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The Market for “Lemons”: Quality Uncertainty and the Market Mechanism

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Abstract

This paper relates quality and uncertainty. The existence of goods of many grades poses interesting and important problems for the theory of markets. On the one hand, the interaction of quality differences and uncertainty may explain important institutions of the labor market. On the other hand, this paper presents a struggling attempt to give structure to the statement: “Business in under-developed countries is difficult”; in particular, a structure is given for determining the economic costs of dishonesty. Additional applications of the theory include comments on the structure of money markets, on the notion of “insurability,” on the liquidity of durables, and on brand-name goods.

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... For example, some vendors failed to provide privacy policy regarding how they utilize the customer's information collected. 1 Some online vendors of used cars are unwilling to disclose clear warranty policy about their products [19]. ...
... In the B2C e-commerce context, information transparency is defined as the extent to which website information is available and accessible to consumers [32,94]. Although information transparency has been recognized as a key factor affecting consumers' purchase behaviors in e-commerce, the underlying mechanism by which information transparency influences consumers' purchase intention is still unknown, and thus, no practical guidance is available to e-vendors to 1. What types of information on a B2C e-commerce website influences consumers perceived transparency towards the website? 2. How does consumers perceived information transparency towards a B2C e-commerce website influence their intention to purchase from the website? ...
... To better understand the nature of the effect of perceived information transparency on intention to purchase, we draw upon the perspective of the agency theory to explicate transactional arrangements between self-interested parties (principal and agent) with incongruent goals in the presence of information asymmetry [1,45]. It has been empathized that the agency theory research in the context of information systems should focus on risks [21]. ...
... Conforme essa teoria, em uma transação entre dois agentes, existirá de um lado aquele que busca se apropriar de valor e de outro aquele que procura mecanismos para se defender contra a apropriação de valor. Em um contexto de assimetria de informação -em que um dos agentes possui melhores condições de mensurar e conhecer as dimensões transacionadas -o risco de apropriação de valor é crescente (AKERLOF, 1970). Desse modo, para a ECM, a informação, advinda da mensuração, é elemento essencial na discussão da eficiência das transações, visto que é custosa para se produzir e complexa para se transmitir entre os agentes (BARZEL, 2005). ...
... Nessas situações em que a possibilidade de mensuração da qualidade é dificultada, Barzel (2006) ainda argumenta que o vendedor deve oferecer o máximo de informações possível, além de oferecer garantias que reduzam o risco do comprador, a fim de facilitar a ocorrência da transação e da relação de longo-prazo com seus compradores. É importante ainda considerar que, situações de assimetria de informação possibilitam também a ocorrência de seleção adversa entre os agentes, beneficiando aquele que possui maior acesso à informação (AKERLOF, 1970). Entretanto essa situação pode, no futuro, prejudicar a relação de longo-prazo e novas transações. ...
... Entretanto, a informação é incompleta e há uma assimetria de informação entre os agentes, dado que as partes não são capazes de distinguir plenamente as reais qualidade de um ativo (AKERLOF, 1970;BARZEL, 1997). Sendo a informação incompleta, os direitos de propriedade não são bem definidos, deixando parte do valor em domínio público. ...
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Face às mudanças provocadas pela COVID-19, observam-se problemas relacionados à assimetria de informação na relação entre compradores e vendedores de produtos agroalimentares. Neste estudo, através de uma discussão bibliográfica, buscou-se compreender como as mudanças causadas pela COVID-19 na distribuição de alimentos podem impactar na relação entre compradores e vendedores de produtos agroalimentares, em especial frutas, legumes e verduras. Observou-se que as restrições na distribuição em supermercados, feiras livres e mercado online dificultam ou impedem a mensuração da qualidade dos produtos por parte dos compradores. Nesse contexto, os compradores têm a sua avaliação limitada a informações que o vendedor passa acerca dos atributos de qualidade, podendo implicar em problemas de apropriação de valor. Conclui-se que as mudanças na distribuição de produtos agroalimentares, ainda que garantam o acesso aos suprimentos, trazem riscos à relação entre compradores e vendedores quando se consideram assimetria de informação e seleção adversa.
... In principle, the resource-based view (e.g., Barney, 1991) postulates that ventures that possess a larger set of unique resources are more valuable. However, scholars agree that the often large information asymmetries between venture insiders and external investors generate a lemon premium (Akerlof, 1970). Entrepreneurial ventures often have limited track records, their assets are predominantly intangible, and their operations are surrounded by high uncertainty. ...
... Early-stage financial intermediaries (IVCs-GVCS) -Contracting Theory (Hellmann, 1998) -Property Rights Theory (Grossman & Hart, 1987;Hart & Moore, 1990) -Theory of Contingent Control (Aghion & Bolton, 1992) CVCs -Network Theory (Knoke & Burt, 1983) -Standard bargaining theory (Masulis & Nahata, 2009) Scale-up / Exit: -Social Identity Theory (Fauchart & Gruber, 2011) -Threshold Theory (DeTienne, 2010Gimeno et al., 1997), Prospect Theory (Kahneman & Tversky, 1979;Wennberg et al., 2010), Aspiration Theory (Greve, 1998) -Expected Utility Theory (Becker, 1965;Douglas & Shepherd, 2000) IPOs -Timing: Window-of-Opportunity Theory (Ritter, 1991) -Pricing: Winner's curse (Akerlof, 1970;Rock, 1986) Late-stage Financial Intermediaries (PEs) -Multiple agency frameworks (Batt & Appelbaum, 2020) M&As by Corporations -Auction Theory (Wu et al., 2013) -Industrial Organization Theory: Efficiency Enhancing Merger; Anticompetitive Merger (Stigler, 1950) -Matching Theory of Ownership Change (Lichtenberg & Siegel, 1987, 1989 -Property Rights Theory (Grossman & Hart, 1987;Hart & Moore, 1990) -Theory of Transaction Costs (Williamson, 1973(Williamson, , 1975(Williamson, , 1979 What drives the valuation of entrepreneurial ventures? A map to navigate the literature and… of new digital markets, such as ICOs, that presents retail investors with the opportunities but also the challenges of direct assessments of entrepreneurial ventures •Drivers related to growth opportunities, market conditions, and institutional factors need to be further investigated in seed and early-stage milestones, such as equity crowdfunding campaigns and ICOs (e.g., Masiak et al., 2020) •We need more exploration of the behavioral characteristics of investors in new digital milestones •Investors in new digital milestones have access to a large amount of noisy information. ...
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Plain English Summary In this paper, we conduct a systematic literature review on entrepreneurial ventures’ valuation drivers and their underlying theoretical lenses, highlighting how and why they vary along firms’ life cycle. The valuation of entrepreneurial ventures is a challenging task for practitioners and a relevant issue that attracts the attention of scholars in entrepreneurship, finance, management, and economics. The literature on the topic is highly fragmented. Indeed, the context in which venture valuations are observed (e.g., in private deals or public offerings) differs across different financial milestones. The introduction of new digital financing channels (e.g., crowdfunding, initial coin offerings) and the increased diversity in the sequence of financial milestones that ventures go through further challenge our understanding of valuation drivers. This study is primarily aimed at scholars, offering them a map to create order in what we know about the drivers of entrepreneurial venture valuations and indicating promising avenues for future research.
