Showing papers by "IE University published in 2001"

Favoritism Under Social Pressure

Abstract: This paper provides empirical evidence of favoritism by agents, where that favoritism is generated by social pressure. To do so, we explore the behavior of professional soccer referees. Referees have discretion over the addition of extra time at the end of a soccer game (called injury time), to compensate for lost time due to unusual stoppages. We test for systematic bias shown by Spanish referees in favor of home teams. We show that referees systematically favor home teams by shortening close games where the home team is ahead, and lengthening close games where the home team is behind. They show no such bias for games that are not close. We further show that when the rewards for winning games increase, referees change their bias accordingly. We also identify that the mechanism through which bias operates is the referees' desire to satisfy the crowd, by documenting how the size and composition of the crowd affect referee favoritism.

Top Management Team Characteristics and Strategic Changes in International Diversification: The Case of U. S. Multinationals in the European Community

Abstract: This study examined the relationship of top management team (TMT) composition to strategic changes in international diversification of a sample of U.S. multinationals in Europe during the 1980s. The findings indicate that international diversification of U.S. multinationals in Europe increased and that certain TMT demographics were significantly associated with such change. Specifically, the results indicate that greater TMT organizational tenure was positively associated and TMT core functional specialization negatively associated with increases in international diversification. A top management team’s cognitive perspectives as reflected in team demographic characteristics influence the degree of change in international diversification of the multinationals in the sample.

Investment Policy, Internal Financing and Ownership Concentration in the UK

Abstract: This paper investigates whether investment spending of firms is sensitive to the availability of internal funds. Imperfect capital markets create a hierarchy for the different sources of funds such that investment and financial decisions are not independent. The relation between corporate investment and free cash flow is investigated using the Bond and Meghir [Review of Economic Studies, 61 (1994a) 197] Euler-equation model for a panel of 240 companies listed on the London Stock Exchange over a 6-year period. This method allows for a direct test of the first-order condition of an intertemporal maximisation problem. It does not require the use of Tobin's q, which is subject to mis-measurement problems. Apart from past investment levels and generated cash flow, the model also includes a leverage factor which captures potential bankruptcy costs and the tax advantages of debt. More importantly, we investigate whether ownership concentration by class of shareholder creates or mitigates liquidity constraints. When industrial companies control large shareholdings, there is evidence of increased overinvestment. This relation is strong when the relative voting power (measured by the Shapley values) of the combined equity stakes of families and industrial companies and the Herfindahl index of industrial ownership are high. This suggests that a small coalition of industrial companies is able to influence investment spending. In contrast, large institutional holdings reduce the positive link between investment spending and cash flow relation and hence suboptimal investing. Whereas there is no evidence of over- or under-investing at low levels of insider shareholding, a high concentration of control in the hands of executive directors reduces the underinvestment problem.

Sobre modas y realidades: CRM o el nuevo marketing digital

Abstract: El reciente auge del Customer Relationship Management (CRM) en empresas de todos los sectores ha hecho que se plantee una revision del concepto de marketing basado en las reglas que parecen marcar lo que se ha dado en llamar la «nueva economia», y que se intente evaluar hasta que punto dichas reglas han cambiado. El presente articulo pretende realizar una revision conceptual y terminologica del marketing ligado a iniciativas novedosas, como el CRM, asi como elaborar una vision normativa del mismo en sus diferentes fases. Las conclusiones sugieren que herramientas como el CRM estan ligadas a una nueva vision, a un concepto de economia cliente-centrica que se opone al producto-centrismo habitual y que trasciende del area de marketing, aunque una segunda interpretacion afirma que no se trata, en general, de conceptos nuevos, sino mas bien de la recreacion de los antiguos a la luz de las posibilidades brindadas por el desarrollo de las nuevas tecnologias.

IT Responsiveness in Small and Medium Enterprises: It Pays to Be on Top of IT

Abstract: Information technology today is a complex area, in which new problems and challenges constantly arise and innovations emerge. The ability to incorporate an innovation in time or to solve a problem efficiently can mean competitive advantages for some firms. Being responsive in IT involves being alert, knowledgeable and prepared to face technical problems and to solve them in appropriate ways. In Europe, the year 1999 confronted firms with two examples of such challenges: the adaptation to the new European currency, the Euro, and the so-called millennium bug or Y2K problem. The present paper studies how fast a sample of 1,700 small and medium enterprises in Spain have reacted to these two problems, and introduces the company’s degree of IT responsiveness into a classical production function expressed as a structural equation model. The newly defined construct is found to be positively associated to output generation: firms that are proactive and responsive to their IT-related problems tend to outperform those who are not.

