An optimal target cost contract with a risk neutral owner

2014 ◽  
Vol 21 (5) ◽  
pp. 586-604 ◽  
Author(s):  
S. Mahdi Hosseinian ◽  
David G. Carmichael
Keyword(s):  
Design Methodology ◽  
Maximization Problem ◽  
Risk Averse ◽  
Content Type ◽  
Cost Uncertainty ◽  
Target Cost ◽  
Risk Neutral ◽  
Optimal Target ◽  
The Cost ◽  
Practical Implications

Purpose – Target cost contracts are commonly used to share the monetary outcome of work or a project. However, discussion is ongoing, as to what constitutes optimal sharing. The purpose of this paper is to examine optimal sharing and derives a result for defined risk assumptions on the owner (risk neutral) and contractor (risk-averse ranging to risk neutral). Design/methodology/approach – The derivation is based on solving a constrained maximization problem using ideas from principal-agent theory. Practitioners were engaged in a designed exercise in order to validate the approach and propositions. The influence of the contractor's level of risk aversion, the cost uncertainty and the contractor's effort effectiveness are examined. Findings – The paper shows that, at the optimum, the sharing ratio between contractor and owner needs to reduce and the fixed fee needs to increase when the contractor becomes more risk-averse, the level of the cost uncertainty increases, or the effectiveness of the contractor effort decreases. Practical implications – The paper's findings provide practitioners with a useful benchmark for outcome sharing in target contracts. Originality/value – Existing work on outcome sharing in target contracts is limited to being qualitative and anecdotal in nature. This paper extends existing knowledge by providing a quantitative treatment of optimal sharing.

Corporate investment in social responsibility versus dividends?

2012 ◽  
Vol 8 (2) ◽  
pp. 199-207 ◽  
Author(s):  
Michel T.J. Rakotomavo
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Design Methodology ◽  
Corporate Investment ◽  
Cash Flows ◽  
Cost Of Equity ◽  
Content Type ◽  
Corporate Social ◽  
The Cost ◽  
Practical Implications

PurposeThe paper aims to examine whether corporate investment in social responsibility takes away from expected dividends.Design/methodology/approachThe article builds two hypotheses that are tested empirically through the analysis of 17,670 US firm‐year observations covering the period 1991‐2007. The tests are conducted in both univariate and multivariate settings.FindingsThe evidence supports the hypothesis that mature firms tend to invest more in corporate social responsibility (CSR). Specifically, firms investing highly in CSR tend to be larger, more profitable, and with greater earned (rather than contributed) equity. The evidence also supports the hypothesis that CSR investment does not subtract from dividends. Instead, CSR effort and dividend tend to increase together. Thus, CSR investment tends to be effected by companies who can afford it, and it does not lower value by lowering investors' expected payout.Practical implicationsThese results imply that spending resources on CSR does not lower the cash flows paid out to investors. When combined with the finding that CSR lowers the cost of equity, they also mean that CSR increases the value of a company's stock.Originality/valueThis is the first study that explicitly links CSR to the dividend flow.

Cost-driven motives to relocate manufacturing abroad among small- and medium-sized manufacturers

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jan Stentoft ◽  
Kent Adsbøll Wickstrøm ◽  
Anders Haug ◽  
Kristian Philipsen
Keyword(s):  
Empirical Analysis ◽  
Questionnaire Survey ◽  
Industry 4.0 ◽  
Design Methodology ◽  
Decision Makers ◽  
Perceived Barriers ◽  
Competitive Strategies ◽  
Content Type ◽  
The Cost ◽  
Practical Implications

PurposeThe purpose of this paper is to advance the understanding of how Industry 4.0 related technologies affect the relocation of manufacturing abroad by small and medium-sized enterprises.Design/methodology/approachThis paper contains an empirical analysis of how Industry 4.0 related technologies affect the cost-driven relocation of manufacturing abroad based on 191 comprehensive and full responses to a questionnaire survey distributed in 2018 among small- and medium-sized Danish manufacturers.FindingsThis paper builds upon data, which reveals that companies' pursuit of cost-focused competitive strategies is positively correlated with relocating manufacturing abroad. However, the data also shows that the more Industry 4.0-ready decision-makers are, the less cost-focused strategy drives manufacturing abroad. Furthermore, perceived barriers to Industry 4.0 related technologies promote the cost-driven relocation of manufacturing abroad whereas perceived drivers decrease this phenomenon.Research limitations/implicationsThis paper is based on the answers given by a single respondent from each company and only on Danish respondents.Practical implicationsThe results indicate a need to invest resources to obtain a better knowledge of Industry 4.0 related technologies when used in processes involved in decisions about where to locate manufacturing.Originality/valueThis paper contains new, empirically founded information about how Industry 4.0 related technologies affect the cost-driven relocation of manufacturing abroad from the perspective of small- and medium-sized manufacturers.