... The positive relationship may stem from the fact that decommissioning disclosure is unfavourable information ; however, oil and gas firms have incentives to provide more details about the decommissioning provision or process reduce the probability of being considered 'a lemon' by investors (Akerlof 1970). If a firm does not provide disclosures, this might be seen as withholding negative information, which could drive investors to lower the market value of the Table 6 Correlation table *p < 0.05, **p < 0.01, ***p < 0.001, representing 10%, 1%, and 0.01% significance levels Variables firm . ...
... Oil and gas firms may have incentives to provide more details about the decommissioning provision or process to reduce the probability of being considered 'a lemon' by investors (Akerlof 1970). Signalling theory posits that firm performance can drive share prices and market value. ...
Article
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Oil and gas reserves and asset decommissioning are the most significant cash flow indicators of the oil and gas industry. Investors use disclosures by oil and gas firms to estimate future cash flows. Thus, this study examines impacts of oil and gas reserve disclosures and disclosures of decommissioning costs of oil and gas assets on the financial performance and value of listed oil and gas companies in the UK. We survey data from 52 listed firms. We conclude that whilst mandatory and voluntary reserve disclosures negatively impact firms’ performance, they positively impact value. Mandatory decommissioning disclosures are positively related to performance and value. Voluntary decommissioning disclosures negatively correlate with firms’ value, but positively relate with firms’ performance. These findings contribute to the debate around the usefulness and impacts of oil and gas reserves disclosures and disclosures of decommissioning costs of oil and gas assets on companies values and performance.
... The above definitions appear to be one-sided and only characterized those endogenous factors from the supply side (banks) while ignoring other hindrances to access to credit which may emanate from the potential borrowers (SMEs). However, Akerlof (1970) intervened and brought a more holistic argument about the theory. He drew attention to information problems (that is, information asymmetry) among business enterprises in retarding the development of lending markets especially in developing economies. ...
... Obi and Uzodigwe (2016) conducted a threshold analysis of inflation in Nigeria using annual data from 1970 to 2015. The study was divided into four different periods of pre-SAP era (1970( -1986( ), post-SAP era (1986, the civil rule era (1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011)(2012)(2013)(2014)(2015) and the whole sample period 1970-2015. The study equally found four different inflationary thresholds; one each for a period. ...
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High unemployment and poverty rate have become alarming over the world especially in Sub-Saharan Africa. Consequently, several poverty alleviation and employment generation programmes have been implemented by Nigerian governments. Root Tubers Expansion Programme (RTEP) is one of such programmes. Past researches have been carried out on challenges and effect of RTEP’s technologies on farmers’ productivity and poverty alleviation, but no indebt research on effect of RTEP on micro-scale cassava processors’ (MSCPs) products’ quality. This research intends to close this gap by assessing the effect of RTEP on the quality of MSCPs’ products. Survey design was used for the study, and the MSCPs were selected with multistage sampling technique. Data from 151 respondents were gathered with structured questionnaire and analysed with descriptive statistic. Hypothesis was tested with t-test at 5% significant level. The level of significance of .000 respectively which were lower than the table value of 0.05 were obtained from the t-test meaning there was a significant difference in MSCPs products’ quality before and after partaking in RTEP. The paper recommends the implementation of more integrative poverty alleviation and employment generation programmes to improve the MSCPs products’ quality and make them more competitive in local and world markets.
... We argue that a combination of higher interest rates, a reducing pool of borrowers and the requirement to satisfy shareholders' demand for profit will induce banks to allocate their lending towards high-risk, high-return projects, hence increasing banks' default risk. A compounding factor is when higher loan interest rates apply, borrowers are more likely to commit to riskier projects (in the quest to realise higher returns), thus increasing moral hazard problems and exposing banks to greater default risk (Akerlof, 1970;Stiglitz & Weiss, 1981;Boyd & De Nicoló, 2005). Further, relatively higher interest charges may result in a riskier set of bank borrowings due to greater adverse selection. ...
... In addition, higher lending rates will likely deepen the adverse selection problem or 'lemon' problem as first described by Akerlof (1970). That is, banks charge an average (macro) ...
Article
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We show that bank risk rises, particularly for larger banks and those with greater interest-sensitive liabilities, during times of economic policy uncertainty through two economic channels: 'credit rationing' and 'revenue diversification'. The credit rationing channel shows that economic policy uncertainty increases aggregate loan spreads, exacerbating both adverse selection and moral hazard problems leading to higher bank risk. The revenue diversification channel suggests that as economic policy uncertainty reduces bank profits from traditional interest-based products, banks diversify into other non-traditional activities, thereby increasing their instability. Overall, our findings highlight the impact of economic policy uncertainty on exacerbating bank risk.
... The direct effect observed in all the experiments presented in this article was that the market mindset significantly hampers declared trust toward others. The recurrent presence of such an effect in our experimental project might seem puzzling because theoretical considerations along with evidence found in research indicate that trust is both necessary and present in market settings as it catalyzes transactions and sustains the economic system as a whole (Aghion et al., 2010;Akerlof, 1970;Cohen, 2020;Fukuyama, 1995;Zak & Knack, 2001). Although business-type interactions are typically regulated by various written agreements, they rarely reduce uncertainty entirely as a complete substitute for trust (McCannon et al., 2018). ...
... If, in such a case, trust is reciprocated, both transaction sides avoid lengthy and costly litigation. We might even say that the economic system would be paralyzed if everybody on the market strictly followed the principle of limited trust or did not trust others at all (Akerlof, 1970). One more example which supports the reasoning that trust is inevitably involved in the economic system is the Trust Game (Berg et al., 1995), which has been widely used to study trusting decisions in various financial contexts. ...
Article
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In a series of five experiments, we provided evidence that evoking the market mindset negatively affects trust. We found that the market mindset reduces trust compared to the communal mindset (Experiment 1) and a neutral condition (Experiment 2). Next, we examined the psychological mechanisms behind the detrimental effect of the market mindset on trust and found that this effect was mediated by enhanced proportional thinking (Experiments 3 and 4) and reduced state empathy (Experiments 4 and 5). Finally, in a preregistered Experiment 5, we showed that these two psychological mechanisms are relatively independent.
... Information asymmetry between buyers and sellers leads to buyers being unable to obtain sufficient vehicle information, and sellers can take advantage to sell lower-quality cars to ill-informed buyers. Akerlof warned that the market may crash in the limit, because the average quality of cars will be lower than that of the population of cars in the 'lemon' used car market, thus low-quality cars will drive high-quality cars out of the market [4]. One possible way to solve the harm dealt by information asymmetry in the used car industry is to set up a blockchain platform that would make information about second-hand cars more transparent [6]. ...
... For Random Forest Regression Model, we create two sets of adjustable parameters, the number of trees in the forest (n_estimators) is set as [3,10,30,60] for both sets and the number of features to consider when looking for the best split (max_features) is set as [2,4,6,8] for both sets. The only difference between the two sets is bootstrap is set as True in set 1 by default but False in set 2. ...
