Abstract:
Prior studies examine equity value effects of SEC Exchange Act Rule 13a-14 on the submission dates of sworn testimonies in August 2002. The inconclusive results from these studies suggest a review of the event dates employed and/or the interpretation of economic implications of such ruling. We employ June 12, proposal of Rule 13a-14, and June 27, ruling of certification requirement, as event dates. We investigate litigation cost implication of proposal and ruling and focus on firms in industries that are highly exposed to class action lawsuits. Because the final ruling differed from what was previously proposed, examination of the implications of proposal on June 12, 2002, becomes crucial in evaluating the stock price effect of certification requirement. We find negative abnormal returns surrounding June 12, and positive abnormal returns surrounding June 27, for firms relieved from compliance requirement. The results are more profound for firms in high litigation risk industries.

Abstract:
We discover performance persistence in the equity transactions of institutional investors and their brokers over the period 1999-2005. Brokers (institutional clients) ranked as top performers based on execution quality outperform brokers (clients) ranked as bottom performers over adjacent periods. The broker and client persistence patterns are independent and cannot be explained by client investment style or soft dollar arrangements. The best brokers tend to specialize in certain industries, charge higher commissions, more often work the order, and can consistently execute trades with no price impact. The best performing clients tend to be larger, concentrate order flow with fewer brokers, and can robustly obtain negative trading costs, suggesting that their trading desks help create positive (investment) alpha through their trading strategies. We find that the worst brokers lose market share slowly and that the worst clients tend to specify low commission execution venues, suggesting they focus on explicit costs. Our findings imply that broker selection is an important dimension of an institution’s Best Execution obligation, and that persistence in execution performance is important enough to explain a significant portion of mutual fund performance persistence.

Abstract:
This paper compares a group of firms that go public using penny stock initial public offerings (PSIPOs) to those using reverse mergers (RMs) and analyzes firm characteristics driving US firms to opt for RMs instead of PSIPOs. Since no offerings are conducted upon initiation of trading, we hypothesize that contrary to the going public literature, RMs can be highly information asymmetric firms. We analyze RMs’ characteristics prior to going public and find that they are small, still in the development stage, illiquid, they exhibit losses, high short-term obligations and low expenses as they are early in their lifecycle. They have planned stock-financed acquisitions with the intention to acquire a greater market share. Their insiders maintain a high ownership stake after going public with no intention to cash out within the first two years after going public. We find that RMs exhibit shorter duration of negotiations, are frequently PIPE-financed and manage to be upgraded to one of the main US stock exchanges. We also find that the decision to go public using an RM is made to exploit private information advantages held by insiders that manifest themselves in future cash flows.

Abstract:
Most game operators handle the issue of risk exposure in their fixed odds numbers game by imposing a liability limit on the sales of each number - all future bets on numbers with accumulated sales hitting the liability limit will be rejected. This raises an associated question - how should the game operator set the liability limit in the optimal manner? In this paper, we address the issue of liability limit management from two angles - The players can exploit the liability limit to construct betting strategies to increase their odds of making a profit in the game. Using realistic parameters in a numbers game played in Singapore, we formulate a model to construct a betting strategy with at least 90\% chances of making a profit in the game. We also exploit a curious property (observed from empirical data) on the way players select numbers in these games, and use that to develop a method for the game operator to set the liability limit, based on total sales forecast. Our approach builds on anecdotal evidences and empirical studies which suggest that the players have a tendency to bet on ``small" numbers. This can be attributed to players choosing numbers that are closely related to events around them (e.g. birth dates, addresses etc.), and also due to cognitive biases for small numbers even when the players intend to choose the numbers at ''random". We quantify this phenomenon through its connection with the classical Benford's Law. Interestingly, the betting data on second significant digit shows more volatility which could not be explained by the classical law. We modeled this phenomenon by introducing a modified version of Benford's law, obtained by carefully mimicking the way players compose the numbers together in the game.