How to offer mobile targeting promotion under asymmetry

2017 ◽  
Vol 8 (3) ◽  
pp. 289-303
Author(s):  
Qin Wan ◽  
Jing Zhu ◽  
Huijing Li ◽  
Lili Wang
Keyword(s):  
Game Theory ◽  
Price Competition ◽  
Design Methodology ◽  
Game Model ◽  
Trade Off ◽  
Content Type ◽  
Equilibrium Prices ◽  
Mobile Accessibility ◽  
The Cost ◽  
Practical Implications

Purpose Based on consumers’ geographic real-time locations, firms can utilize mobile targeting promotion (MTP) to target consumers through some applications embedded in mobile device. This paper aims to focus on two competing firms about how to make MTP strategies under asymmetric mobile accessibilities, i.e. the proportions of consumers who can be targeted by firms through apps are different. Design/methodology/approach This paper develops a game model for two competing firms. Aiming to maximizing profit, firms should consider how to utilize MTP strategies to trade off the benefit (expand market share) and the cost (intensive price competition). Findings The optimal MTP strategies and equilibrium prices have been presented under different scenarios. This paper verifies that asymmetry can make the firm with high mobile accessibility obtain extra profits. Furthermore, when unit targeting cost is relatively low, profit of the firm with low mobile accessibility increases first and decreases later with respect to its mobile accessibility. Practical implications Competing firms’ optimal MTP strategies and equilibrium prices are determined not only by unit targeting cost but also by consumers’ mobile accessibilities to firms. Firms have strong incentive to enlarge the mobile accessibility to procure more profit in monopoly context, but, under competing context, a higher mobile accessibility may not mean better for firm. Originality/value This is one of the few papers which study mobile targeting based on game theory considering unit targeting cost and asymmetric mobile accessibility simultaneously.

Exploring intellectual capital disclosure as a mediator for the relationship between IPO firm-specific characteristics and underpricing

2015 ◽  
Vol 16 (3) ◽  
pp. 639-660 ◽  
Author(s):  
Shaw Warn Too ◽  
Wan Fadzilah Wan Yusoff
Keyword(s):  
Initial Public Offerings ◽  
Intellectual Capital ◽  
Design Methodology ◽  
Firm Characteristics ◽  
Content Type ◽  
Public Offerings ◽  
Intangible Resources ◽  
The Cost ◽  
The Relationship ◽  
Practical Implications

Purpose – The purpose of this paper is to examine the direct and indirect impact of firm-specific characteristics on the level of underpricing among Malaysian initial public offerings (IPOs). Design/methodology/approach – Content analysis of IPO prospectuses was used for 331 firms underwent listing between 2002 and 2008. The extent of disclosure was computed by applying the disclosure index of Bukh et al. (2005). Findings – Of the five firm characteristics examined, there is a direct relationship between the firm’s financial performance and the level of foreign activity, and the level of underpricing, instead of being mediated through disclosure. However, some firm characteristics have direct influence on the extent of disclosure but do not have any influence on underpricing. Research limitations/implications – This empirical study concentrates on the Malaysian IPOs on a single disclosure mechanism. Other disclosure items can be examined together with the intellectual capital disclosure items. Practical implications – As the findings reveal that the extent of disclosure is relatively low in influencing the level of underpricing. Had the disclosure been higher, it may have some influence on underpricing. The accounting governance board need to regulate the disclosures of the intangible resources so that the level of underpricing can be minimized. Originality/value – This study provides new insight for the examination of direct and indirect (through disclosure) association between firm-specific characteristics and underpricing. The findings shed some lights to the IPO issuers to enhance disclosure so that the cost of capital can be reduced.

