Organizational economics and the food processing industry
01 Jan 2004-
TL;DR: In this article, the authors examine the two prevalent organizational theories, Transaction Cost Economics and Agency Theory, through a study of the food processing industry and make predictions from each theory regarding the aspects of capital structure and firm expansion.
Abstract: OF THESIS ORGANIZATIONAL ECONOMICS AND THE FOOD PROCESSING INDUSTRY The food processing industry is dominated by large corporations. These firms play a critical role in forming the derived demand faced by agricultural producers, but little is understood about how these companies make strategic choices. Organizational economics provides a framework for exploring the firm’s decision process. However, several theories exist in this discipline, operating in fundamentally different ways. This paper examines the two prevalent organizational theories, Transaction Cost Economics and Agency Theory, through a study of the food processing industry. This sector is thoroughly analyzed in order to make predictions from each theory regarding the aspects of capital structure and firm expansion. With accounting data for a sample of food processing firms, these predictions are then tested empirically using an ICAPM model in a cross-section of expected stock returns. Our results indicate that Agency Theory is the relevant organizational model for food manufacturers, making it the appropriate tool for evaluating the actions of these firms in agricultural markets.
Citations
More filters
[...]
01 Jan 1997
TL;DR: If you are one of the people love reading as a manner, you can find golden parachute as your reading material and help you to overcome something to better.
Abstract: In wondering the things that you should do, reading can be a new choice of you in making new things. It's always said that reading will always help you to overcome something to better. Yeah, golden parachute is one that we always offer. Even we share again and again about the books, what's your conception? If you are one of the people love reading as a manner, you can find golden parachute as your reading material.
24 citations
Posted Content•
TL;DR: In this article, the authors compare the economic organization of agriculture in the United States and the European Union and highlight the interaction between the institutional environment and the arrangements established to govern agricultural transactions.
Abstract: This paper outlines a research program comparing the economic organization of agriculture in the United States and European Union. Both have highly developed agricultural sectors but their organizational arrangements vary widely. Comparative analysis not only provides a broad set of firms and industries to compare, but also highlights the interaction between the institutional environment and the arrangements established to govern agricultural transactions. We first assess the common trend toward consolidation and vertical integration, turning next to the economic organization of formal and informal networks. While history and path dependence explain some of the variety among U.S. and European practices, other local conditions are important as well. We conclude by assessing the policy implications of recent changes in economic organization.
16 citations
References
More filters
TL;DR: In this article, a corporate strategy perspective may complement the traditional financial paradigm in explaining capital structure in large U.S. corporations, and results suggest a managerial choice perspective may help to explain the capital structure choice at the firm level of analysis.
Abstract: The basic thesis of this exploratory investigation was that a corporate strategy perspective may complement the traditional financial paradigm in explaining capital structure in large U.S. corporations. Earlier fusion of strategic and financial literature led to a series of propositions antecedent to this work. Inclusion of Rumelt's diversification categories plus elsewhere validated financial contextual variables led to hypotheses for the present study. Results suggest a managerial choice perspective may help to explain the capital structure choice at the firm level of analysis.
279 citations
TL;DR: A scholarly edition of a work by Adam Smith is presented in this article, together with an introduction, commentary notes, and scholarly apparatus, and the text is annotated with annotations.
Abstract: A scholarly edition of a work by Adam Smith. The edition presents an authoritative text, together with an introduction, commentary notes, and scholarly apparatus.
250 citations
TL;DR: The human capital explanation for the wage-seniority relationship has become controversial in recent years, in part because implicit contract theories predict that compensation will be redistributed over the period of the contract as discussed by the authors.
Abstract: Why does a worker's wage tend to grow with seniority in the firm, and what does this have to do with productivity? Two decades ago, neoclassical labor economists thought that the theory of human capital provided a good answer to this question. The last decade has, however, been one of puzzles and doubt. At this point few would give an unambiguous answer. And much hinges on the answer. An attractive feature of human capital theory is that it yields a consistent and coherent explanation for several aspects of the employer-employee relationship. For example, seniority systems, layoff policies that vary with skill, and the relationship between tenure and turnover can be explained in terms of human capital. The fact that these explanations are connected leads, however, to something like a domino effect: doubts about one cast doubt on the others. If the human capital explanation for the wage-seniority relationship is flawed, then human capital explanations for other phenomena may require reevaluation. In addition, an important body of empirical research is built around the assumption that, at any point in time, a person's wage indicates the person's productivity. Included here is the extensive literature on the human capital earnings function, as well as work on labor demand, market discrimination, and compensating differentials. That assumption has become controversial in recent years, in part because implicit contract theories predict that compensation will be redistributed over the period of the contract. If a person's spot wage has little to do with spot productivity, but rather is an instrument of a complex insurance or deferred compensation scheme, then a reassessment of the empirical research may be necessary.
229 citations
TL;DR: In this paper, a simple analysis of variance method is used to decompose restructuring transactions and outcomes into the three effects of free cash flow, corporate governance, and takeover threat in determining financial and portfolio restructuring.
Abstract: This study seeks to estimate the relative importance of free cash flow, corporate governance, and takeover threat in determining financial and portfolio restructuring. The free cash flow hypothesis and agency theory prescriptions are used as the basis for developing a model of restructuring. A simple analysis of variance method is used to decompose restructuring transactions and outcomes into the three effects. The results support the hypothesis that financial and portfolio restructuring are motivated, in part, by agency costs. Decomposition of variances indicates that restructuring is equally explained by free cash flow and interaction of governance and takeover threat with free cash flow.
227 citations
TL;DR: In this paper, the authors argue that the extant evidence mainly supports the transaction cost viewpoint and two organizational phenomena-leveraged buyouts and product diversification-are used to highlight the comparison.
Abstract: The study of capital structure has increasingly gained importance in strategic management research Paradigms derived from organizational economics have also gained popularity in explaining firm actions Agency theory and transaction cost economics represent two such paradigms that rely on the notion of market imperfections Notwithstanding the similarities between them, these two offer different explanations of the role of debt and equity in a firm The governance abilities of the financing structures and the nature of assets of the firm provide two key sources of differences Viewing capital structure from transaction cost economics gives rise to predictions that are contradictory to those presented by agency theory It is argued that the extant evidence mainly supports the transaction cost viewpoint Two organizational phenomena-leveraged buyouts and product diversification-are used to highlight the comparison
222 citations