... For example, in a market transaction, where price is the coordinating mechanism, how can an exchange partner understand that the price is efficient without access to appropriate sources of additional information? The market with its efficient price mechanism can lead to a lack of optimal results without access to other types of information (Spence 1973;Akerlof 1978). Even in the modern economy the lack of information still leads to a market for lemons (e.g., low quality product that is still sold) (Akerlof 1978). ...
... The market with its efficient price mechanism can lead to a lack of optimal results without access to other types of information (Spence 1973;Akerlof 1978). Even in the modern economy the lack of information still leads to a market for lemons (e.g., low quality product that is still sold) (Akerlof 1978). People form social relationships, in part, to reduce asymmetrical information in exchange. ...
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To date much of the entrepreneurial ecosystems literature treated ecosystems as confined geographic locations with definitive boards. However, in the past decades, technological innovation and developments in social relationships (e.g., online platforms, social media, and the sharing economy) have extended and blurred the boundaries of entrepreneurial ecosystems. Thus, current research on entrepreneurial ecosystems often underestimates the reach and impacts of a given ecosystem. To remedy this, we advocate the use of a more holistic approach in modern entrepreneurial ecosystems frameworks which includes social relationships and technology, thus extending beyond geographical barriers. We discuss how technology has dissolved locational barriers and connected elements of ecosystems, how social relationships maximize advantages through greater resource access, and how the entrepreneurship ecosystem now exists on a plane that is both physical and cyber.
... Eventually, this situation will create a "lemon market," which might lead to reduced user engagement and, ultimately, failure of the crowdsourcing market. Akerlof(1978) presented the lemon market theory in his ground-breaking paper about the consequences of information asymmetry. In markets in which it is impossible to assess the quality of a product/service, the seller has more information than the buyer, which has the result that high quality products and services leave the market, since they only sell at the rate of averagemarket-quality goods. ...
... Due to the malicious behavior of the sponsors, high-quality works do not get the reward they deserve, and thus, workers are unwilling to invest substantial time and energy in carrying out high-level innovation and only provide works of average quality; this will lead to the gradual degradation of the quality of work in the crowdsourcing market. On the other hand, Akerlof's (1978) paper also talked about the "cost of dishonesty," which lies not only in the amount by which the purchaser is cheated but must also include the loss incurred from driving legitimate business out of existence. Similarly, the projects of honest sponsors will also be affected in that they will not be able to obtain the expected excellent and satisfactory works, which means other sponsors may be reluctant to invest much in rewards. ...
Article
As an important mode of open innovation, crowdsourcing can effectively integrate external resources, enabling enterprises to obtain stronger competitiveness and more benefits at a faster speed and lower cost. However, this mode has inevitable intellectual property protection challenges, especially on contest-based crowdsourcing platforms. Previous studies mostly focused on the protection of the rights of sponsors while ignoring the rights of workers, rarely paying attention to sponsor fraud, which may reduce the enthusiasm of participants and eventually turn crowdsourcing;' into a lemon market. This study proposes several fraud detection models to address this problem on contest-based crowdsourcing platforms. Furthermore, this paper explores and compares the value of four types of information as deception cues in crowdsourcing contexts via data mining technology and machine learning methods. The results benefit participants in crowdsourcing markets and contribute to fraud detection research and open innovation in the knowledge economy.
... MFIs use an intermediation system that relies on the (i) social monitoring of loans through the engagement of self-selected borrower groups and the (ii) pooling of economic surplus through donations, in addition to deposits. Thereby, MFIs overcome the information asymmetries, adverse selection, and moral hazard problems in offering financial services (Akerlof, 1970;Stiglitz & Weiss, 1983) to people who are not eligible to access traditional banking services. Banks and MFIs provide financial intermediation services to the people, albeit in different ways. ...
... Essentially, the financial intermediaries help mobilize savings and minimize potential investments searching costs, thus facilitating funds transfer from savers to investors (Allen & Santomero, 1997). Historically, the traditional banking system evolved, providing intermediation services to mitigate information asymmetry, adverse selection of borrowers and lenders (Akerlof, 1970), and moral hazard problems (Stiglitz & Weiss, 1983). The theoretical view of financial intermediation does not differentiate between the classes of savers and borrowers but emphasizes making everyone bankable. ...
Article
Microfinance institutions (MFIs) use an alternative financial intermediation system (business model) to offer banking services for the marginal people where collateral-based conventional banking has not been effective. They facilitate collateral-free lending through close loan monitoring and possess a distinct capability to collect savings via donations (besides deposits). We assert that the unique intermediation model presents MFIs with a lower credit risk; however, that comes at the cost of higher business risk. We provide empirical support for our argument by analyzing a broad cross-country dataset comprising banks and MFIs from 68 countries. We show that MFIs maintain a lower non-performing loan ratio but retain higher cash and capital ratios and a smaller deposit ratio than banks. We provide insights into the areas of variation between two dissimilar models for financial intermediation, associated risks, and prospects for integrating them within a common regulatory framework.
... Misconduct ranges from simple and comparatively inconsequential 'shirking' to egregious and consequential misconduct such as theft and fraud. Agency theory (Jensen and Meckling 1976) asserts that these issues are, essentially, Hayekian knowledge problems, or information asymmetries (Akerlof 1970), between principal and agent. The corporate context is almost universally hierarchical to some extent, the principal delegating the firm's complex tasks to specialist agents. ...
... As a result, each individual's distinct knowledge is placed at that individual's own behest, their utility maximization efforts further bolstered by mutually beneficial exchange. Not all such asymmetries are thus mitigated, however-intellectual property protections and lemons problems (Akerlof 1970) can leave persistent inefficiencies. Yet, in Akerlof's used car example, even these asymmetry problems have been largely mitigated over time with innovative market solutions. ...
Article
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The theory and practice of corporate governance has been in something of an arms race with corporate malefactors-as corporate governance mechanisms have incrementally advance, so too have the strategies of malefactors who skirt those gov-ernance practices to engage in costly misconduct. Modern centralized governance approaches appear inapt to filling the gaps caused by agency and knowledge problems. Here, we start afresh using the atypical 'praxeological' method to reconstruct governance theory anew from basic foundations. The resultant theory is distinctive from prevailing corporate governance theorizing in several key ways. One of the more important conclusions from our reconstructed theory is that governance may benefit from a more 'market' or decentralized approach. In short, the governance holes derived from agency and knowledge problems are, or may be, much smaller when governance is decentralized, where employees police each other. While the implementation of such a radical rethinking of governance practice is left ambiguous in our treatment, the theoretical basis for such an approach is compelling. Keywords Corporate governance · Agency theory · Knowledge asymmetry · Ownership · Management · Praxeological method JEL Classification G30 · G34 · O16 · B53 · D82 · D86 Most directors today recognize the importance of robust oversight, but it is unclear whether boards, as they are currently constituted and operate, are up to the task. The increasing size and complexity of companies, the expanding array of risk areas, and the difficulty boards have in getting the information needed to exercise effective oversight all bode poorly for a positive answer to this question.