Abstract:
There is an emerging debate in India on impact of reforms on inequality. This paperlooks at various measures of inequality to show that inequality in India is increasing even though poverty has been falling in the 1990s and 2000s. It finds that in almost all states of India, inequality, as measured by Gini coefficients has been rising. And this is true for both urban and rural areas. We find that states that have had greater per capita GSDP growth between 1993-94 and 2004-05 are more likely to have reduced absolute poverty levels (as defined by the Planning Commissions poverty line). Paradoxically, we also find a positive association between state-level per capita incomes and inequality as measured by Gini coeffieicnts, in that states that have grown more tend to have increased inequality levels during the period 1993-94 and 2004-05. Last, we find some, but not a significant enough link between poverty reduction and inequality. The paper then looks into other issues related to inequality - it finds that those at the bottom of the pyramid (whether measured on the basis of expenditure quintiles or educational characteristics) have had relatively greater income/expenditure growth than the middle classes. However, the uppermost segments (by quintiles or by educational profile) have hadhighest growth from 93-94 to 04-05. Analysis of occupational profile reveals that inequality levels tend to be lower among the self employed than the salaried classes, and that states that have high self-employment levels tend to have low inequality levels.The qualification is that we do not attempt to look for causality in this version of the paper. That work is ongoing.

Abstract:
The global impact of American Restaurant Franchises is evident in different parts of the world. Global markets in Pan-Pacific, European Union, Africa, Middle East, Asia, South America are all flooded with US franchises. This study examines the most notable impact of products and services provided by these franchises, using McDonald. Both beneficial and adverse impacts are systematically examined and presented. Under examination are cultural, social, economical, legal, technological, and environmental impacts. Case examples from different parts of the world are highlighted. Future impact and trends due to the growth on multinational enterprises are forecasted.Response to these impacts from various countries are comparatively assessed and outlined in this paper.

Abstract:
Sentiment in stock market should be seen as a risk, especially when we define sentiments in the noise trader model framework. In this research, sentiment risk has been measured for 22 stock markets. We distinguish between local sentiments and global sentiments and rank which stock markets are most driven by local sentiments and which are most driven by global sentiments. We find that stock markets that have been established recently (compared to others in the sample) and are shallow in nature tend to be driven by sentiments to a larger extent than others. Another hypothesis that this research has tested is – with the spread of information technology and internet trading, stock markets will become more sentiment driven over time or sentiments would be pronounced in certain growth phases than others.This research doesn’t find support for these hypotheses.

Abstract:
We use borrower bankruptcy filings (loan defaults) and their impact on the subsequent lending activity of lead arrangers to investigate the role of reputation and capital constraints in the loan syndication market. Consistent with reputation effects, following loan defaults, lead arrangers syndicate loans less often and retain a larger fraction of the loans that they do syndicate. The effects are smaller when the lead arranger is larger and when several other lead arrangers also experience loan defaults; the effects are larger for defaults of low yield loans and when defaults occur soon after loan origination. Lenders that participate in the lead arranger’s syndicates following defaults are more likely to be smaller, less diversified and to have a strong existing relationship with the lead arranger. Overall, there is a significant decline in the lead arranger’s lending activity following defaults. Our findings strongly support the notion that loan defaults damage the lead arranger’s reputation and also lead to an erosion of its capital. The findings highlight the importance of reputation concerns in the loan syndication market,how such concerns vary in the cross-section, and the limitations of a reputation-based disciplining mechanism.

Abstract:
I will discuss the valuation of complex intellectual property, especially the valuation of early stage technologies. Many transactions involving pharmaceutical and biotechnology firms occur when the underlying assets are in very early stages of development. These early stage technologies face a number of unique risks related to clinical research, the success of clinical trials, and the outcome of regulatory review, in addition to the usual risks of commercialization. A key problem in valuing these technologies is how to meaningfully risk adjust cash flows when the path to commercialization is extremely risky and is often 10+ years away. I will cover the practical challenges we face in using DCF and real options models in valuing early stage technologies.

Abstract:
In this study, we present new evidence on the question of what happens when firms patent. We do so by creating a new dataset that links the NBER patent data to firm data from the US Census Bureau. Our linked dataset covers more than 48,000 unique assignees (compared to about 4,100 assignees covered by the Compustat-NBER link), representing almost two-thirds of all non-individual, non-university, non-government assignees from 1975 to 1997. Using this new dataset, we examine what happens when firms patent by looking at a large sample (about 9200) of first time patentees. We find that while there are significant cross-sectional differences in size and total factor productivity between patentee firms and non-patentee firms, changes in patent-ownership status within firms is associated with a contemporaneous and substantial increase in firm size, but little to no change in total factor productivity. This evidence suggests that patenting is associated with firm growth through new product innovations (firm scope) rather than through reduction in the cost of producing existing products (firm productivity). Consistent with this explanation, we find that when firms patent, there is a contemporaneous increase in the number of products that the firms produce. Estimates of (within-firm) elasticity of firm characteristics to patent stock confirm our results. Our findings are robust to alternative measures of size and productivity, and to various sample selection criteria.

