Browsing by Subject "Information asymmetry"
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Item Disintermediation and co-opetition in platform ecosystems and modern value chains(2015-05) Li, Zhuoxin; Agarwal, Ashish; Gilbert, Stephen M.; Barua, Anitesh; Duan, Jun (Jason); Lai, Guoming; Whinston, Andrew B.This dissertation investigates partial disintermediation and co-opetition in platform-based ecosystems and modern supply chains. Disintermediation has been an intriguing puzzle for managers for the last several decades, but recent development in electronic commerce makes the management of this trade-off even more challenging. The first type of partial disintermediation I study, often referred to as platform envelopment, is widely observed in platform-based businesses. Platform owners often rely on complementary innovations from third-party providers (i.e., third-party contents), while providing their own products/services to consumers (i.e., first-party contents). The second type of partial disintermediation I study is referred to as supplier encroachment. Due to the fast development of electronic commerce, many manufacturers have established their direct-selling channels on the internet (e.g., online stores), instead of completely relying on third-party retailers to reach customers. The widespread observation of disintermediation and the resulting co-opetition behaviors in various industries has motivated me to investigate two important questions: (1) what's the impact of partial disintermediation on consumer demand and firm profits? (2) what strategies can be used to manage the co-opetition relationship? I use both analytical modeling and empirical methods to study the impact of disintermediation on consumer behaviors, firm profits, and social welfare. The findings provide managerial insights into how to manage the co-opetition dilemma due to disintermediation.Item How information asymmetry affects contract design : paying for private firms with IOU's(2016-05) Jansen, Mark; Parrino, Robert, 1957-; Fracassi, Cesare; Almazan, Andres; Hartzell, Jay; Starks, Laura; Abrevaya, JasonThis dissertation examines a financing mechanism that is common in the acquisition of privately-held firms. Using a novel database of transactions in which the target firm is private, this paper shows that sellers receive a debt claim as a contingent payment for the firm that is being sold. The debt claim, which takes the form of seller financing, is secured by the assets of the target firm. I show that proxies for information asymmetry are correlated with the presence of seller financing as payment in the transaction. I also find that when the firm is more likely to have received a financial audit, the transaction is less likely to include seller financing. Since financial audits improve firm transparency, I interpret this as evidence that a reduction in information asymmetries between the parties of a acquisition affect the deal structure. A complementary explanation for the use of seller financing is related to capital constraints faced by buyers in the financing of the transaction. I present evidence that contract structures are affected by cross-sectional and time-series changes in the supply of local investment capital for buyouts. I find that seller financing is less common in areas in which locally informed capital is more abundant. I also find that transactions contain a lower percentage of seller financing in city-years in which Small Business Administration provides loan guarantees for the acquisition and expansion of firm’s loan guarantees are higher. The evidence suggests that seller financing is solving a contracting problem because it is unaffected by controls for local banking activity.Item Two essays on information asymmetry and corporate governance(2012-08) Vinjamury, Naga Venkata; Hein, Scott E.; Harrison, David M.; Winters, Drew B.; Westfall, Peter H.The underlying theme connecting both my essays is the issue pertaining to information asymmetry and corporate governance.In my first essay, I analyze whether the information environment has an influence in shaping corporate governance mechanisms for large complex banking organizations. In this context, I focus on corporate board size and corporate board independence which have been identified in the literature as important corporate governance mechanisms. In addition, the role of CEO option based compensation in an informationally opaque environment is explored. The study identifies market based, quasi market based and accounting based proxies for information asymmetry in the banking industry. These proxies are used to analyze their role in shaping corporate governance mechanisms in the banking industry. The results of the study document an inverted U-shaped relationship between proxies of information asymmetry and bank board size across the banks during the sample period. An inverted U-shaped relationship is also documented between proxies of information asymmetry and bank board independence within banks for the same sample period. At the same time, there is little evidence to support the notion that opaque information environment creates a need for greater CEO option based compensation. Finally, the study documents a positive relationship between outside director ownership and board size and a positive relationship between outside director ownership and board independence. This relationship is consistent with the view that when incentive alignment between insiders and shareholders (measured in terms of ownership) is relatively weak, the need for external monitoring by means of additional board members who are independent directors increases. In my second essay, I seek to identify corporate governance mechanisms that can potentially address the issue of informational asymmetries affecting firms early in their life cycle. Specifically, the study focuses on Real Estate Investment Trusts (REITs) at the IPO stage to empirically examine the role of corporate governance mechanisms in minimizing informational asymmetries. The study documents REIT corporate board structure in terms of board size, board independence and board financial expertise at the IPO stage. The study uses REIT IPO underpricing as a gauge of information asymmetry for REITs. This is an important contribution since very little is known about REIT governance structures at the IPO stage vis a vis the information environment. The results of the study indicate that smaller boards experience lesser degree of underpricing at the IPO stage. Study documents a positive relationship between board size and board independence, suggesting that larger boards on average have proportionately more independent directors. There is no evidence to suggest that board independence and financial expertise reduce the degree of REIT underpricing. This may be due to the unique nature of the real estate industry. REITs frequently access capital markets because they are required to payout 90 percent of their taxable income as dividends. Accessing the capital markets frequently, subjects REITs to enhanced market scrutiny compared to other industries. In this context, additional internal scrutiny by independent directors and financial experts may not play a crucial role for REITs. The study provides some evidence to show a decline in REIT underpricing after the enactment of REIT Modernization Act of 1999. However, the evidence with respect to REIT Modernization Act of 1999 is not conclusive.