scholarly journals Equity-based incentive to coordinate shareholder-manager interests under information asymmetry

2021 ◽  
Vol 0 (0) ◽  
pp. 0
Author(s):  
Zhiping Zhou ◽  
Yao Yin ◽  
Mi Zhou ◽  
Hao Cheng ◽  
Panos M. Pardalos
Keyword(s):  
Information Asymmetry ◽  
Private Information ◽  
Comparative Statics ◽  
Theoretic Model ◽  
Business Operation ◽  
Hierarchical Levels ◽  
Research Findings ◽  
Expected Revenue ◽  
Perceived Unfairness ◽  
High Effort

<p style='text-indent:20px;'>The shareholder's interest oriented from business operation relies on opportunism regulation of the manager under asymmetry. Effective motivation incentives should be exploited to facilitate the manager's effort devotion enthusiasms. This paper establishes a theoretic model in which the shareholder offers equity-based incentive to a fairness-preferred manager to coordinate their interest conflicts and maximize her expected revenue. The manager exerts unverifiable levels of efforts toward both decision and coordination tasks making the most of his private information about fairness preference. Two interrelated performance measures on different hierarchical levels are considered for contracting purposes. In each situation, we derive the equilibrium effort choices and incentive coefficients of both participants, and investigate how these decisions are affected by fairness preference. Research findings suggest that the incorporation of firm equity dominates pure profit incentive in eliciting high effort levels toward two distinctive managerial tasks. Besides, the equity-based incentive weakens the perceived unfairness and facilitates the participants' expected revenue. Comparative statics and numerical analysis are conducted to demonstrate our results and the effectiveness of the proposed equity-based incentive. Finally, we summarize the contributions of this paper and put forward directions for further study.</p>

The Impacts of Channel Structure and Information on an OEM’s Procurement Strategy

2020 ◽  
Vol 37 (03) ◽  
pp. 2050010
Author(s):  
Fei Lv
Keyword(s):  
Information Asymmetry ◽  
Private Information ◽  
Single Channel ◽  
Channel Structure ◽  
Market Size ◽  
Purchasing Cost ◽  
Sourcing Strategies ◽  
Production Activity ◽  
Procurement Strategy ◽  
Channel Structures

This paper investigates the optimal procurement strategy for an original equipment manufacturer (OEM) under different information and channel structures. We consider two possible sourcing strategies, Consignment and Turnkey, in which Consignment represents the situation when an OEM procures components itself and only assigns the production activity to a contract manufacturer (CM) and Turnkey is defined as when an OEM delegates both the procurement and production activities to the CM. We specifically consider two channel structures, a single channel with one OEM and one CM and two competing channels in which each consists of an OEM and a CM. Under each channel structure, the CM’s purchasing cost may be public or private information. We find that under both channel structures, in the absence of information asymmetry, the OEM will always choose Turnkey if its cost is higher than the CM’s average cost. However, in the presence of information asymmetry, the OEM is more likely to adopt Consignment with the increase in market size. We also find that when the two CMs’ cost correlation is small (large), the structure of the competing channels increases the possibility that the OEM adopts Turnkey (Consignment) in equilibrium.

scholarly journals Revenue-Capped Efficient Auctions

2019 ◽  
Vol 18 (3) ◽  
pp. 1284-1320 ◽  
Author(s):  
Nozomu Muto ◽  
Yasuhiro Shirata ◽  
Takuro Yamashita
Keyword(s):  
Upper Bound ◽  
Private Information ◽  
Weighted Sum ◽  
Reserve Price ◽  
Total Surplus ◽  
Good For ◽  
Expected Revenue ◽  
Social Surplus

Abstract We study an auction that maximizes the expected social surplus under an upper-bound constraint on the seller’s expected revenue, which we call a revenue cap. Such a constrained-efficient auction may arise, for example, when (i) the auction designer is “pro-buyer”, that is, he maximizes the weighted sum of the buyers’ and seller’s auction payoffs, where the weight for the buyers is greater than that for the seller; (ii) the auction designer maximizes the (unweighted) total surplus in a multiunit auction in which the number of units the seller owns is private information; or (iii) multiple sellers compete to attract buyers before the auction. We characterize the mechanisms for constrained-efficient auctions and identify their important properties. First, the seller sets no reserve price and sells the good for sure. Second, with a nontrivial revenue cap, “bunching” is necessary. Finally, with a sufficiently severe revenue cap, the constrained-efficient auction has a bid cap, so that bunching occurs at least “at the top,” that is, “no distortion at the top” fails.