Using lateritic gravel as all-in aggregate for concrete production

2017 ◽  
Vol 15 (03) ◽  
pp. 305-316 ◽  
Author(s):  
Richard Ohene Asiedu
Keyword(s):  
Compressive Strength ◽  
Design Methodology ◽  
Structural Concrete ◽  
Content Type ◽  
Rate Of Increase ◽  
Concrete Production ◽  
Alternative Sources ◽  
The Cost ◽  
Practical Implications ◽  
Better Than

Purpose The quest to reduce the cost of concrete which is a major construction input has prompted investigations into assessing the suitability of alternative sources of conventional materials. This paper aims to report the compressive strength and workability of lateritic gravel used as all-in aggregate for concrete production. Design/methodology/approach Three prescribed mixes from all-in aggregate concrete were compared with concrete from lateritic gravel. The paper investigated the variation in strength of four different mixes – 100: 0, 90: 10, 80: 20 and 70: 30 – when portions of the lateritic gravel were replaced with pit sand, respectively, using varying water cement ratios to achieve optimal workability. Findings The density and compressive strength of each cube was measured on the 7th and 28th test dates. An increase in slump and compressive strength was observed in the lateritic concrete, as portions of the lateritic gravel were replaced with sand. However, the rate of increase in the compressive strength tended to decrease with increase in part replacement of lateritic gravel with sand indicating that there was a threshold of percentage of sand increase after which the compressive strengths are likely to decrease. This work never reached this threshold, but it is estimated to be about 40 per cent. Research limitations/implications Investigations focused on lateritic gravel sampled from two sites to represent samples from both the forest and savannah belt. Practical/implications Lateritic gravel can be used as all-in aggregate for non-structural concrete. Originality/value The compressive strengths achieved were better than those for the available normal all-in aggregate used.

Returning to work after injury: factors that influence the timing

2016 ◽  
Vol 24 (5) ◽  
pp. 19-21 ◽  
Author(s):  
Graham Cole
Keyword(s):  
Labor Markets ◽  
Design Methodology ◽  
Occupational Hazards ◽  
Way Of Life ◽  
Content Type ◽  
Returning To Work ◽  
Pertinent Information ◽  
Serious Injury ◽  
The Cost ◽  
Practical Implications

Purpose This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies. Design/methodology/approach This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context. Findings Occupational hazards are an unfortunate way of life for workers in many industries. For some, the risk of serious injury or illness is considerable. More positive is the decline over recent decades in the number of such incidents reported. However, in Western nations the cost of injury or illness at work remains substantial. Statistics show that in European Union (EU) countries, it can range between 2.6 per cent and 3.8 per cent of GDP. Regulations and conditions within specific labor markets help determine where these costs are absorbed. There are wide variations across countries in terms of how injured employees are compensated during their time off work. Practical implications The paper provides strategic insights and practical thinking that have influenced some of the world’s leading organizations. Originality/value The briefing saves busy executives and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

Reducing system toil in a university library

2020 ◽  
Vol 41 (4/5) ◽  
pp. 173-181
Author(s):  
Emily E. Boss ◽  
Nathan Gerth
Keyword(s):  
Information Technology ◽  
Academic Libraries ◽  
Design Methodology ◽  
System Analysis ◽  
Costs And Benefits ◽  
Content Type ◽  
Definition Of ◽  
The Cost ◽  
System Mapping ◽  
Practical Implications

PurposeThe purpose of this paper is to expand the information technology concept of toil by applying it to system analysis for academic libraries. System mapping and toil definitions are used to measure costs and benefits of maintaining library information systems. The concept of toil provides a vehicle to shape the decisions made by managers when refining or building new library system infrastructure.Design/methodology/approachUsing a system map of all library systems, the definition of toil was used to identify highly manual or high toil systems. This mapping was used to illuminate the need to migrate or eliminate certain library systems to managers in order to reduce the amount of toil undertaken by library employees.FindingsTwo library systems were identified for migration to more automated systems and two library systems were recommended for elimination in order to reduce the overall amount of toil present in the library systems ecosystem.Practical implicationsUsing system mapping and toil definitions are helpful in identifying and relaying the cost of outdated systems to library managers.Originality/valueThis paper provides library managers an easy way to assess the ecosystem and efficiency of library systems without the need for technical expertise. It also expands the use of information technology concepts into the field of academic libraries.

