Three Essays On Network Peer Effects On Firms And Financial Markets
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Three Essays On Network Peer Effects On Firms And Financial Markets
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Author : Bahman Fathi Ajirloo
language : en
Publisher:
Release Date : 2021
Three Essays On Network Peer Effects On Firms And Financial Markets written by Bahman Fathi Ajirloo and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
This dissertation consists of three essays that address recent topics in corporate finance that concern for scholars, policymakers, and investors. Main body of this dissertation has been developed based on the "nexus of contracts" theory of the firm which in recent years has sparked renewed debates on the motivation underlying firm size and boundary. The first essay explores a network of interconnected firms and examines the impact of the firm's relationships with peers, rivals, and customers on its capital structure, and how the firm's revealed peers influence its financing decisions. We demonstrate that industry classification approach is fraught with measurement error, and instead implement an alternative peer identification scheme that designates peer groups as those explicitly disclosed by managers to shareholders. The results contrast with previous studies that find only weak evidence for peer effects on capital structure. We find that peer effects are particularly strong when focal firms have persistent rivals, in the sense of supplying common customers for at least two consecutive years. While constructing the firm's actual network poses a challenge, the new approach can lead to more real-world insights about firm behavior. In the second essay, I approach to a challenging version of peer effects model with firm's and peer's multinomial decision outcome as endogenous and financial fundamentals as exogenous explanatory variables. I show that managers do not set dividend policy independently and they are significantly under the influence of few self-disclosed diverse competitors rather than industry peers. The test results show that firm's dividend change actions are significantly correlated with past dividend actions of its peers and it is highly predictable for the next period. I also investigate and report marginal effects of firm's and peers' different endogenous and exogenous determinants on the outcome decision variable for example a peer group with an overall dividend increase action in the past 180 days, increases the chance of the dividend increase in the focal firm. Considering the market capitalization of dividend paying firms, the identified marginal effects and prediction of the cash distribution are economically meaningful and important. In the third essay, I propose a new approach to model and measure intangible value of the firm as the joint of network feature and book value of the firm. Despite the growing importance, the empirical asset pricing research has struggled to evaluate the effects of intangible assets on firms' market value. Utilizing characteristics of the firm network, I propose a network-centric value factor to replace the under-performing traditional value factor (HML) in a series of asset pricing factor model. I show that the new value factor portfolio provides stronger performance in all periods of the sample. I also explore short and long strategies to better understand effects of the networks on value of the firms. Initial findings emphasize that asset pricing studies should adjust the factor models by including intangible network value of the firm.
Three Essays On The Role Of Information Networks In Financial Markets
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Author : Swasti Gupta-Mukherjee
language : en
Publisher:
Release Date : 2007
Three Essays On The Role Of Information Networks In Financial Markets written by Swasti Gupta-Mukherjee and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Capital market categories.
Based on previous evidence that there are information heterogeneities in capital markets, three essays including empirical frameworks for examining the information processes that impact portfolio investments and corporate investments was proposed. The first essay considers information channels among mutual fund managers (fund-fund networks), and between holding companies and fund managers (fund-company networks). Results show that (1) fund-fund (fund-company) information networks help in generating positive risk-adjusted returns from holdings in absence of fund-company (fund-fund) networks; (2) fund-company networks create information advantage only when the networks are relatively exclusive. Superior networks seem to pick stocks which outperform beyond the quarter. The second essay examines mutual fund managers' tendency to deviate from the strategies of their peers. Results indicate a significantly negative relationship between the managers' deviating tendency and fund performance, suggesting that the average fund manager is more likely to make erroneous decisions when they deviate from their peers. The third essay investigates the determinants of target choices in corporate acquisitions. Results reveal the influence of various factors, including information asymmetries, which may drive this behavior, including economic opportunities, anti-takeover regimes, competitive responses to other managers, and acquirers' size and book-to-market ratios.