Abstract:
We use a unique, new, database to examine micro depositor level data for a bank that faced a run. We use minute-by-minute depositor withdrawal data to understand the role of social networks, the effectiveness of deposit insurance, the role of relationships and other factors in influencing depositor propensity to run. We employ methods from the epidemiology literature which examine how diseases spread to estimate transmission probabilities of depositors running, and the significant underlying factors. Our results suggest that social network effects are important but are mitigated by other factors, in particular the length and depth of the bank-depositor relationship. Depositors with longer relationships, and those who have availed of loans from a bank are less likely to run during a crisis, suggesting that cross-selling acts not just as a revenue generator but also as a complementary insurance mechanism for the bank. We further find that deposit insurance is only partially effective in preventing bank runs. Finally, we find long term effects of a bank crisis in that depositors who run do not return back to the bank. Our results help understand the underlying dynamics of bank runs and hold important policy implications.

Abstract:
This paper studies the pricing to market (PTM) behaviour of Indian exporters during the economic reforms period (1992-2005). A PTM model has been estimated using panel data at the four-digit level of classification for the G3 and three emerging markets (Brazil, China and South Africa), distinguishing also homogeneous from differentiated goods. Overall, we observe that there is clear evidence of incomplete exchange rate passthrough (ERPT) to buyers’ currency prices. This degree of ERPT is net of changes in thelevel of protection faced by India’s exporters (import tariffs in destination markets),inflation and openness in the export destination market, a macroeconomic policy index partly reflecting changes in exporter’s costs, the share of the exporter in the destination market and the share of the product in the exporter’s total exports. When distinguishing between G3 and emerging markets, the empirical results indicate that Indian firms do practice PTM and have some pricing power in G3 markets, but they fully pass-through the exchange rate changes in emerging markets. On the contrary, Indian exporters seem to be taking advantage of trade liberalisation in destination markets by marginally increasing the exporter currency prices into emerging markets but not into the G3. We also find a similar impact of trade liberalisation in the case of differentiated goods.

Abstract:
This study examines how takeover decisions are influenced by the quality of information in target firms’ earnings. We find that bidders are more likely to prefer negotiations in deals involving targets with poor earnings quality. Moreover, in such deals, earnings quality and takeover premiums are negatively related, suggesting that bidders obtain valuable private information through negotiations. Also, bidders share information risk with target shareholders by paying with more equity for targets with poor earnings quality. The results are stronger for private bidders than for public bidders, suggesting that private and public bidders respond differently to information risks in takeovers.

Abstract:
Passenger airlines (carriers), who carry nearly two thirds of the worldwide airfreight, sell a significant portion of their cargo space through intermediaries called freight forwarders. Carriers also sell directly to shippers. In a typical carrier-forwarder contract, which can remain in effect anywhere from a few months to a year, a certain amount of capacity on specific recurring flights is pre-allocated (guaranteed) to the forwarder at a negotiated price per unit of capacity. Carriers often find it difficult to obtain full payment from the forwarders who typically pay freight charges only for the space actually used. Guaranteed allocations provide an incentive to forwarders to exert a greater effort on attracting demand. However, they limit a carrier’s ability to realize the highest possible revenue from cargo capacity. In this talk, we propose two reasons why carriers offer guaranteed allocations – information asymmetry and moral hazard. We explore the latter in detail and study two contract mechanisms that fall within the general contracting framework prevalent in the air cargo business. We show that contract flexibility afforded by guaranteed allocations allows the carrier to achieve an efficient capacity allocation to the forwarder and the direct-ship demand streams under both mechanisms. Moreover, a carrier that charges a deposit for guaranteed allocation can induce the forwarder to simultaneously choose the optimal effort-level and earn maximum profit.

Abstract:
Two pervasive features of industries experiencing rapid technological progress are uncertainty (with regard to the technological feasibility and marketabilility of an innovation) and networks (the dense web of research alliances and joint ventures linking firms to each other). This paper connects the two disparate phenomena using the notion of real options. It visualizes firms as nodes and the links connecting them as call options that give each pair of interlinked firms the right, but not the obligation, to sink additional resources into a project at some future date conditional on favorable technical/market information. The formation of networks is endogenous as firms establish links with others by appraising their value using option pricing methods. Our model explains the following: why networks are particularly ubiquitous in industries that are subject to high uncertainty; why networks often display an interconnected “hubs and spokes” architecture; why small(or peripheral spoke) firms often sink resources into relatively higher risk higher return investment projects (and those too with only large, or hub firms); and why so many research alliances are continuously formed and dissolved. Our paper also outlines the conditions under which ex-ante symmetric firms end up ex-post forming complex asymmetric networks.