... There are two potential agency problems in the NCG model that stem from information asymmetries between the principal and the agent: 1. adverse selection, and 2. moral hazard (see e.g. Akerlof, 1970;Dembe & Boden, 2000;Landström, 2017). Adverse selection occurs if foreign shareholders eschew investments in listed companies due to a fear of large domestic owners' misbehaviour. ...
Article
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This paper examines the relationship between ownership concentration and firm performance within the Nordic corporate governance model. Using data on Finnish publicly listed companies (PLCs) during a period of economic growth and stability, we find that the ownership share of the largest owner is negatively related to Tobin's Q. We posit that certain blockholders may exchange their active monitoring and control function of the management for the private benefits of control, which is an inherent risk of the Nordic Corporate Governance (NCG) model. We find that state ownership is negatively associated with Tobin's Q, suggesting that government owners might promote politically desirable goals rather than create long-term value for all shareholders. It is plausible that certain domestic blockholders render PLCs with a concentrated ownership structure less a ractive to foreign investors.
... Concurrently, the experts' intrinsic accuracy is distinct from the honesty of their public testimony. Their epistemic advantage over laypeople allows them to pursue ends that are not necessarily compatible with those of their clients (Akerlof 1970). In short, experts-no matter how accurate-may be incentivized to distort their situation assessment. ...
Preprint
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The paper addresses the media filtering of experts. We consider a media firm that asks experts to assess if a given problem is major or minor so it can report the type of the problem. The media firm always first asks a generalist who can be contacted with zero cost but has limited accuracy. After observing the generalist's report, the media firm decides whether to contact a specialist. The specialist can identify the type of the problem with certainty; however, finding one is costly. We analyze how equilibria depend on the media search costs and the probability that the true state later reveals itself to the public. We demonstrate that the probability that the true state will ultimately be revealed in a way obvious to the lay public is the critical determinant of the accuracy of the reported expert testimony. If the revelation probability is low, strategizing by the experts and the media bias may prevent accurate expertise from being broadcasted. The paper suggests implementing techniques that improve the falsifiability of expert forecasts to mitigate the problem.
... Institutional political economists have devoted substantial attention to the role of government and other formal structures designed to alleviate uncertainty. From constitutional contracts (Buchanan, 2000(Buchanan, [1975; North and Weingast, 1989) to laws reducing information asymmetries (Akerlof, 1970;Grossman and Stiglitz, 1980), government is seen as providing rules and enforcement that reduce uncertainty and allow humans to interact predictably and peacefully. Recently, though, attention has shifted toward the study of culture and community selfgovernance (as opposed to government) that provide norms and rituals that harmonize social interaction within civil society (Brennan et al., 2013;Ellickson, 1991;Leeson, 2014b;Ostrom, 1990Ostrom, , 2000Skyrms, 2014Skyrms, [1996). ...
Article
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In his Scroogenomics, Joel Waldfogel argues that gifting creates enormous deadweight loss, as individuals give one another gifts that they do not want or cannot use. He views efficiency as static, calculating the gains from trade (or gifting) at the moment of transaction. A puzzle arises, however, when one realizes that gifting has been a nearly ubiquitous institution throughout history. If gifting wastes valuable resources, why does it persist? We argue that gift giving is dynamically efficient despite the possibility of generating short-term deadweight loss. A well-functioning market economy requires expanded social networks and trustworthiness among anonymous and quasi-anonymous exchange partners. Gifting allows individuals to signal trustworthiness by offering ‘burnt sacrifices’. Gifting practices that include a willingness to sacrifice via reciprocity norms, public visibility and ritual will tend to promote generalized trust. We consider these four elements – sacrifice, reciprocity, publicness, and ritual – to be critical institutional design principles for fostering dynamic efficiency. Our essay contributes to the literature on institutional economics by prompting scholars to think about the long-term (dynamic) efficiencies generated by cultural practices that appear inexplicably inefficient.
... Some argue that, if decision-making regarding app permissions was completely rational, users would grant the fewest permissions needed for their regular use of the app to protect their privacy [4]. However, due to the constant evolution of information technologies and the complex, nuanced trade-offs associated with decisions about one's personal data, users are left with incomplete information about both the set of possible privacy-relevant outcomes (e.g., sharing of location data to advertisers) and the respective consequences (e.g., receiving location-based personalized ads) [5], [6]. As users face these layers of complexity, bounded rationality and systematic psychological deviations from rationality (i.e., cognitive biases) influence the decision-making process [7]. ...
Conference Paper
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App permission requests are a control mechanism meant to help users oversee and safeguard access to data and resources on their smartphones. To decide whether to accept or deny such requests and make this consent valid, users need to understand the underlying reasons and judge the relevance of disclosing data in line with their own use of an app. This study investigates people’s certainty about app permission requests via an online survey with 400 representative participants of the UK population. The results demonstrate that users are uncertain about the necessity of granting app permissions for about half of the tested permission requests. This implies substantial privacy risks, which are discussed in the paper, resulting in a call for user-protecting interventions by privacy engineers.
... The theoretical consequences of these problems are straightforward and seem to fit with ground realities in Uganda. Higher-quality seed producers have been pushed out by lower-quality producers crowding into an imperfect market, as illustrated by the classic "lemons" problem described by Akerlof (1970). As a result, few legitimate seed companies are investing significantly in the infrastructure, equipment, and other components needed to produce quality seed. ...
Article
Efforts to increase smallholder access to improved varieties and quality seed is often central to agricultural development, economic growth and poverty reduction in low‐income countries. Yet many governments and development partners grow impatient with slow progress in their seed sectors. Uganda stands out for its recent policy innovations, regulatory reforms, and market experiments for seed, and for the extensive analysis of its experience. This paper reviews the changing landscape of Uganda’s seed system and assesses recent policy, regulatory, and institutional changes. We draw on a wide range of documents, studies, and statistics. The low uptake of improved varieties and quality seed in Uganda has encouraged innovation to overcome failures in the country’s seed market. These innovations include regulatory changes to allow the production of quality‐declared seed (QDS) by smallholder seed producers; labelling to allow text message verification of seed; and crowd‐sourcing information on seed quality by farmers. All have promise, but it remains to be seen just how effective they will be. In the meantime, vested interests may resist moves to a more innovative seed sector, instead preferring to maintain the incumbent approach designed to use seed to secure political support from smallholders. This is at variance with the spirit of the 2018 legislation and subsequent regulatory reforms. Uganda has a policy framework that could make a real difference to farmer access to better varieties and seed. Market innovations can help the vision to become reality. But the seed sector needs sufficient public investment to generate new varieties and foundation seed, and capacity to manage the seed market to the benefit of producers, dealers and farmers. Having come so far, it would be counter‐productive for political economy factors to displace the efforts of private provision which is far more sustainable in the medium and long run.
... Product differentiation through quality certification schemes may also contribute to preventing free-rider problems and information asymmetry in the market [29]. Considering that consumers cannot easily identify mountain products in the market [9,24], the application of the mountain labelling scheme to wines may facilitate the identification of the "authentic" mountain wine. ...