Essays In Entrepreneurship And Finance
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Author : R David Ratigan
language : en
Publisher:
Release Date : 2019
Essays In Entrepreneurship And Finance written by R David Ratigan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
In this dissertation, I study three economic issues in the field of entrepreneurship and a fourth that looks at the network structure of financial markets. Chapter 1, titled "Patenting and Nascent Firm Performance", examines how patents interact with nascent firm outcomes. The primary motivation follows a puzzle present in the data and discussed in the literature. Patents are prized possessions for business owners but the value that they confer is dubious. In this sample, patenting firms have no better survival rates and have significantly worse profit outcomes. A Oaxaca decomposition demonstrates the reason for this lies with patents' attraction of equity financing. The burden of the equity relationship proves to be a strain on the young firms. Chapter 2, titled "Signal vs Appropriation Value in Patenting" provides insight into the causal connection between patents and equity financing. This chapter also weighs in on the source of the equity firms' attraction to patents. Controlling for unobservable influences via fixed effects regression, the value measured by the coefficient on patent, demonstrates the appropriative value of the patent, rather than the signal value. Further examination reveals that equity firms are very sensitive to the legal status of the firm, eschewing general partnerships. Chapter 3, titled "Peer Effects in Entrepreneurship", studies gender differences in firm financing as a function of response to peers. This research borrows from the social interaction modeling pioneered by Charles Manski by adopting methods to include peer variables. The main finding is that males are positively and significantly affected by peer financing levels but females are not. This result is robust to industry, experience, credit risk, and other financing sources. Chapter 4, "Network Analysis of the S\&P 500", examines the financial market as a network. The literature takes two approaches to performing this analysis but no study has compared the two approaches. This chapter is the first study to compare them and provide insight as to which provides the more descriptive model. The threshold correlation approach provides much more useful results for any kind of analysis involving market connectedness and shock transition dynamics.
Three Essays On Finanical Economics
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Author : Yi-An Chen
language : en
Publisher:
Release Date : 2015
Three Essays On Finanical Economics written by Yi-An Chen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
This thesis discusses network risk and its implications for financial economics. A stock's tendency to co-move with its related stocks is defined as network risk. In the first chapter, I propose a new econometric procedure to estimate network risk using a factor model and show that network risk is not negligible in the 2007-2008 financial crisis. The second chapter examines the pricing of network risk in the cross section of stock expected returns. Using the Fama-McBeth regression, I show that a newly-derived network volatility component of idiosyncratic volatility, termed NVOL, was priced with a 1.01 percent monthly premium between Sep. 1967 and Dec. 2012. This finding suggests a risk-based explanation of the equity premium: Stocks are compensated for risk that arises from shocks to networks that contain them. Finally, the third chapter summarizes various systemic risk measures developed after the financial crisis in 2008. These measures are classified into four categories: (1) Tail dependence; (2) Default probability; (3) Network measure; and (4) Others based on their approach and data required. Robust-yet-Fragile property which is one of the characteristics of a modern financial system is identified as a key to understanding the cascade effects of systemic risk. Network based systemic risk models have great potential to capture this property, both theoretically and empirically.
Three Essays On The Interaction Between Product Markets And Financial Markets
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Author : John Joohahn Moon
language : en
Publisher:
Release Date : 1994
Three Essays On The Interaction Between Product Markets And Financial Markets written by John Joohahn Moon and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1994 with Asset allocation categories.
Three Essays On Venture Capital Backed Firms And Peer To Peer Lending
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Author : Abdelhamid Riani
language : en
Publisher:
Release Date : 2019
Three Essays On Venture Capital Backed Firms And Peer To Peer Lending written by Abdelhamid Riani and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with Finance categories.
Three Essays In Financial Economics
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Author : Mark W. Westerfield
language : en
Publisher:
Release Date : 2004
Three Essays In Financial Economics written by Mark W. Westerfield and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with categories.