Can Auditors Mitigate Information Asymmetry in M&As? An Empirical Analysis of the Method of Payment in Belgian Transactions

2013 ◽  
Vol 33 (1) ◽  
pp. 57-91 ◽  
Author(s):  
Mathieu Luypaert ◽  
Tom Van Caneghem
Keyword(s):  
Information Asymmetry ◽  
Private Information ◽  
Regression Models ◽  
Financial Statements ◽  
Financial Statement ◽  
Firm Characteristics ◽  
Target Level ◽  
Financial Statement Audit ◽  
Method Of Payment ◽  
The Relationship

SUMMARY In this paper, we empirically examine the relationship between the external financial statement audit and the method of payment across a sample of Belgian mergers and acquisitions between listed and private firms over the period 1997–2009. We investigate whether a Big N audit (at the target level) reduces the need for a contingent payment resulting from information asymmetry about the target's value. In addition, we analyze whether a Big N audit (at the bidder level) limits incentives for bidders to exploit private information about their own value. Using multivariate ordered probit and binary regression models, we determine that contingent payments are less common when the target is audited by a Big N auditor after controlling for several other deal and firm characteristics. Furthermore, we find that the incentive to use stock payments in periods of stock market overvaluation is lower for acquirers with a Big N auditor. Finally, target shareholders are more likely to accept a contingent offer if the acquirer's financial statements are certified by a Big N auditor. JEL Classifications: G34; M4.

scholarly journals Debt maturity and corporate R&D investment – the empirical study of US listed firms

2018 ◽  
Vol 13 (4) ◽  
pp. 1-16 ◽  
Author(s):  
Hai-Chin Yu ◽  
Thi-Thanh Phan
Keyword(s):  
Information Asymmetry ◽  
Private Information ◽  
Small Businesses ◽  
Negative Impact ◽  
Debt Maturity ◽  
Bank Debt ◽  
Listed Firms ◽  
Sarbanes Oxley ◽  
Maturity Structure ◽  
D Investment

This study investigates the relationships between debt maturity structure and corporation R&amp;amp;D investment. Using a large sample of US listed firms over the period of 1995 to 2015, it was found that the use of bank debt positively influences R&amp;amp;D investment, whereas the use of public debt exerts a negative impact. However, the Sarbanes-Oxley Act (SOX) mitigates the information asymmetry such that the advantages of private information from banks shrunk. As a result, public debtholders benefit more from the SOX and turn out to be positively influenced by the R&amp;amp;D investment after SOX. Moreover, bank debt impact on R&amp;amp;D spending reduces over the post-SOX. The results also find that the SOX influences the debt maturity on corporate R&amp;amp;D investment only for large corporations, the effects remain unchanged for small businesses.

scholarly journals Profil Perencanaan Karir Siswa Sekolah Menengah Kejuruan dengan Pemodelan Rasch Berdasarkan Jenis Kelamin

Konselor ◽  
2017 ◽  
Vol 6 (2) ◽  
pp. 39 ◽  
Author(s):  
Itsar Bolo Rangka ◽  
Wahyu Eka Prasetyaningtyas ◽  
Hengki Satrianta ◽  
Sisca Folastri
Keyword(s):  
Rasch Model ◽  
Female Student ◽  
Career Planning ◽  
Male Student ◽  
Male Gender ◽  
Power Measurement ◽  
Measurement Information ◽  
Theoretic Model ◽  
High Measurement ◽  
Research Findings

This research aimed to (1) perform inventory career planning of students, and (2) measuring students career planning based on gender. Data analysis used Rasch model for 45 students with actual power measurement 0.9272652. The research findings showed (1) inventory career planning has been fit with the theoretic model, and (2) female student have a tendency to a higher career planning rather than male student. In the future, to measurement of student’s career planning by using this inventory can only produce a high measurement information for students who have a mediocre ability. Further, the researcher need to consider to eliminate item No. 12 in this inventory due to the biased towards the male gender.

