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Author: Jian Sun (Scientist in business management)
Publisher:
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Category :
Languages : en
Pages : 0
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This dissertation consists of three chapters.
Author: Jian Sun (Scientist in business management)
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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This dissertation consists of three chapters.
Author: Mr. Andrey Malenko
Publisher:
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Category :
Languages : en
Pages :
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This thesis consists of three essays that examine various problems in corporate finance. The central theme of all essays is information asymmetry between agents. The first essay features information asymmetry between the headquarters and the division manager about investment projects of the division and studies the best way to provide the manager with incentives to invest efficiently. The second essay studies implications of asymmetric information between the decision-maker and the outsiders on exercise decisions of real options in several settings. The third essay features asymmetric information between sellers of assets and potential buyers and studies what selling procedures arise in equilibrium in a market with multiple sellers and potential buyers. More specifically, in Chapter 1 of the dissertation, I study optimal design of a capital allocation system in a firm in which the division manager with empire-building preferences privately observes the arrival and properties of investment projects, and the headquarters is able to audit each project at a cost. I show that under certain conditions the optimal system takes the form of a budgeting mechanism with threshold division of authority. Specifically, the headquarters: (i) allocates a spending account to the manager at the initial date and accumulates it over time; (ii) sets a threshold on the size of individual projects, such that all projects below the threshold are delegated to the manager and financed out of her spending account, while all projects above the threshold are audited and financed fully by the headquarters. I extend the model in several directions, including multiple audit technologies, multiple project categories, and the possibility of renegotiation. In Chapter 2, which is the product of joint work with Steven R. Grenadier, forthcoming in the Review of Financial Studies, we study games in which the decision to exercise an option is a signal of private information to outsiders, whose beliefs affect the utility of the decision-maker. In a general setting that accommodates a variety of applications we show that signaling incentives distort the timing of exercise, and the direction of distortion depends on whether the decision-maker's utility increases or decreases in the outsiders' belief about the payoff from exercise. In the former case, signaling incentives erode the value of the option to wait and speed up option exercise, while in the latter case option exercise is delayed. We demonstrate the implications of the general model through four corporate finance applications: investment under managerial myopia, venture capital grandstanding, investment under cash flow diversion, and product market competition. In Chapter 3, which is the product of joint work with\ Alexander S.\ Gorbenko, forthcoming in the American\ Economic Review, we study simultaneous security-bid second-price auctions with competition among sellers for potential bidders. The key difference from the prior literature on competition among auctioneers is that we allow bidders to make bids in the form of contingent claims on future payoffs of the assets. The sellers compete for bidders by designing ordered sets of securities that the bidders can offer as payment for the assets. Upon observing auction designs, potential bidders decide which auctions to enter. We characterize all symmetric equilibria and show that there always exist equilibria in which auctions are in standard securities or their combinations. In large markets the unique equilibrium is auctions in pure cash. We extend the model for competition in reserve prices and show that binding reserve prices never constitute equilibrium as long as equilibrium security designs are not call options.
Author: Gianfranco Gambarelli
Publisher: Springer Science & Business Media
ISBN: 1402029365
Category : Business & Economics
Languages : en
Pages : 241
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Essays on Cooperative Games collates selected contributions on Cooperative Games. The papers cover both theoretical aspects (Coalition Formation, Values, Simple Games and Dynamic Games) and applied aspects (in Finance, Production, Transportation and Market Games). A contribution on Minimax Theorem (by Ken Binmore) and a brief history of early Game Theory (by Gianfranco Gambarelli and Guillermo Owen) are also enclosed.