Article
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European Commission has recently published the rules on the use of the quality term "mountain product". The new regulation aims to promote the sustainable development of mountain areas and to facilitate the identification of mountain products by consumers. Despite the importance of viticulture for several European mountain communities and the growing interest of European consumers in quality certified foods, the regulation did not encompass wines. The literature addresses many issues regarding wines and consumer preferences, but so far mountain wines are not specifically researched. With this study, we seek to fill this gap by analysing Italian consumers’ preferences for mountain wines as well as their opinion on the inclusion of this product in the mountain labelling scheme. To do so, this study applies a best-worst scaling model and subsequent latent class analysis. Data was collected through an online questionnaire applied to a consumer panel. The results indicate that most of respondents are in favour of applying the mountain label to wines. The three most preferred attributes are related to human health, ecological sustainability and product typicity. Most of the participants gave less importance to the attributes that characterize mountain agriculture. Only one consumer segment valued some of these. The findings suggest that the inclusion of mountain wines in the labelling scheme may increase the interest of Italian wine consumers, especially if health, sustainability and typicity are ensured by producers.
... To insulate themselves from excess risk, they raise their prices for everyone, which drives the less risky subjects out of the pool. This may lead to market failure (Akerlof 1970;93, 137). When private insurers do have information on the risk profiles of their clients, they try to tailor the premiums they charge to the level of risk that a given individual adds to the pool. ...
... The seminal paper by Akerlof (1970), "market for lemons" explains asymmetric information in rather practical terms as a situation where sellers have more knowledge about a product (cars) than the buyers. Specifically, from an information for decision making perspective, the ...
... With respect to water markets, institutions have been shown to strongly affect allocative efficiency [71]. Institutions can also reduce uncertainty over the quality of services [72], for instance, by mandating quality standards [9]. Likewise, they may monitor and regulate the withdrawal of water quantities [15]. ...
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Tanker water markets (TWM) supply water services in many urban areas, including those unconnected to public infrastructures. Notwithstanding, they have been associated with outcomes in conflict with sustainability goals of water policy, e.g., through inequitable and unaffordable supply or by contributing to groundwater overexploitation. So far, the literature dedicated to TWM has primarily conducted case studies embedded in diverse local contexts, which impedes the comparison and transfer of insights. In this article, we systematically summarize existing empirical knowledge on TWM and assess to what extent normative claims about the impacts of TWM on sustainability goals are supported by evidence. We use the concept of sustainable access, which combines notions of what constitutes access to water and what characterizes sustainable supply of services. The available evidence suggests that TWM have two key functions in urban water systems: (1) They provide services at otherwise unavailable levels, particularly with respect to the temporal availability and spatial accessibility of the service, and (2) they extend access to areas without or with low-quality network supply, typically low-income communities on the fringe of cities. From the perspective of sustainable access, we find that TWM can provide high service levels and thus fill a specific gap in the landscape of urban water services. Due to comparatively high prices, however, it is unlikely that these services are affordable for all. The combination of heterogeneous access to cheaper (subsidized) piped water and marginal pricing in TWM results in allocation outcomes that are not coherent with existing notions of equitable access to water. However, there is little convincing evidence that TWM necessarily result in unsustainable water use. The literature indicates that urban water governance in the studied areas is frequently characterized by a lack of effective institutions, which impedes the regulation or formalization of TWM.
... Gender diversity on the board expands the body of knowledge used in the decisionmaking process, which improves the boards' ability to exercise their strategic and monitoring roles (García-Meca et al., 2022& Tuggle et al., 2010. According to the agency theories, senior management, signaling and legitimacy, and gender diversity on the board of directors improve independence, monitoring and the decision-making process, increases the company's legitimacy, acceptance and reputation with its stakeholders, and also improves the company's financial performance, signaling equality, transparency and good governance (Akerlof, 1978& Deegan, 2019& Hambrick & Mason, 1984& Jehn & Bezrukova, 2004& Rhaman et al., 2022. ...
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Objective: the objective of this article is to verify if there is a critical mass of women to be reached in the board of directors to impact the extent of disclosure of information of a social nature and if the functional training and experience of the director in the sector of activity of the companies moderates this relationship. Theoretical framework: the research is based on studies on how the characteristics of the members of the board of directors affect the decision-making process about the disclosure of information of a social nature, using the literature on corporate social responsibility and the theory of the mass criticism. Method: the research is quantitative, descriptive, carried out by linear regressions with fixed effects panel data. The tests were applied to a sample of 104 publicly traded companies that voluntarily disclosed sustainability reports over a five-year period (2016 to 2020). Results and conclusion: The main findings reveal that the presence of women on the board of directors positively affects the extent of disclosure of information of a social nature. The critical mass of 4 women or more positively impacts the extent of disclosure of social information. And, when there is a critical mass of 4 women, the extent of this type of disclosure increases by 9.95%. The board member's functional training and experience in the company's sector of activity were not significant to moderate the relationship between the critical mass of women on the board and the extent of disclosure of information of a social nature. Research implications: the study has implications for academia, companies and regulatory bodies, as it implies the structure, composition and functioning of boards of directors, and the advantageous knowledge of the number of women needed on boards to make a difference in the improvement of policies for dissemination of social responsibility information. Originality/value: the research innovates by verifying the percentage of variation in the rate of disclosure of information of a social nature when there are one, two, three, four and five women on the councils; and when it includes moderation variables to verify if the individual characteristics of the council members moderate the relationship studied.
... On the other hand, under the dual strategic background of innovation-driven and low-carbon development in recent years, Chinese central and local governments have launched numerous industrial and regional policies to encourage green innovation by enterprises (Boeing et al., 2022;Ren et al., 2021;Zhang and Zheng, 2018). However, asymmetric information between governments and enterprises will inevitably cause moral hazard and adverse selection problems (Akerlof, 1970;Stiglitz and Weiss, 1981;Grossman and Hart, 1983). For example, studies by Li and Zheng (2016), Zhang and Zheng (2018), and Huang et al. (2021a) argued that many enterprises apply for green patents not primarily to seek property protection for the green technology but rather to obtain fiscal subsidies, financial incentives, preferential tax rates, short-term stock returns, and capital market reputation. ...
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As the second-largest economy in the world with both high-energy consumption and high‑carbon emission, China has launched several green finance pilot zones (GFPZ) targeting regional sustainable development goals (SDGs). Despite critical policy significance, whether and how green finance affects green innovation by enterprises still remains not well understood. Hence, using a difference-in-difference identification strategy and a micro-sample of A-share Chinese listed enterprises during 2007–2019, we investigated the aggregate casual effects of the GFPZ policy on green innovation quality. The empirical results show that the GFPZ policy has incentive and restraint effects on the enterprises' green innovation behavior. It substantially restricts enterprises from engaging in low-quality green innovation and encourages them to spur high-quality ones in the long run. Furthermore, we explore three plausible channels that may explain this beneficial effect; mitigating financial constraints, reducing transaction costs and intensifying peer-to-peer competition in research and development (R&D). In addition, this effect is more pronounced for sub-samples of high-polluting industries, non-state-owned enterprises, and small, medium and micro enterprises. We further show that high-quality green innovation is a plausible mechanism that links green finance with regional green development through enhancing green productivity growth. Overall, these findings provide new insights into the real effects of green finance on green innovation and productivity growth in the context of SDGs.
