric Information ◽  
Market Failure ◽  
Quality Standards ◽  
Full Information ◽  
Information Market ◽  
Market Outcomes ◽  
Market Prices ◽  
Total Surplus ◽  
Quality Grade ◽  
Low Levels

The incentives that arise in markets with asymmetric information are illustrated in the classroom exercise presented here. Student sellers choose both a quality ‘grade’ and a price for their products. Initially, both prices and grades for all sellers are posted, and buyers select from these offerings. In this full-information setup, the market prices and grades quickly reach efficient levels that maximize total surplus. Next, although sellers continue to choose grades and prices, only prices (not grades) are posted for buyers to see when they shop. The grades and prices then fall to inefficiently low levels. The observed market outcomes in this exercise can stimulate useful discussion of asymmetric information, market failure, and remedies such as quality standards and warranties.

scholarly journals Market-Share Contracts with Asymmetric Information

2009 ◽  
Vol 18 (2) ◽  
pp. 393-421 ◽  
Author(s):  
Adrian Majumdar ◽  
Greg Shaffer
Keyword(s):  
Asymmetric Information ◽  
Market Share

Environment, Market Share, and Market Power

1990 ◽  
Vol 36 (10) ◽  
pp. 1160-1177 ◽  
Author(s):  
William Boulding ◽  
Richard Staelin
Keyword(s):  
Market Power ◽  
Market Share

scholarly journals Information, Market Power and Price Volatility

2019 ◽  
Author(s):  
Dirk Bergemann ◽  
Tibor Heumann ◽  
Stephen Edward Morris
Keyword(s):  
Market Power ◽  
Price Volatility ◽  
Information Market

scholarly journals Multinational Corporations and Stock Price Crash Risk

2016 ◽  
Vol 5 (4) ◽  
pp. 39-63
Author(s):  
Anthony May ◽  
Rodney Boehme
Keyword(s):  
Asymmetric Information ◽  
Stock Price ◽  
Multinational Firms ◽  
Agency Problems ◽  
Bad News ◽  
Crash Risk ◽  
Governance Mechanisms ◽  
Tail Risk ◽  
Domestic Firms ◽  
Market Participants

A nascent literature in finance and accounting on tail risk in individual stock returns concludes that bad news hoarding by corporate managers engenders sudden, extreme crashes in a firm’s stock price when the bad news is eventually made public. This literature finds that firm-specific crash risk is higher among firms with more severe asymmetric information and agency problems. A hitherto disjointed literature spanning the fields of international business, finance, and accounting suggests that geographic dispersion in a firm’s operations, and especially dispersion across different countries, gives rise to organizational complexities and greater costs of monitoring that can exacerbate asymmetric information and agency problems. Motivated by the confluence of arguments and findings from these two strands of literature, this paper examines whether stock price crash risk is higher among multinational firms than domestic firms. Using a large sample of U.S. headquartered firms during 1987-2011, we find robust evidence that multinational firms are significantly more likely to crash than domestic firms. Moreover, we show that the difference in crash risk between multinational and domestic firms is most acute among firms with weaker corporate governance mechanisms, including weaker shareholder rights, less independent boards, and less stable institutional ownership. Our analysis indicates that stronger monitoring from each of these three governance mechanisms significantly attenuates the positive relation between crash risk and multinationality. Our findings are robust to the use of alternative measures of crash risk and to controlling for known determinants of crash risk identified in prior studies. Our study offers new insights that should hold value for scholars and market participants interested in understanding the implications of heighted agency problems that multinational firms are likely to encounter and scholars and market participants interested in developing models that more accurately predict tail risk in the equity returns of individual firms.

Auditor Market Power and Audit Quality Revisited: Effects of Market Concentration, Market Share Distance, and Leadership

2020 ◽  
pp. 0148558X2096624
Author(s):  
Marleen Willekens ◽  
Simon Dekeyser ◽  
Liesbeth Bruynseels ◽  
Wieteke Numan
Keyword(s):  
Market Power ◽  
Market Share ◽  
Financial Reporting ◽  
Audit Quality ◽  
Spatial Competition ◽  
Reporting Quality ◽  
Positive Association ◽  
Market Concentration ◽  
Jel Classification ◽  
Competition Theory

This study examines whether auditor market power is associated with audit quality. Regulators around the world have repeatedly expressed concerns about the high levels of supplier concentration, the limited number of audit suppliers in the audit market, and the potential adverse consequences of their (alleged) market power. Using U.S. data from 2009 to 2017, we examine the effect on audit quality of two competing measures of auditor market power: (a) a “traditional” market concentration measure (Herfindahl index) and (b) a competing measure derived from spatial competition theory (i.e., market share distance from the closest competitor). Following Aobdia, we infer audit quality from two measures of financial reporting quality: (a) the level of absolute abnormal accruals, and (b) the incidence of financial statement restatements. Our results indicate that industry market share distance is positively associated with audit quality, but we do not find an association between market concentration and audit quality. In addition, we find that the positive association between market share distance and audit quality only holds when the incumbent auditor is a market leader, although industry leadership itself is not significantly associated with audit quality. These findings suggest that audit quality is positively affected by a market leader’s industry market share dominance over its competitors rather than by industry specialization per se. JEL Classification: M4; L0

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