Author: Mark Andrew Chen
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 90
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Author:
Publisher:
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Category :
Languages : en
Pages : 154
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Author: Olexandr Gorbenko
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Category :
Languages : en
Pages :
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This thesis consists of three essays that apply game theory, theory and structural econometrics of auctions, and dynamic programming to study problems in two areas of corporate finance and market design: Dynamic theory of the firm and financial auctions. In the first essay (co-authored with Ilya A. Strebulaev), we investigate corporate financial policies in the presence of both temporary and permanent shocks to firms' cash flows. In our framework cash flows can be negative and are imperfectly correlated with firm value, and earnings volatility differs from asset volatility. These results are consistent with empirical stylized facts. They are also contrary to the implications of existing dynamic capital structure models that allow only for permanent shocks to cash flows. Temporary shocks increase the importance of financial flexibility and may provide an intuitively simple and realistic explanation of empirically observed financial conservatism and low leverage phenomena. The theoretical framework developed in this paper is general enough to be used in various corporate finance applications. In the second essay (co-authored with Andrey MalenkoSPAN class=skype_name_highlight_online title=amalenko height="12px" width="15px" SPAN class=skype_name_mark begin_of_the_skype_highlighting SPAN class=skype_name_mark end_of_the_skype_highlighting ), we study simultaneous security-bid second-price auctions with competition among sellers for potential bidders. The sellers compete by designing ordered sets of securities that the bidders can offer as payment for the assets. Upon observing auction designs, potential bidders decide which auctions to enter. We characterize all symmetric equilibria and show that there always exist equilibria in standard securities or their combinations. In large markets the unique equilibrium is auctions in pure cash. We extend the model for competition in reserve prices and show that binding reserve prices never constitute equilibrium as long as equilibrium security designs are not call options. To study how the market for takeovers operates, it is critical to understand how different potential acquirers shape their valuations, or maximum willingness to pay, for targets. In the third essay (co-authored with Andrey Malenko), we propose a structural model of a takeover auction that allows for asymmetries between strategic and financial bidders. Using a hand-collected data on the number of competing bidders, their types and bids, we estimate the model to recover valuations of participating strategic and financial bidders. Our approach helps overcome the sample selection problem that arises if takeover premia are simply interpreted as average bidder valuations. The results suggest that there are substantial differences between strategic and financial bidders along many dimensions. In particular, strategic and financial bidders value targets with different observable characteristics, and strategic bidders are considerably more heterogeneous than financial bidders. While average valuations of strategic bidders are higher than those of financial bidders, the higher takeover premiums that they pay are mainly driven by their greater heterogeneity. We extend the model to incorporate endogenous participation decisions, and show that strategic bidders appear to have considerably higher average participation costs than financial bidders, especially so if the target is highly valued by them or operates in a hi-tech industry.
Author: John R. Minahan
Publisher:
ISBN:
Category :
Languages : en
Pages : 186
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Author: Bernardino Manuel Pereira Adão
Publisher:
ISBN:
Category :
Languages : en
Pages : 292
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Author: Lin William Cong
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Category :
Languages : en
Pages :
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This thesis consists of two essays that examine several problems in corporate finance and mechanism design. The central theme is endogenous agency conflicts and their impact on dynamic investment decisions. The first essay features auctions of assets and projects with embedded real options, and subsequent exercises of these investment options. The essay shows timing and security choice of auctions endogenously misalign incentives among agents and derives the optimal auction design and exercise strategy. The second essay studies implications of endogenous learning on irreversible investment decisions, in particular, how learning gives rise to asymmetric information between managers and shareholders in decentralized firms. Depending on the quality of the project, the optimal contract between principal and agent distorts investments in ways that has not been examined in the literature. Specifically, in Chapter 1 of the dissertation, I study how governments and corporations auction real investment options using both cash and contingent bids. Examples include sales of natural resource leases, real estate, patents and licenses, and start-up firms with growth options. I incorporate both endogenous auction initiation and post-auction option exercise into the traditional auctions framework, and show that common security bids create moral hazard because the winning bidder's real option differs from the seller's. Consequently, investment could be either accelerated or delayed depending on the security design. Strategic auction timing affects auction initiation, security ranking, equilibrium bidding, and investment; it should be considered jointly with security design and the seller's commitment level. Optimal auction design aligns investment incentives using a combination of down payment and royalty payment, but inefficiently delays sale and investment. I also characterize informal negotiations as timing and signaling games in which bidders can initiate an auction and determine the forms of bids. I show that post-auction investments are efficient and bidding equilibria are equivalent to those of cash auctions. However, in this setting, bidders always initiate the informal auctions inefficiently early. In addition, I provide suggestive evidence for model predictions using data from the leasing and exploration of oil and gas tracts, which leads to several ongoing empirical studies. Altogether, these results reconcile theory with several empirical puzzles and imply novel predictions with policy relevance. In Chapter 2, I examine learning as an important source of managerial flexibility and how it naturally induces information asymmetry in decentralized firms. Timing of learning is crucial for investment decisions, and optimal strategies involve sequential thresholds for learning and investing. Incentive contracts are needed for learning and truthful reporting. The inherent agency conflicts alter investment behavior significantly, and are costly to investors and welfare. But contracting on learning restores efficiency with low future uncertainty or sufficient liquidity. Unlike prior studies, the moral hazard of learning accelerates good projects and delays bad projects. Even the best type's investment is distorted, and only when learning is contractible can adverse selection dominate learning.
Author: Shiqi Chen
Publisher:
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Category :
Languages : en
Pages :
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