A Study of Ownership Concentration, Control and Evolution of Chinese IPO Companies

Abstract: One of the typical features in Chinese listed companies is that they have a mixed ownership structure and most of them have high concentration of state shares. By undertaking a sample of all the initial public offering ('IPO') companies in 1993, this paper focuses on analyzing the level and changes of different classes of shares in Chinese companies within different industrial sectors and size groups seven years after the IPO. T-tests and signed rank sum tests with mu, which equals to the average of the different types of shares in the full sample companies and equals to zero, are used respectively to investigate the pattern of concentration and control between different groups. First, we find that smaller and modern industrial companies are concentrated with indirect state shares (legal persons and employee shares) and A shares (domestic private investors) and are more widely held. Conversely, larger and traditional industrial companies are heavily concentrated with direct state shares. Second, smaller, growing and high-risk companies have a greater reduction of state control over the seven-year period. By contrast, the state retains majority control in larger and strategically important companies even seven years after their flotation. Lastly, the concentration of foreign shares displays the fact that the Chinese government has instituted favourable policies to support the development of larger companies and has given priority to them to raise foreign capital in the overseas market.

B2B e-marketplaces: percepción de la propuesta de valor en un mercado incipiente

Abstract: El comercio entre empresas a traves de Internet es un area de desarrollo incipiente en el que pocos o ninguno cosa estan todavia demostradas. Las propuestas de valor para las empresas inciden en areas tales como la formacion de mercados mas eficientes, acceso a mas proveedores y/o clientes, o incluso ganancias de eficiencia en procesas internos. Sin embargo, la percepcion y valoracion que las empresas tienen de dichos propuestas de valor no ha sido hasta el momento estudiada de uno manera empirica. En el presente estudio, 152 grandes empresas espanolas son encuestadas para conocer sus percepciones acerca de estos propuestos, asi como su grado de aproximacion al fenomeno del comercio electronico B2B. Los resultadas muestran diferentes percepciones, preocupaciones y prioridades en funcion de aspectos como el grado actual de implicacion de los empresas, la informacion de que disponen, su papel en un hipotetico mercado B2B o las caracteristicas del sector en el que desarrollan su actividad.

Why Does the Concentration of Control Differ in German and UK Companies? Evidence from Initial Public Offerings

Abstract: The paper investigates why corporate control of listed companies is so different in Germany and the UK. For this purpose we use a unique database which allows us to trace the evolution of control in German and UK firms over the six years after their flotation. Not only do the initial shareholders in the average German company own much larger voting stakes than the UK ones, but the German shareholders lose majority control only 6 years after the IPO. In contrast, the initial owners of UK companies lose control already two years after going public. We find that control retention by initial shareholders depends to a large extent on economic characteristics such as profitability, riskiness, and growth. When a UK firm is risky and experiences high growth in assets, old shareholders are likely to abandon control provided they are not part of the founding family and do not have managerial responsibilities. Thus, control retention by initial shareholders in the UK is more likely in older, profitable firms. In contrast, high growth of a young firm and high profitability is seen as an opportunity by the initial shareholders of German companies to reduce their control. The initial shareholders tend to keep tighter control when the equity structure combines both voting and non-voting shares and when they are involved in the management of the company. In the UK, new large shareholders will accumulate stronger control in smaller, riskier and faster growing firms, especially when it is the founder (or founding family) who reduces control. In German firms in contrast, new large shareholders acquire control in older, profitable firms. However, differences in control between the two countries are not only explained by economic factors, but also by legal determinants. The regulatory environment induces a lower relative cost of holding control blocks in German firms. The weaker protection of shareholder rights in Germany and, hence, the potential to benefit from private benefits of control increases the value of holding large blocks. Therefore, the net benefits from holding large blocks are larger in Germany than in the UK.

On the robustness of least-squares Monte Carlo (LSM) for pricing American derivatives

Abstract: This paper analyses the robustness of Least-Squares Monte Carlo, a technique recently proposed by Longstaff and Schwartz (2001) for pricing American options. This method is based on least-squares regressions in which the explanatory variables are certain polynomial functions. We analyze the impact of different basis functions on option prices. Numerical results for American put options provide evidence that a) this approach is very robust to the choice of different alternative polynomials and b) few basis functions are required. However, these conclusions are not reached when analyzing more complex derivatives.

Delegation and Firms' Ability to Collude

Abstract: In a model of repeated Cournot competition under complete information, we show that delegation has no effect on cartel stability if managers collude, while it may hinder cartel stability when owners collude in setting the incentive schemes. If owners can choose whether to delegate or keep control of their respective firms, and both groups of individuals collude or play noncooperatively in their respective variables according to the level of intertemporal discount factor, then if managers are not able to collude in output levels, owners' delegation decision is non-monotone in the discount factor.