A Theory of Participative Budgeting

2013 ◽  
Vol 89 (3) ◽  
pp. 1025-1050 ◽  
Author(s):  
Mirko S. Heinle ◽  
Nicholas Ross ◽  
Richard E. Saouma
Keyword(s):  
Information Asymmetry ◽  
Private Information ◽  
Agency Costs ◽  
Top Down ◽  
Maximal Level ◽  
Bottom Up ◽  
Budgetary Slack ◽  
Participative Budgeting ◽  
And Performance ◽  
Budgeting Process

ABSTRACT This paper complements the ongoing empirical discussion surrounding participative budgeting by comparing its economic merits relative to a top-down budgeting alternative. In both budgeting regimes, private information is communicated vertically between a principal and a manager. We show that top-down budgeting incurs fewer agency costs than bottom-up budgeting whenever the level of information asymmetry is relatively low. Although the choice between top-down and bottom-up budgeting ultimately determines who receives private information within the firm, we find that both the principal and manager's preferences over the allocation of private information remain qualitatively similar across the two budgeting paradigms. Specifically, while the principal always prefers either minimal or maximal private information, the manager prefers an interim or maximal level of private information regardless of who is privately informed. Last, we use our model to address empirical inconsistencies relating the firm's choice of budgeting process, the resulting budgetary slack, and performance.

scholarly journals Delay and Deadlines: Freeriding and Information Revelation in Partnerships

2014 ◽  
Vol 6 (2) ◽  
pp. 163-204 ◽  
Author(s):  
Arthur Campbell ◽  
Florian Ederer ◽  
Johannes Spinnewijn
Keyword(s):  
Performance Measures ◽  
Team Performance ◽  
Private Information ◽  
Comparative Statics ◽  
Information Revelation ◽  
Communication Partners

We study two sources of delay in teams: freeriding and lack of communication. Partners contribute to the value of a common project, but have private information about the success of their own efforts. When the deadline is far away, unsuccessful partners freeride on each others' efforts. When the deadline draws close, successful partners stop revealing their success to maintain their partners' motivation. We derive comparative statics results for common team performance measures and find that the optimal deadline maximizes productive efforts while avoiding unnecessary delays. Welfare is higher when information is only privately observable rather than revealed to the partnership.(JEL D82, D83, L26, M54, O30)

scholarly journals An Experimental Study of Jury Decision Rules

2000 ◽  
Vol 94 (2) ◽  
pp. 407-423 ◽  
Author(s):  
Serena Guarnaschelli ◽  
Richard D. McKelvey ◽  
Thomas R. Palfrey
Keyword(s):  
Private Information ◽  
Large Fraction ◽  
Decision Rules ◽  
Theoretic Model ◽  
Quantal Response ◽  
Unanimity Rule ◽  
Group Data ◽  
Game Theoretic ◽  
The Individual ◽  
Jury Decision

We present experimental results on groups facing a decision problem analogous to that faced by a jury. We consider three treatment variables: group size (three or six), number of votes needed for conviction (majority or unanimity), and pre-vote deliberation. We find evidence of strategic voting under the unanimity rule: A large fraction of our subjects vote for a decision analogous to conviction even when their private information indicates a state analogous to innocence. This is roughly consistent with the game theoretic predictions of Feddersen and Pesendorfer. Although individual behavior is explained well by the game theoretic model, there are discrepancies at the level of the group decision. Contrary to Feddersen and Pesendorfer, in our experiments there are fewer outcomes analogous to incorrect convictions under unanimity rule than under majority rule. In the case of no deliberation, we simultaneously account for the individual and group data using quantal response equilibrium.

Information asymmetry and incentive contracting with the tax department

2017 ◽  
Vol 16 (3) ◽  
pp. 385-402 ◽  
Author(s):  
Horn-chern Lin ◽  
Tao Zeng
Keyword(s):  
Theoretical Model ◽  
Information Asymmetry ◽  
Private Information ◽  
Relevant Information ◽  
Tax Planning ◽  
Risk Averse ◽  
Content Type ◽  
Incentive Schemes ◽  
The Impact ◽  
Optimal Incentives

Purpose This paper aims to examine the design of optimal incentives for a firm’s tax department in the presence of information asymmetry. Design/methodology/approach This paper provides a theoretical model to examine the design of optimal incentives. The focus is on a situation in which a risk-averse tax department has private information about its efficiency type or effort to be exerted before the firm sets the incentive schemes. Findings This paper shows that a tax department’s risk aversion leads to a decline in the fraction of the cost borne by the tax department. It also shows that the optimal contract schemes should be designed to filter out as much uncontrollable risk as possible by using third-party information relevant to a tax department’s realized cost. Social implications It contributes to a better understanding of the impact of corporate incentive plans on firms’ tax practices. This study, by designing a theoretical model, helps explain why there exist differences in tax planning across firms based on the finding that incentives for tax planning activities differ across firms. Originality/value This paper is the first study that considers the situation in which tax managers’ risk-averse and types, as well as relevant information collected by the firms, can be used to set up incentive schemes and investigates whether and how the incentive schemes will be affected when firms improve their prior information by acquiring relevant information before the tax department acts.

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