Do Shareholders Really Prefer Their Executives to Maximize the Equity Value? A Newsvendor Case*

In this article, we study how the operational decisions of a firm manager depend on her own incentives, the capital structure, and financial decisions in the context of the newsvendor framework. We establish a relationship between the firm’s cost of raising funds and the riskiness of the inventory decisions of the manager. We consider four types of managers, namely, profit, equity, firm value, and profit‐equity maximizers, and initially assume that they may raise funds to increase the inventory level only by issuing debt. We show that the shareholders are indifferent between the different types of managers when the coefficient of variation (CV) of demand is low. However, this is not the case when the CV of demand is high. Based on the demand and the firm’s specific characteristics such as profitability, leverage, and bankruptcy costs, the shareholders might be better off with the manager whose compensation package is tied to the firm value as opposed to the equity value. We, then, extend our model by allowing the manager to raise the required funds by issuing both debt and equity. For this case we focus on the equity and firm value maximizer managers and show that our earlier results (for the debt only case) still hold subject to the cost of issuing equity. However the benefit of the firm value maximizer manager over the equity maximizer manager for shareholders is considerably less in this case compared to the case where the manager can only issue debt. The Board of Directors can take these factors into consideration when establishing/modifying the right incentive package for the managers. We also incorporate the notion of the asymmetric information to capture its impact on the board of directors’ decision about the managers’ incentive package.     

职工薪酬分配比例、产权性质与企业价值

随着现代企业的发展，职工在企业中扮演的角色越来越重要，职工激励问题对企业的重要性也不言而喻。已有研究主要集中于薪酬和期权等绝对激励，关于职工激励对企业的影响程度的研究则较少。 利用2003年至2013年中国上市公司数据，基于公平理论构建职工薪酬分配比例与企业价值关系的OLS模型，对职工薪酬分配比例对企业价值的影响进行实证检验。 研究结果表明，全样本中职工薪酬分配比例越高，企业价值越低；区分产权性质后，国有企业薪酬分配比例明显高于民营企业，继续提高国有企业薪酬分配比例会降低国有企业价值，民营企业薪酬分配比例仍有提升空间；行业收入较高会弱化提高薪酬分配比例带来的激励作用；劳动密集度会提高薪酬分配比例带来的激励作用；薪酬分配比例显著影响企业价值，产权性质、行业收入差距和劳动密集度影响薪酬分配比例与企业价值的关系。研究结论在用工具变量和外生事件考虑二者的内生性问题后仍然成立。 研究结果丰富了企业价值的影响因素和薪酬契约激励经济后果方面的研究，也为职工薪酬分配比例对企业价值的影响提供了新的经验证据，同时对上市公司制定合理的薪酬激励政策和中国当前提高劳动分配比例的政策具有重要的借鉴意义。建议监管者在制定薪酬管制政策时应根据公司的实际情况(如产权性质和非货币性福利等)对不同的公司进行监管，以促进企业发展。     

Investigating Institutional,Economic and Social Determinants of European Regions for Firm Growth Through Employment Generation

This paper examines the influence of the institutional, economic and social characteristics of a region on firm growth through employment generation across 14 European countries for the time period 2010–2013. Theoretically, we utilize the resource‐based view alongside insights from institutional theory to develop a conceptual framework that captures the influence of regional characteristics on firm employment growth. Based on this framework, our empirical results indicate that not only does firm growth depend on the firm‐specific characteristics found in the literature, but regional attributes also significantly impact firm growth in a heterogeneous way for different firm types. In line with the heterogeneous nature of firm growth, our results point to significant differences in the influence of institutional, economic and social characteristics on firm growth in different‐sized groups and across different rates of growth distribution. The implications of our study suggest the importance of managers and policy‐makers realizing which firms are mostly expected to benefit from the external environment, and which in turn can be planned via tailored policy reform by regional governments and firm‐level strategy‐making by managers.     

Stakeholder Perspectives on E‐Waste Take‐Back Legislation

In this study, we compare two common forms of product take‐back legislation implementation: (i) manufacturer‐operated systems, where the state imposes certain take‐back objectives on manufacturers, and (ii) state‐operated systems, where manufacturers or consumers finance take‐back through recovery fees. We show that their impacts on different stakeholders, that is, social welfare, manufacturers, consumers, and the environment, can be significantly different and stakeholder preferences for these models vary depending on the operating environments (e.g., production and take‐back costs, and environmental externalities). We also consider the impact of operational externalities such as operating and monitoring costs, and show how they affect stakeholder preferences.     

How Do Individuals Apply Risk Information When Choosing Among Health Care Interventions?