(Cont.) left on the table" due to underpricing in the IPO allocation is not capital the firm could have raised; instead, it is the empirical regularity associated with obtaining a high quality aftermarket, high equity valuation, and higher proceeds to the issuer. We examine the principal-agent problem in a simple continuous time framework when potential agents have heterogeneous priors. We find that the principal prefers agents with priors very different from his own. The principal will create a contract that includes side-bets to exploit gains from trade created by heterogeneous priors despite the distortionary effect on effort choice. In a semi-dynamic labor market, the principal can optimally choose to churn his employees to prevent them from learning about project profitability, even when agents' skills are increasing with job tenure. We develop several empirical predictions, and relate our model to the labor market in the financial industry.
Essays On Networks And Markets
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Author : Itay Perah Fainmesser
language : en
Publisher:
Release Date : 2010
Essays On Networks And Markets written by Itay Perah Fainmesser and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
This thesis consists of three essays on the theory of networks and its applications to markets. The first essay develops a new model for studying repeated games in buyer-seller networks, and explores the connection between network structure and cooperation. The second essay introduces new techniques to analyze the effect of Word-Of-Mouth (WOM) on cooperation in networked markets. The third essay studies how network structure affects the timing of hiring in networked markets. Consider a large market with asymmetric information, in which sellers choose whether to cooperate or deviate and 'cheat' their buyers, and buyers decide whether to re-purchase from different sellers. In the first chapter I model active trade relationships as links in a buyer-seller network and suggest a framework for studying repeated games in such networks. I derive conditions that determine whether a network is a Steady State Cooperation Network (SSCN)--a network that is consistent with trade and trust between every buyer and seller that are connected. In particular, three network features increase the incentives for cooperation: sparseness, moderate competition, and segregation.
Three Essays In Operations And Marketing
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Author : Te Ke
language : en
Publisher:
Release Date : 2015
Three Essays In Operations And Marketing written by Te Ke and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
My thesis consists of three essays in the field of operations management and marketing. In the first essay, I study the problem of consumer search for information on multiple products. When a consumer considers purchasing a product in a product category, the consumer can gather information sequentially on several products. At each moment the consumer can choose which product to gather more information on, and whether to stop gathering information and purchase one of the products, or to exit market with no purchase. Given costly information gathering, consumers end up not gathering complete information on all the products, and need to make decisions under imperfect information. I solve for the optimal search, switch, and purchase or exit behavior in such a setting, which is characterized by an optimal consideration set and a purchase threshold structure. It is shown that a product is only considered for search or purchase if it has a sufficiently high expected utility. Given multiple products in the consumer's consideration set, the consumer only stops searching for information and purchases a product if the difference between the expected utilities of the top two products is greater than some threshold. Comparative statics show that negative information correlation among products widens the purchase threshold, and so does an increase in the number of the choices. Under my rational consumer model, I show that choice overload can occur when consumers search or evaluate multiple alternatives before making a purchase decision. I also find that it is optimal for sellers of multiple products to facilitate information search for low-valuation consumers, while obfuscate information for those with high valuations. In the second essay, I conduct an empirical study of peer effects of iPhone adoptions on social networks. I use a unique data set from a provincial capital city in China, in a span of over four years starting from iPhone's first introduction to mainland China. I construct a social network using six month's call transactions between iPhone adopters and all other users on a carrier's network. Strength of social ties is measured by duration of calls. Based on the network structure, I test whether an individual's adoption decision is influenced by his friends' adoptions. A fixed-effect model shows that, on average, a friend's adoption increases one's adoption probability in next month by 0.89%, and the marginal effect decreases in the size of his current neighboring adopters. To further control for potential time-varying correlated unobservables, I instrument adoptions of one's friends by their birthdays, based on the fact that consumers are more likely to adopt iPhones on birthdays. The IV estimation shows a slightly smaller peer effect at 0.75%. I also investigate how network structures modulate the magnitude of peer influence. My results show that peer effect is stronger when the influencer has more friends or has a stronger relationship with the influence. In the third essay, I study the problem of coordination of operations and marketing decisions for new product introductions. In the industry with radical technology push or rapidly changing customer preference, it is firms' common wisdom to introduce high-end product first, and follow by low-end product line extensions. A key decision in this "down-market stretch" strategy is the introduction time. High inventory cost is pervasive in such industries, but its impact has long been ignored during the presale planning stage. This essay takes a first step towards filling this gap. I propose an integrated inventory (supply) and diffusion (demand) framework, and analyze how inventory cost influences the introduction timing of product line extensions, considering substitution effect among successive generations. I show that under low inventory cost or frequent replenishment ordering policy, the optimal introduction time indeed follows the well-known "Now" or "Never" rule. However, sequential introduction becomes optimal as the inventory holding gets more substantial or the product life cycle gets shorter. The optimal introduction timing can increase or decrease with the inventory cost depending on the marketplace setting, requiring a careful analysis.
