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on Industrial Organization |
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Issue of 2024‒05‒27
eight papers chosen by |
| By: | Buhui Qiu; Teng Wang |
| Abstract: | This paper examines corporate mergers and acquisitions (M&A) outcomes under lender scrutiny. Using the unique shocks of U.S. supervisory stress testing, we find that firms under increased lender scrutiny after their relationship banks fail stress tests engage in fewer but higher-quality M&A deals. Evidence from comprehensive supervisory data reveals improved credit quality for newly originated M&A-related loans under enhanced lender scrutiny. This improvement is further evident in positive stock return reactions to M&A deals financed by loans subject to enhanced lender scrutiny. As companies engage in fewer but higher-quality deals, they also experience higher returns on assets. Our findings highlight the importance of lender scrutiny in corporate M&A activities. |
| Keywords: | Mergers and acquisitions; Lender scrutiny; Stress tests |
| JEL: | G21 G34 |
| Date: | 2024–04–19 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2024-25&r=ind |
| By: | John M. Barrios; Jeremy Bertomeu; Radhika Lunawat; Ibrahima Sall |
| Abstract: | We examine the impacts of ethical declarations on market transactions through a controlled laboratory experiment, where privately-informed sellers issue a public report prior to a first-price auction. We find that while signing an ethical statement does not reduce misreporting by sellers, it significantly increases buyer trust, often skewing the terms of the trade in favor of sellers. Contrary to rational expectations, buyers consistently struggle to undo the bias. In counterfactual scenarios, from our structural analysis, we find that price efficiency improves when buyers rationally process uncertainty about sellers' ethical preferences, yet bias persists even when buyers have more accurate perceptions of sellers'’ ethical standards. Overall, our results suggests that disclosure interventions aimed at enhancing ethical conduct in market settings may not necessarily lead to more efficient pricing or reduced bias, and in some instances, may even disadvantage certain market participants. |
| JEL: | D53 G10 G14 G4 G41 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32385&r=ind |
| By: | Gayle, Philip |
| Abstract: | This study examines whether nonprofits (NP) engage in ‘excessive’ fundraising (EF) relative to what may be socially optimal. The investigation requires using a structural empirical model to approximate socially optimal fundraising levels. The analysis reveals evidence of EF of up to 31% in a year and identifies the “donor-stealing” attribute of fundraising across rival NPs as a key driver of EF. I show that if rival NPs cooperatively set fundraising levels, then this practice effectively eliminates EF since each NP internalizes the “donor-stealing” effect. The findings support united fund drives like those we see mobilized by the United Way. |
| Keywords: | Nonprofit Organizations; Excessive Fundraising |
| JEL: | L13 L22 L30 |
| Date: | 2024–04–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120684&r=ind |
| By: | Joaquin Vespignani (Tasmanian School of Business and Economics, University of Tasmania, Australia); Russell Smyth (Department of Economics, Monash University, Clayton, Australia) |
| Abstract: | This paper employs insights from earth science on the financial risk of project developments to present an economic theory of critical minerals. Our theory posits that back-ended critical mineral projects that have unaddressed technical and nontechnical barriers, such as those involving lithium and cobalt, exhibit an additional risk for investors which we term the “back-ended risk premium”. We show that the back-ended risk premium increases the cost of capital and, therefore, has the potential to reduce investment in the sector. We posit that the back-ended risk premium may also reduce the gains in productivity expected from artificial intelligence (AI) technologies in the mining sector. Progress in AI may, however, lessen the back-ended risk premium itself through shortening the duration of mining projects and the required rate of investment through reducing the associated risk. We conclude that the best way to reduce the costs associated with energy transition is for governments to invest heavily in AI mining technologies and research. |
| Keywords: | Critical Minerals, Artificial Intelligence, Risk Premium |
| JEL: | Q02 Q40 Q50 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2024-08&r=ind |
| By: | Gayle, Philip |
| Abstract: | This study examines the extent to which government grants to nonprofits crowd-out or crowd-in private giving to them. Grants influence private giving via two channels: (i) “directly” through donors’ preference-induced optimal change in their giving in response to the grants; and (ii) “indirectly” through nonprofits’ optimally changing their fundraising efforts, which in turn influence private giving. I use a structural model that disentangles the two channels and explains the mixed empirical results in the literature on the crowd-out/crowd-in hypothesis. Relative strengths of the “direct” and “indirect” channels depend on the presence of strategic interaction among nonprofits with respect to fundraising. |
| Keywords: | Nonprofit Organizations; Crowd-out; Crowd-in; Government Grants; Private Donations; Fundraising |
| JEL: | L13 L22 L30 |
| Date: | 2024–04–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120685&r=ind |
| By: | Ahmed Kouider Aissa; Alessandro Tampieri |
| Abstract: | We investigate the interaction between consumers' environmental concern, environmental corporate social responsibility (ECSR), and environmental regulations during the transition towards sustainable production. We study an economy in which a subpopulation of consumers is sensitive to environmental issues. In this setting, we analyse the steady-state equilibrium in a framework à la Droste et al. (2002), where rms compete in quantities and decide whether or not to engage in ECSR activities, which ultimately reduce the impact of production on the environment. We nd that the variation of social welfare with the increase of ECSR rms is U-shaped, driven by the variation in consumer surplus, while environmental damage is minimised when all rms adopt ECSR practices. Therefore, the short-run social incentives to pursue a transition towards sustainable production are scarce. In contrast, there exists a private incentive to internalise emissions and to proliferate ECSR rms, as prots increase with the proportion of ECSR rms. |
| Keywords: | Mixed oligopoly markets, emission reduction investment, evolutionary dynamics |
| JEL: | C73 H23 L13 L21 M14 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2024_04.rdf&r=ind |
| By: | Jacob P. Gramlich; Serafin J. Grundl |
| Abstract: | The U.S. banking industry is well suited to assess the common ownership hypothesis (COH), because thousands of private banks without common ownership (CO) compete with hundreds of public banks with high and increasing levels of CO. This paper assesses the COH in the banking industry using more comprehensive ownership data than previous studies. In simple comparisons of raw deposit rate averages we document that (i) private banks do offer substantially more attractive deposit rates than public banks, but (ii) the deposit rates of public banks are similar in markets without CO where a single public bank competes only with private rivals, and in markets with CO where multiple public banks compete with each other. Panel regressions of deposit rates on the profit weights implied by the COH are generally consistent with the COH if only quarter FEs (without other controls) are included but not if bank-quarter FEs are included. Estimates with bank-quarter FEs are “precise zeros†with 95% CIs suggesting that the threefold rise in CO among public banks between 2005 and 2022 moved their deposit rates by less than a quarter of a basis point in either direction. To assess the COH along non-price dimensions we also estimate the effect of CO on deposit quantities, and find that the estimates are also not consistent with the COH. |
| Keywords: | Bank competition; Common ownership |
| JEL: | L40 L10 G34 G21 L20 |
| Date: | 2024–04–19 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2024-22&r=ind |
| By: | Colleen Carey; Michael Daly; Jing Li |
| Abstract: | Physicians commonly receive marketing-related transfers from drug firms. We examine the impact of these relationships on the prescribing of physician-administered cancer drugs in Medicare. We find that prescribing of the associated drug increases 4\% in the twelve months after a payment is received, with the increase beginning sharply in the month of payment and fading out within a year. A marketing payment also leads physicians to begin treating cancer patients with lower expected mortality. While payments result in greater expenditure on cancer drugs, there are no associated improvements in patient mortality. |
| JEL: | I11 L15 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32336&r=ind |