A sample of 3,201 Danes was subjected to personal interviews in which they were asked to state their preferences for risk-reducing health care interventions based on information on absolute risk reduction (ARR) and relative risk reduction (RRR). The aim of the study was to measure the relative weighting of different types of risk information under various circumstances. The effect of presenting questions, and of explicitly formulating RRR, was analyzed. A preference for increases in RRR was demonstrated. There was a stronger inclination to choose the intervention that offered the highest RRR if RRR was explicitly stated. Individuals with more than 10 years of schooling also demonstrated a preference for increased ARR, but only when facing individually framed choices. In a social choice context, preferences for RRR remained intact, but the magnitude of ARR had no impact on choices. Results imply that social framing may induce a propensity to prefer interventions that target high-risk populations. Those respondents who had received < or = 10 years of schooling demonstrated preferences for RRR but not ARR, and no impact of social framing was observed.     

We Are the Corporation: Dispersive CSR

We contend that the current trend of emphasis on corporate social responsibility (CSR) serves to divert the public's attention from the real ethical issues facing business and society. We extend the scope of social responsibility beyond business corporations to include a range of institutions. We also propose that CSRs be reconceptualized in terms of the ways that managers enable stakeholders to hold themselves and each other responsible for the ways their actions affect each other as they conduct business through the firm. In this article, we propose a new view of corporations and responsibility that reconstrues behavior currently referred to as CSR. Starting with an overview of theories of the firm, we show that the way in which a firm is conceived yields different views on CSR. A shortcoming of the theory of the firm approach to CSR is that it leads us to focus excessively on business corporations at the expense of a broader analysis of other institutional players. These theories also tend to emphasize the obligations of corporations to people rather than of people to each other. We propose that social responsibility be viewed through a systems theory paradigm instead. We then argue that corporations should be construed in terms of the people who impact them. We advance a different conception of business responsibility that is more comprehensive, inclusive, and systemic.     

An Assessment of the Italian 2007 Complementary Social Security Reform: A Simulation Approach

In this paper we aim at assessing the outcomes of the 2007 Italian reform of the complementary social security scheme and at identifying the determinants behind them. The reform provided workers with relevant incentives to switch the investment of about 7 per cent of their gross yearly wages from a firm‐managed scheme (which took the form of a termination indemnity payment, the Trattamento di Fine Rapporto scheme) to an external pension fund. We provide a theoretical framework to model the workers' problem of choosing between these two different forms of complementary social security schemes and we then perform an agent‐based simulation taking into account all the details of the reform. Differently from previous contributions, we stress the impact that the investment decision has on the financial health of firms and, consequently, on workers' employment stability. Our simulations are able to replicate the Italian data in terms of adhesion rates to complementary social security and also to identify some of the key determinants of that outcome, such as fiscal incentives, individual preferences, the working of both the Italian labour and the financial markets and the productive structure of the Italian economy.     

盟员行为偏好下生鲜农产品供应链生鲜努力激励机制与协调研究

本文建立了"合作社+核心企业"模式下两阶段折扣定价的二级生鲜农产品供应链，基于消费者生鲜偏好、价格敏感度对市场需求的影响，选取Nash谈判解作为公平参考点，引入合作社公平偏好理论，研究供应链盟员保鲜投入决策。针对合作社保鲜努力激励，探讨供应链盟员偏好对保鲜努力水平以及收益共享契约激励协调效果的影响。研究发现，消费者生鲜偏好的提高能够促进收益共享契约的激励效果，并且提高合作社公平效用。同时，收益共享契约在第一阶段对保鲜努力水平的激励效果优于第二阶段，而在第二阶段联合使用收益共享和成本分摊能够显著提高该阶段的保鲜投入。     

Knowledge Strategies,Firm Types,and Complementarity in Human-Resource Practices

This paper argues that complementary humanresource practices play an important role inthe development of a knowledge based theory offirm. In general, such a theory might beadvanced through investigating complementarycoordination mechanisms as components ofgovernance structures. In particular, humanresource practice combinations contribute ascoordination mechanisms to organise knowledgecreation and exploitation in complex socialrelations. Yet, little is known about why and howinnovation strategies and activity systems ofdifferent firm types relate to combinations ofhuman resource practices. We address this gapby investigating the impact of firm types andknowledge strategies pursued on the applicationof human resource practices in a multisectoralsample of 684 manufacturing and 1,200non-manufacturing firms. We find that theadoption of practices applied differ with thecharacteristics of knowledge strategies andwith firm types. In addition, after controllingfor these differences, we find thatcomplementarity effects among practices arepresent in varying degrees. The implications ofour findings include that there are fewerrestrictions to combinations of coordinationmechanisms than widely assumed.     

Using incentives to address cannibalization

In a decentralized multi-product firm, different products within the firm sometimes compete with one another for the same customers. This paper proposes managing such cannibalistic behavior with incentives. Designing the appropriate incentives requires detailed information on how the sales of one product impact the profitability of other products. As this paper shows, the only additional information required is the second choice preferences of buyers. Drawing on successful development by General Motors, this paper shows how this information can be collected and used to develop cannibalization incentives. While developed for the automotive industry, this approach is applicable across industries.     