... Access to debt is especially crucial for public firms as secondary equity offerings suffer from lemon problem of asymmetric information (Akerlof, 1970;Myers and Majluf, 1984). The lemon problem for long-term R&D investment is likely to be greater than that for ordinary short-term investment because of the greater information asymmetry associated with R&D (Leland and Pyle, 1977;Hall and Lerner, 2010). ...
Preprint
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Studies on capital structure show that firms with below-target debt are more willing to raise debt (if needed) compared to firms with above-target debt. In this paper, I examine how capital structure decisions affect R&D investment policies and firm innovation. I show that firms with below-target debt (willing to raise debt) are more likely to innovate and have better quality innovations. Additionally, I show that when firms have below-target debt, they use a greater fraction of proceeds from net debt issuance to finance R&D expenses (directly or indirectly) and show higher level of R&D smoothing.
... La necessità di fornire informazioni circa le performance aziendali trova origine nella necessità da parte delle aziende di favorire le attività di coinvolgimento dei propri stakeholder. Il legame conoscitivo che vede contrapporsi da un lato l'azienda e i suoi stakeholder interni e dall'altro gli stakeholder esterni si caratterizza, infatti, per la presenza di asimmetrie informative (Akerlof, 1978). Il concetto di asimmetria informativa fa riferimento, infatti, all'esistenza di gap informativi che limitano la capacità segnaletica di un soggetto, denominato "principale", nei confronti di un soggetto terzo, denominato "agente". ...
Book
La transizione dalla Non Financial Reporting Directive (NFRD) alla Corporate Sustainability Reporting Directive (CSRD), unitamente agli effetti connessi alla progressiva adozione di nuovi strumenti di accountability da parte di aziende private e pubbliche, impone la necessità di condurre nuove riflessioni sul tema dell’informativa di sostenibilità. Lo scopo del presente lavoro è quello, pertanto, di analizzare in rassegna le principali evidenze teoriche emerse in questi ultimi anni sull’evoluzione del sustainability reporting per meglio comprendere quale sia, ad oggi, lo stato dell’arte del dibattito nel contesto nazionale ed internazionale in tema di standardizzazione dell’informativa di sostenibilità. A tal proposito, partendo dall’analisi dei principali framework teorici sviluppati nell’ambito del financial accounting, il lavoro ha cercato di costruire un parallelismo tra la regolamentazione dell’informativa finanziaria e l’altrettanto complesso processo di regulation dell’informativa di sostenibilità. La ricerca evidenzia come il grado di efficacia del D.Lgs. 254/2016 sia stato in parte limitato dalla facoltà concessa da parte del Legislatore di ricorrere a forme alternative di rendicontazione. L’analisi evidenzia, inoltre, come l’armonizzazione de jure dell’informativa sia stata in questi anni supportata dall’adozione de facto negli Enti di Interesse Pubblico delle linee guida GRI Standards. In tale prospettiva, i risultati raccolti evidenziano come il passaggio da un approccio di tipo principle based, fondato sul paradigma dell’armonizzazione, ad un modello più restrittivo, ispirato dal principio della standardizzazione, risulti essere un elemento di complessità la cui analisi non può prescindere dalla preliminare comprensione dei principali limiti che hanno caratterizzato la NFRD.
... if security experts do not find guidelines clearly actionable, we should not expect (security non-expert) manufacturers to magically find a way to adopt and implement the advice. The economic motivation of manufacturers [54] (keeping in mind markets for lemons [2]), their poor track record in IoT security, and lack of accountability for vulnerabilities, point to a worrisome future. We hope that our work is a step towards improving the efficacy of advice on best practices. ...
Preprint
Academic research has highlighted the failure of many Internet of Things (IoT) product manufacturers to follow accepted practices, while IoT security best practices have recently attracted considerable attention worldwide from industry and governments. Given current examples of security advice, confusion is evident from guidelines that conflate desired outcomes with security practices to achieve those outcomes. We explore a surprising lack of clarity, and void in the literature, on what (generically) best practice means, independent of identifying specific individual practices or highlighting failure to follow best practices. We consider categories of security advice, and analyze how they apply over the lifecycle of IoT devices. For concreteness in discussion, we use iterative inductive coding to code and systematically analyze a set of 1013 IoT security best practices, recommendations, and guidelines collated from industrial, government, and academic sources. Among our findings, of all analyzed items, 68% fail to meet our definition of an (actionable) practice, and 73% of all actionable advice relates to the software development lifecycle phase, highlighting the critical position of manufacturers and developers. We hope that our work provides a basis for the community to better understand best practices, identify and reach consensus on specific practices, and find ways to motivate relevant stakeholders to follow them.
... Essentially, the financial intermediaries help mobilize savings and minimize potential investments searching costs, thus facilitating funds transfer from savers to investors (Allen and Santomero, 1997). Historically, the traditional banking system evolved, providing intermediation services to mitigate information asymmetry, adverse selection of borrowers and lenders (Akerlof, 1970), and moral hazard problems (Stiglitz and Weiss, 1983). The theoretical view of financial intermediation does not differentiate between the classes of savers and borrowers but emphasizes making every-one bankable. ...
Microfinance institutions (MFIs) use an alternative financial intermediation system (business model) to offer banking services for the marginal people where collateral-based conventional banking has not been effective. They facilitate collateral-free lending through close loan monitoring and possess a distinct capability to collect savings via donations (besides deposits). We assert that the unique intermediation model presents MFIs with a lower credit risk; however, that comes at the cost of higher business risk. We provide empirical support for our argument by analyzing a broad cross-country dataset comprising banks and MFIs from 68 countries. We show that MFIs maintain a lower non-performing loan ratio but retain higher cash and capital ratios and a smaller deposit ratio than banks. We provide insights into the areas of variation between two dissimilar models for financial intermediation, associated risks, and prospects for integrating them within a common regulatory framework.
... The attention that was directed to the subject results in great part from the questions raised by the New Institutional Economics. According to this economic approach, individuals, contrary to what neoclassical theory argues, are not able to create perfect markets on the basis of complete information (AKERLOF, 1970;COASE, 1937;WILLIAMSON, 1981;STIGLER, 1992;MILGROM;ROBERTS, 1988). On the contrary, New Institutional Economics upholds the idea that, given the bounded rationality of the human being, as well as opportunism on markets and asset specificity, perfect markets have never been close to being achieved. ...
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This article discusses how institutions, including the law, can artificially produce trust between people and between people and organizations through the imposition of standards of behavior, procedures and competencies. Building on the rational choice theory, on institutionalism and constructivism, this study systematizes theoretical and empirical findings in three ideal types. The ideal types have been called “calculative trust”, “institutional trust”, and “active trust”.
... We find that the ask multipliers are near the value justified by median song cashflows, while the bid multipliers are close to the bottom decile. This market outcome resembles the work of [1] which examines how the quality of goods traded in a market can degrade in the presence of information asymmetry between buyers and sellers. In particular, the seller of music rights may have information that is not available to the buyer, such as the costs associated with the success of songs in a catalog. ...