Essays On Social Interactions Competition And Markets
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Author : Qi Wu
language : en
Publisher:
Release Date : 2021
Essays On Social Interactions Competition And Markets written by Qi Wu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
This dissertation consists of three essays in the areas of Industrial Organizationand Applied Microeconomics, examining the role of social interactions on market outcomes and the welfare consequences. The first essay studies the role of social influence on consumer demand and firm competition through pricing strategies. Social influence is an important driver of consumption behavior, but its effect on firm competition and pricing is understudied. This paper investigates whether and how social influence affects product choices and firm competition, drawing on a novel dataset that consists of large-scale de-identified mobile call records from a city in China. I first identify social influence using a new identification strategy that exploits the partially overlapping network of friends and residential neighbors and the intertemporal variation in friend circles. I find that the purchasing probability for a phone model doubles with 10 percent more friends using the same model. Consumers are more likely to conform to wealthier friends and choose visually distinct features, suggesting that status-seeking motivation may be an important driver of social influence. I then evaluate how social influence affects firm competition by building and estimating a structural model that incorporates social influence in consumer demand. I find that social influence favors high-quality products while reducing low-quality products' market share. In addition, a small price drop of a product would lead to larger gains through quantity expansion by peers. Social influence, on average, reduces initial prices by 0.7 percent and increases subsequent prices by 0.1 percent. It also increases the total profits of new products by 3.4 percent and increases consumer surplus by about 1.7 percent. In the second essay, my co-authors and I examine the role of social referrals and information exchange in urban labor markets. We use the universe of deidentified and geocoded cellphone records for over a million individuals from a major Chinese telecommunication provider. We find that information flows, as measured by call volume, correlates strongly with worker flows, a pattern that persists at different levels of geographic aggregation. Conditional on information flow, socioeconomic diversity of the social contacts, especially that associated with the working population, helps to predict the worker flows. We supplement the phone records with administrative data on firm attributes and auxiliary data on job postings and residential housing prices. Referred jobs are associated with higher monetary gains, a higher likelihood to transition from part-time to full-time, reduced commuting time, and a higher probability of entering desirable jobs. The third essay studies the effects of parental retirement on adult children's labor supply through intergenerational time and monetary transfer. My coauthor and I exploit the mandatory retirement age in China as the cut-off point and apply a regression discontinuity (RD) approach to four waves of the China Family Panel Studies (CFPS) Dataset. Our findings suggest that parental retirement reduces adult children's annual hours of labor supply by 3 to 4 percent. This reduction is especially pronounced for female children. We find that the reduction can be explained by parents' increasing demand for time and care from children due to the significant drop in parents' self-rated health upon retirement. Although both male and female children increased their monetary and time transfers to parents, we find that parents tend to make more transfers to sons compared to daughters. Daughters are also more likely to make transfers to parents after they retire, both in terms of money and in terms of time.