The Phenomenology of Earnings Management within the Confines of Agency Theory

Agents' selective and acceptable reporting of economic events by different accounting systems, compounded by alternative accounting methods and estimates, make financial statements an approximation of economic reality. The tendency to delay accounting recognition of some transactions suggests that financial statements lag behind reality. The difference between reality and imaginary is often referred to as the agency problem. An essential characteristic of this problem is risk attitudes of principals (shareholders) and agents (management). Shareholders are considered risk neutral in their preferences for individual firms. They are in a position to diversify their shareholdings across multiple firms. Agents on the other hand have security and income that are inextricably linked to one firm. It would not be surprising to find agents exhibiting risk aversion in decisions regarding the firm. Immediately one's attention is drawn to the opportunity costs that arise for the risk-neutral shareholders who prefer that agents maximize their returns. The risk differential between agents and principals creates a problem in principal-agent relationship. It is within this framework that supervisory and incentive alignment mechanisms that alter the risk orientation of agents are set up. Powerful incentives act upon agents as they exercise their judgment, particularly when the judgment can trigger a stock market response that will, in turn, affect the firm in numerous ways. The responsibility of agents is to manage earnings. From a principal's perspective not all of the methods used to achieve this goal are equally desirable. Agents can either increase productivity or they can strategically manipulate accounting choices to affect earnings. The latter method need not come with any associated changes in productivity. Consequently, there is misstatement of the financial results and position. The calculus of earnings management is considered within the confines of agents' treatment of risk. Using an Agency Theory framework, this study examines the techniques used by agents to manage and manipulate earnings. The study initially tests the hypothesis whether earnings are really managed. For this purpose two manipulation indices were developed and based upon these indices the phenomenology earnings management was considered.     

Strategic Sourcing in the Presence of Uncertain Supply and Retail Competition

This study develops an analytical model to evaluate competing retail firms' sourcing strategies in the presence of supply uncertainty. We consider a common supplier that sells its uncertain supply to two downstream retail firms engaging in price competition in a horizontally differentiated product market. The focal firm has a dual‐sourcing option, while the rival firm can only source from the common supplier. We assess the system‐wide effects of supply uncertainty on the focal firm's incentive to pursue the dual‐sourcing strategy. We find that the focal firm's dual‐sourcing strategy can create a win–win situation that leads to increased retail prices and expected profits for both firms. Furthermore, under certain conditions, we show that it is beneficial for the focal firm to strategically source from the common supplier, even if its alternative supplier offers a lower wholesale price. Overall, we identify two types of incentives for adopting the dual‐sourcing strategy: the incentive of mitigating supply risk through supplier diversification and the incentive of strategic sourcing for more effective retail competition.     

内在激励对企业外在激励供给策略的影响研究

在员工拥有内在激励的情形下,探讨企业对于外在激励的最优供给策略。研究表明:随着员工内在激励水平的提高,企业对于外在激励的最优供给水平并不一定因此而降低;在员工内在激励发生变化的情形下,企业是否增加、减少或维持其外在激励的供给水平,实际上取决于收益函数对员工努力水平的二阶导数;随着员工内在激励的提高,无论企业所提供的最优外在激励是增加、减少或不变,员工的总激励总会提高;且企业利润是员工内在激励的增函数。     

Board size and firm value: evidence from Australia

We study the effect of board size on firm value in Australia. Using a large sample of Australian firms over the period 2001–2011, we find strong evidence of a negative relationship. We show that firms with a large board are associated with CEO compensation that is sensitive to firm size, but not to firm performance. This incentive to accumulate assets is congruent with the fact that firms with a large board also exhibit lower operating performance and higher operating costs. Furthermore, we find that the effect of board size is stronger in small firms. This result might explain why earlier studies, which focused on large Australian firms, found board size to have little impact on firm value.     

When Are Local Incentive Constraints Sufficient?

We study the question of whether local incentive constraints are sufficient to imply full incentive compatibility in a variety of mechanism design settings, allowing for probabilistic mechanisms. We give a unified approach that covers both continuous and discrete type spaces. On many common preference domains—including any convex domain of cardinal or ordinal preferences, single‐peaked ordinal preferences, and successive single‐crossing ordinal preferences—local incentive compatibility (suitably defined) implies full incentive compatibility. On domains of cardinal preferences that satisfy a strong nonconvexity condition, local incentive compatibility is not sufficient. Our sufficiency results hold for dominant‐strategy and Bayesian Nash solution concepts, and allow for some interdependence in preferences.     