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We propose a risk neutral approach to forecast the cashflows of music catalogs, based on historical revenue data. We use a discounted cashflows formula to produce reasonable ranges of multipliers for these assets, based on the age of the catalog, the last-twelve-months revenue and the duration of the contract. We compare the multipliers implied by the cashflows of top, median and bottom performing songs on the Royalty Exchange platform. We find that ask prices are close to the multipliers justified by median song cashflows. The best bids are near the multipliers justified by the bottom decile of song cashflows.
... Developed market acquirers of emerging market targets realize a statistically significant cumulative abnormal positive return when acquirer gain majority control over the target (Chari et al., 2010), On the other hand, few researchers have put forward different views. Industry and cultural differences may indeed generate information asymmetries and potential integration difficulties (Akerlof, 1970;Balakrishnan and Koza, 1993;Chen and Hennart, 2004). Therefore, firms prefer minority acquisitions to mitigate such risks. ...
Technical Report
Foreign Direct Investments are the major drivers for a developing economy. One of the preferred methods of FDI is Mergers and Acquisitions that enable foreign firms to expand their markets, take advantage of technological innovation and economies of scale to increase shareholder value. Since the economic liberalization in 1991, India has seen a host of cross-border acquisitions. Though it is a common belief that changes in the stock prices of acquirer and target firms provide accurate insights on the potential wealth creation, this can be misleading with respect to Indian and other emerging markets where the capital markets are still under developed. This leads to the necessity of identifying and understanding various other factors that can make M&A activity successful in the perspective of better value creation in the future times.
... Therefore, this study would be based on the information asymmetry theory (Akerlof, 1970;Spence;1973;Rothschild and Stiglitz, 1976;Mirrlees, 1999;Holmström, 1979;Grossman and Hart, 1983), Agency theory (Jensen and Meckling, 1976;Sappington, 1991;Hart, 1995), Modern Portfolio theory (Markowitz, 1952;Tobin, 1958;Sharpe, 1964) and Resourced based theory (Wernerfelt, 1984;Barney, 1991). ...
Article
This paper examined the effects of credit risk, intellectual capital as well as credit risk moderated by intellectual capital on financial performance of fifteen listed deposit money banks in Nigeria (DMBs) from 2007 to 2016. Data were sourced from annual reports of banks and Nigerian National Bureau of Statistics and analysed using Generalised Method of Moments (GMM). The study finds that credit risk index by loan loss ratio negatively affects financial performance of the sampled banks; while capital employed efficiency, loan loss provision moderated by intellectual capital, capital adequacy ratio, income and diversification have positive relationship with banks’ financial performance. Thus, the study recommends that banks should strengthen their credit risk management culture to ensure prompt repayment of loans. The banks should operate within the required capital adequacy ratio to serve as buffer against loan loss provisions provided by the Central Bank of Nigeria. A strong credit risk management culture should be embedded within intellectual capital structure of banks, where all persons at all levels appreciate and understand the banks’ risk management policies as well as strategies and incorporate same into decision-making and business processes.
... Numerous gests have proven the efficacity of deposit and loan guarantee institutions in reducing bank defaults; these systems have broad administrative powers to the extent of field supervision over banks operating in the concerned country, and the part of these institutions isn't limited to the administrative and preventative part, but also to the remedial part and furnishing results, Intermediating to help banks in cases of dereliction represented by several measures, including an attempt to combine the worried bank with NSout and working in liquidity to the worried bank to correct its conditions and reorganize the bank administratively, and financially. Inviting shareholders to support the bank (Akerlof, 1970). ...
... Conversely, the others trade for liquidity only using information that is publically available (Abad and Rubia, 2005). As mentioned, agency conflicts between insiders and outsiders may arise due to such information asymmetry, which lessens the volume as well as the number of transactions in the stock market ultimately leading to a fall in stock market liquidity (Akerlof, 1970). According to Jensen (1986) debt financing is substantially less information-sensitive than equity financing whereas equity financing is the most susceptible to the adverse selection problem. ...
Article
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This study has investigated the influence of the stock liquidity (measured by Amihud’s illiquidity) of a company on its capital structure using the top 100 non-finance firms listed in the NSE from 2010-11 to 2019-20. Using the fixed-effect panel regression model, the study has established that illiquidity has a significant affirmative influence on the book and market leverage. Furthermore, the findings reveal that turnover representing the business size and return on assets have adverse associations with both book and market leverage. Moreover, asset tangibility bears a positive influence on book leverage. The results endorse the usefulness of the notion of Peckingorder in the context of Indian companies.
Conference Paper
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Risk assessment for the workplace and work environment of an organization governed by the document on risk assessment, which actually is a project risk management in the specific field of protection engineering. This paper presents document on risk assessment with special reference to the methodology of risk assessment for each workplace with increased risk of application of decision support systems, especially one tool, a software package Expert Choice 2000.
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Penelitian ini menganalisis pengaruh stakeholder's pressure, good corporate governance (GCG), dan struktur modal terhadap sustainability reporting disclosure (SRD). Penelitian ini menggunakan data kuartalan dari 7 high level governance perusahaan yang tergabung dalam Indonesian Institute of Corporate Governance (IICG) periode 2014-2019 dengan total 168 observasi. Dengan menggunakan random effect model, penelitian ini menemukan bahwa stakeholder's pressure yang diukur secara komposit menggunakan consumer proximity industry (CPI), investor oriented industry (IOI), dan employee oriented industry (EOI) terbukti berpengaruh positif terhadap sustainability reporting disclosure. Hasil ini robust setelah diestimasi ulang dengan menggunakan robust regression dan covariance based structural equation modeling (CB-SEM). Di sisi lain, penelitian ini gagal menemukan adanya pengaruh GCG dan struktur modal terhadap SRD. Meskipun tingkat GCG perusahaan tinggi, namun tidak membuat perusahaan tersebut meningkatkan SRD. Kondisi ini mengindikasikan bahwa tata kelola yang dilakukan perusahaan belum berorientasi pada kinerja keberlanjutan. Hasil penelitian ini berimplikasi pada pentingnya mensinergiskan praktek GCG yang dilakukan perusahaan dengan SRD. Oleh karena itu, pemerintah perlu memberikan sosialisasi yang lebih intensif mengenai pentingnya SRD, khususnya kepada para investor.
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Twenty years ago, we circulated our first “Rookie's Guide” to the academic labor market for finance Ph.D. students. Labor market logistics are easier now due to technological change, but the basic informational frictions that made it difficult for rookies to learn the ropes still exist, as do the fundamental market frictions that make bilateral matching between labor demand (hiring schools) and labor supply (the rookies) awkward and challenging. We recapitulate basic advice from previous guides, provide modern updates for the intense interview process, and discuss what to do after you accept an offer and during your first year of employment.