Tax evasion in Brazil: the case of specialists

2018 ◽  
Vol 45 (2) ◽  
pp. 401-410 ◽  
Author(s):  
Felippe Clemente ◽  
Viviani Silva Lírio
Keyword(s):  
Game Theory ◽  
Tax Evasion ◽  
Design Methodology ◽  
Equilibrium System ◽  
Content Type ◽  
Federal Revenue ◽  
Public Body ◽  
The Cost ◽  
First Time ◽  
Practical Implications

Purpose The purpose of this paper is to use the instrumental game theory to understand the behavior of the front agents tax evasion and tax authority in Brazil. Design/methodology/approach In order to analyze the taxpayer’s behavior before the Brazilian tax system and tax actions aimed at reducing tax evasion, the authors developed a theoretical model based on the payoffs of Graetz et al. (1986) and increased with situations proposed by Siqueira (2004), Lipatov (2006) and Oliveira (2011). Findings Considering the cases with and without specialists, the main results show that in high dropout situation, penalize taxpayers with high fines or deprivations of liberty may not be as effective. Another result of the analysis is that the audit and inspection costs played an important role in driving the equilibrium system. Research limitations/implications One limitation of this study is to consider how the exogenous tax authorities earnings (Federal Revenue of Brazil and Federal Police) and not as a function of the goals and certain enforcement policies for each public body. Practical implications The authors suggest the following policy: investing in tax inspectors and unbureaucratic the authorities of the cost structure become a more effective tool to combat non-compliance with tax obligations that the intensity of the penalties imposed by the act of evading. Originality/value This paper contributes to the literature insofar as it models for the first time, using game theory, the behavior of the evading agent and the tax authority in Brazil.

When training works: strategies for effective learning

2016 ◽  
Vol 30 (4) ◽  
pp. 21-23
Keyword(s):  
Organizational Performance ◽  
Design Methodology ◽  
Reading Time ◽  
Average Amount ◽  
Content Type ◽  
Knowledge And Skills ◽  
Effective Learning ◽  
Pertinent Information ◽  
The Cost ◽  
Practical Implications

Purpose This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies. Design/methodology/approach This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context. Findings Any organization paying out US$1,200 per employee wants to see some benefit for its spending. Especially if spending that money also involves taking up 30-plus hours of employee time. According to the Association for Talent Development, that is the average amount per employee that US businesses were spending on training in 2013 – and the cost typically goes up each year. What is less clear is how much newly learnt knowledge and skills gets applied to deliver improved organizational performance and increased competitiveness. Practical implications The paper provides strategic insights and practical thinking that have influenced some of the world’s leading organizations. Originality/value The briefing saves busy executives and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

Effects of platform quality requirement on sellers

Kybernetes ◽  
2017 ◽  
Vol 46 (7) ◽  
pp. 1204-1222
Author(s):  
Huijun Hou ◽  
Xiaoying Cheng
Keyword(s):  
Product Quality ◽  
Design Methodology ◽  
Optimal Decision ◽  
Quality Level ◽  
Risk Averse ◽  
Quality Requirement ◽  
Minimum Level ◽  
Content Type ◽  
Service Charge ◽  
Risk Neutral

Purpose The purpose of this paper is to study the effects of the requirement on product quality and refund (return service charge). Design/methodology/approach The authors set a minimum product quality level for platform to study the effects of the minimum product quality level on product quality and refund for risk-neutral sellers and risk-averse sellers, respectively. Findings For the risk-neutral sellers whose optimal product quality level is lower than the minimum level will improve the product quality to the minimum required level. However, under a certain condition with the requirement the sellers will increase refund. Similar results are found when uncertainty is incorporated into demand and return quantity. In addition, how the sellers’ optimal refund is affected by market parameters and market volatile factors is discussed. Specially, the correlation between the uncertainty of the demand and the return quantity affects sellers’ optimal decision of return service charge in many ways. Originality/value The obtained results can provide operational managers in reality with valuable suggestions in quality management for platform.

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