Design for the Environment: Life‐Cycle Approach Using a Newsvendor Model

Introducing environmental innovations in product and process design can affect the product's cost and demand, as well as the environmental impact in different stages of its life cycle (such as manufacturing and use stages). In this article, we advance understanding on where such design changes can be most effective economically to the firm and examine their corresponding environmental consequences. We consider a profit maximizing firm (newsvendor) deciding on the production quantity as well as its environmentally focused design efforts. We focus our results along the two dimensions of demand characteristics and life‐cycle environmental impact levels, specifically functional vs. innovative products, and higher manufacturing stage environmental impact vs. higher use stage environmental impact. We also discuss the environmental impact of overproduction and how it relates to the different types of products and their salvage options. We find that although the environmental impact per unit always improves when firms use eco‐efficient or demand‐enhancing innovations, the total environmental impact can either increase or decrease due to increased production quantities. We identify the conditions for such cases by looking at the environmentally focused design efforts needed to compensate for the increase in production. We also show that the environmental impact of overproduction plays an important role in the overall environmental impact of the firm. We conclude by applying our model to different product categories.     

A risk perception model of alliance structuring

The literature on the strategic alliance structuring process does not provide an adequate view of the role of decision-makers in that process, especially about how alliance partners form their structural preferences. Given the critical role of structure in alliance management, the decision-making process regarding the choice of an appropriate alliance structure deserves particular research attention. We propose a model of strategic alliance structuring that has managerial risk perception as its core. Our model consists of the following parts: the antecedents of risk perception, relational risk and performance risk, risk perception and structural preference, and the resolution of preferences. We suggest that the structural preferences of partners are based on their perceptions of relational risk and performance risk, and the overall objective is to minimize the total risk. We also develop a number of propositions as elaboration of the model to facilitate empirical research and the effective management of the structuring process.     

Managerial incentive, organizational slack, and performance: empirical analysis of Japanese firms’ behavior

The main purpose of this study is to investigate how organizational slack is created and how it affects a firm’s performance. To address these questions, we construct three equations: managerial incentive function, organizational slack formation function and performance function, and we apply 3SLS simultaneously to these functions by using the data sets of 2,791 Japanese firms from the years 2001 and 2006. From the empirical analysis of these Japanese firms, we obtain the following results: a firm’s performance declines as organizational slack increases; organizational slack is affected by annual change rate of revenues but not by managerial incentive; managerial incentive decreases as a firm’s performance improves while it increases as the structure of corporate governance is strengthened.     

Strategic Capacity Management When Customers Have Boundedly Rational Expectations

In retailing industries, such as apparel, sporting goods, customer electronics, and appliances, many firms deploy sophisticated modeling and optimization software to conduct dynamic pricing in response to uncertain and fluctuating market conditions. However, the possibility of markdown pricing creates an incentive for customers to strategize over the timing of their purchases. How should a retailing firm optimally account for customer behavior when making its pricing and stocking/capacity decisions? For example, is it optimal for a firm to create rationing risk by deliberately under stocking products? In this study, we develop a stylized modeling framework to answer these questions. In our model, customers strategize over the timing of their purchases. However, customers have boundedly rational expectations in the sense of anecdotal reasoning about the firm's fill rate, i.e., they have to rely on anecdotes, past experiences, or word‐of‐mouth to infer the firm's fill rate. In our modeling framework, we distinguish two settings: (i) capacity commitment, where the firm commits to its capacity level in the long run, or (ii) the firm dynamically changes it in each season. For both settings, within the simplest form of anecdotal reasoning, we prove that strategic capacity rationing is not optimal independent of customer risk preferences. Then, using a general form of anecdotal reasoning, we provide sufficient conditions for capacity rationing to be optimal for both settings, respectively. We show that the result of strategic capacity rationing being suboptimal is fairly robust to different valuation distributions and utility functions, heterogeneous sample size, and price optimization.     

管理层自利行为与外部监督——基于信息披露的信号博弈

代理理论框架下的企业高层管理者具有普遍的自利倾向，而信息不对称是产生代理问题的重要原因。缓解代理问题的方法不外乎监督，激励和减少信息不对称。现有文献通常分别考察以上三种机制对缓解代理问题的作用，本文则构建了管理层与企业外部监督者之间的信号博弈模型，同时考虑监督、激励和信息披露之间的互动，分析外部监管对高管自利行为的有效监督机制。研究表明：在缺少激励机制的情况下，以信息披露质量为信号的博弈仅存在一个低效率的混合均衡，即无论高管是否存在自利行为，都会选择低的信息披露质量。而在对高管选择高质量的信息披露策略给予一定的奖励时，可以实现分离均衡。由此我们提出新的包含奖励的信息披露激励机制以及在这一机制下外部监管者的最优策略选择。利用金牌董秘的评选及其对外部监管的信号效应，我们为理论模型的结论提供了实证支持。