Abstract:
In mature markets with competing firms, a common role for advertising is to shift consumer preferences towards the advertiser in a tug-of-war, with no effect on category demand. In this paper, we analyze the effect of such “combative” advertising on market power. We show that, depending on the nature of consumer response, combative advertising can reduce price competition to benefit competing firms. However, it can also lead to a pro-competitive outcome where individual firms advertise to increase own profitability, but collectively become worse off. This is because combative advertising can intensify price competition such that an "advertising war" leads to a "price war." Similar to price competition, advertising competition can result in a prisoner’s dilemma where all competing firms make less profit even when the effect of each firm’s advertising is to enhance consumer preferences in its favor. Given such pro-competitive effects, we further show that cost of combative advertising could be a blessing in disguise — higher unit cost of advertising resulting in lower equilibrium levels of advertising, leading to higher prices and profits. We conduct a laboratory experiment to investigate how combative advertising by competing brands influences consumer preferences. Our experimental analysis offers strong support for our conclusions.

Abstract:
Recent advances in digital technologies invite consideration of organizing as a process that is accomplished by global, flexible, adaptive, and ad hoc networks that can be created, maintained, dissolved, and reconstituted with remarkable alacrity. This presentation describes a multi-theoretical multilevel (MTML) model of the socio-technical motivations for creating, maintaining, dissolving, and reconstituting knowledge and social networks. Using examples from his research in a wide range of activities such as disaster response, Communities of Practice at Procter & Gamble, public health and massively multiplayer online games (WoW - the World of Warcraft), Contractor will present a visual-analytic framework that can be used to Discover, Diagnose, and Design our knowledge networks in 21st century organizational forms.

Abstract:
This research finds that high and low commitment consumers use different information processing strategies when exposed to competitive brand information. High commitment consumers use a disconfirmatory processing strategy, focusing on the dissimilarities between their preferred brand and the competitor brand. Low commitment consumers focus on the similarities between the advertised brand and their preferred brand. These processing differences lead to differences in evaluation of a competitive brand between high and low commitment consumers. However, priming high commitment consumers to focus on the similarities between their preferred brand and a competitor brand mitigates the ill effects of disconfirmatory processing; similarly, priming low commitment consumers to focus on the dissimilarities between the advertised brand and their preferred brand results in lowered evaluations of the advertised brand.

Abstract:
When corporations make large investments, what benefits do they derive from Project Finance vis-à-vis Corporate Debt Finance? In this paper, we provide empirical evidence that in the lender-borrower relationship, Project Finance mitigates agency costs from insider stealing. We argue that cash flows become verifiable in Project Finance because of: (i) the contractual arrangements made possible with a single, discrete project that is legally separate from the sponsor; and (ii) private enforcement of these contracts through a network of project accounts which ensures lender control of project cash flows. Since Project Financing primarily involves bank debt, we compare bank loans to Project Finance companies with bank loans to regular corporations for their large investments. First, we show across forty countries that Project Finance is more likely in countries where laws protecting against insider stealing are weaker. We highlight the causal channel for this e¤ect by showing that in such countries, Project Finance is disproportionately more likely in industries with higher free cash flows. Second, since creditors' threat to seize collateral deters borrower opportunism, we predict that stronger creditor rights mitigate the marginal e¤ect of weaker protection against insider stealing. We provide evidence for this prediction using exogenous country-level changes in creditor rights and using cross-country tests. Our study highlights that in the lender-borrower relationship, Project Finance emerges as an organizational and contractual substitute for investor protection. Further, our study suggests that enhancing investor protection can encourage Corporate Finance by reducing the need for specialized financing vehicles such as Project Finance.

Abstract:
In two experiments, participants were asked to aesthetically self-design a product using a commercially successful online configurator (which we used as benchmark). Either one week or one month later, they were unexpectedly asked to recognize and evaluate their self-designed product along with 29 other alternatives. These self-designed products were confirmed to be (1) high in design heterogeneity, (2) often correctly recognized, and (3) strongly preferred (which we call the self-design effect). We identified three psychological factors (outcome accuracy,believed authorship, and process affect) that contribute to the self-design effect. We also developed a statistical model that used recognition types (hits, misses, false alarms and correct rejections) to separate the