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This paper revisits capital measurement through a microeconomic analysis of a simple project consisting of diverse types of irreversibly invested capital. Capital is aggregated using the numeraire. Thus, the proposed method of measurement is a form of accounting. It associates all types of capital in a common framework. Under certainty, user cost and depreciation take internal accounting values that obey three axioms that comprise five conditions. The accounting values proliferate, but they have only a limited relation to market prices or shadow prices. Each type of capital earns the market rate of interest. In practice, under uncertainty, calculation of the accounting values would require projections of basic data, and would be hard to comprehend, especially for outsiders, and would leave room for moral hazard. Because of these obstacles, accounting practice departs from the ideal based on cash flows and strictly limits choice by using prescribed schedules of depreciation. These schedules are interpreted from an economic perspective.
Research
Mergers and Acquisitions are the major sources of Foreign Direct Investment and one of the effective strategies for organisational expansion and restructuring. In India, Cross border Acquisitions have increased the inward flow of foreign investments significantly and will continue to remain one of the preferred ways for attracting international investments. One major area of research in Acquisitions is characterizing and predicting the quality of targets firms. This paper reviews the pre-acquisition characteristics of a firm that aid in predicting the apt takeover candidates while pursuing inbound deals. This work attempts to reveal the differences in pre-acquisition characteristics during cross-border and domestic takeovers that makes the deal either profitable or loss making. It also highlights the necessity for a different model for the Indian market when compared to the developed economies due to the structural differences in the Indian economy. The conjecture derived from the review is that firms from other nations favor those Indian firms that characterize good network connectivity, channel and voluminous assets suiting their long termstrategy to explore markets and brands. The research in Merger & Acquisitions occurring in Indian Market is still in infant stage, providing more opportunities to explore and study in various perspectives.
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Based on data from the Renrendai platform in China, this paper studies the impacts of marital status on funding success and default. Probit models are employed to perform the main regressions. The empirical results show that married borrowers have the highest rate of funding success, followed by divorced and single borrowers. Although the default risk of divorced borrowers is higher than that of married borrowers, it is not different from that of single borrowers. In addition, this paper uncovers an important joint effect of marital status and education on online lending.
Conference Paper
The relevance of the research is determined by the development of the digital economy which stimulates a significant reorganization of industrial enterprises, creates new requirements for the skills of employees, and provides the demand for jobs in the digital technology industry. Thus, companies face the problem of a reliable assessment of the digital competencies of employees that will help to develop management decisions that increase the level of digitalization. The purpose of the research is to develop a methodology for assessing the digital competencies of industrial workers using neural network modeling. The neural network modeling method means training a neural network for its future application by an enterprise. The practical significance of the proposed methodology is provided by the fact that a correct interpretation of competencies assessment in the digital economy will allow companies to develop ways to improve the quality of human capital, which will provide them with a competitive advantage.
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Separating selection bias from moral hazard in private health insurance (PHI) markets has been a challenging task. We estimate selection bias and moral hazard in Australia's mixed public‐private health system, where PHI premiums are community‐rated rather than risk‐rated. Using longitudinal cohort data, with fine‐grained measures for medical services predominantly funded by PHI providers, we find consistent and robust estimates of advantageous selection among hospitalized cardiovascular disease (CVD) patients. Specifically, we show that in addition to their risk‐averse attributes, CVD patients who purchase PHI use fewer services that are not covered by PHI providers (e.g., general practitioners and emergency departments) and have fewer comorbidities. Finally, unlike previous studies, we show that ex‐post moral hazard exists in the use of specific “in‐hospital” medical services such as specialist and physician services, miscellaneous diagnostic procedures, and therapeutic treatments. From the perspective of PHI providers, the annual cost of moral hazard translates to a lower bound estimate of $707 per patient, equivalent to a 3.03% reduction in their annual profits.
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We address the strategic interdependence among capital structure, firm-level (process) innovation, and subsequent output decisions. In the backdrop of the limited liability effect, the interlinkage among financial and real variables is established through a three-stage game. The levered duopolist produces higher output and earns a larger profit than its unlevered counterpart. Even the industry output is higher when one of the duopolists is levered. However, if the levered duopolist undertakes investment in (process) innovation, then the debt-financed innovation induced output is larger than the innovation-led output of a completely equity financed firm. The levered innovative firm eventually becomes a monopolist by driving out the unlevered innovative duopolist. JEL Codes: D21, G32, L13, O31
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The study examined the impact of Operating leverage on firm value of quoted manufacturing firms in Nigeria. The study selected twenty-two (22) listed (Consumer goods sector) manufacturing firms listed on Nigeria Stock Exchange from 2013-2019.The data used for this study are panel data. The result of this study revealed that DVAS (Variability in sales) has negative insignificant effect on firm value at (β=-1.04, P>0.05). DVPBIT (Variability in profit before interest and tax) has positive insignificant effect on firm value at (β=12.6, P>0.05). OPLE (Operating leverage in asset) has negative significant effect on firm value at (β=-18.95, P<0.05). Based on the findings of the study, it were therefore recommended that; firms would benefit from the quick variability in fixed asset to current asset. (Changes in fixed cost into variable cost influences sales and long-run profit).
Chapter
Within regulation analytical framework, there are no reason for any convergence of all economies toward a canonical and superior form of capitalism. There are many theoretical and historically observed mix of market, firm, state and community logics. The primacy of political coalition in the design and architecture of institutional forms is another source of diversity across nations. Furthermore, two key processes govern the evolution of capitalisms, respectively endometabolism and hybridization. Creative destruction is not only the outcome of competition, but of these other processes. The diversity of past and present capitalisms is a major stylized fact and display contrasted mix of short run flexibility, dynamic efficiency and social justice objectives. China is a good example of adaptability of capitalist relations to a quite different society. Contrary to a common intuition, internationalization has polarized contrasted trajectories across the four continents.KeywordsDiversity of capitalismsChinese capitalismEndometabolismHybridizationLatin AmericaEuropeAsian capitalismsSoviet Regime
Article
Individuals often face financial incentives that challenge their desire to behave honestly. Strategically making excuses to justify dishonesty allows them to give in to the temptation of financial benefit and retain their moral self‐image. In the context of insurance underwriting, the stakes are high, as providing false information or redacting information allows customers to reduce premiums. This is particularly true for smoking disclosures that carry great weight in life insurance. We conduct a field study with a large insurance company with the aim of neutralizing justification strategies that individuals deploy for reducing the costs of dishonest smoking disclosures to insurers. First, we raise awareness of the negative consequences dishonesty could have on other policy holders to counteract that individuals could attenuate or ignore such adverse consequences. Second, we make salient the pro‐social efforts of the insurer to work against a potentially negative perception of the insurance industry that may feed the excuse of insurance companies being deserving of harm. The study presents field evidence that messages containing information about the social consequences of one's actions or the pro‐social behavior of a second party can influence normative behavior, particularly honesty.
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a landmark in the contemporary approach to economics The Observer
For the mixed record of industrial profit, see The Development of Capitalist Enterprise in India
  • D H Buchanan
Cotton Mill Industry
  • Also
  • See H Industry
  • Fukuzawa
  • H Fukuzawa
For the mixed record of industrial profit, see D
  • H Buchanan
Economic Development
  • C P Kindleberger
  • CP Kindleberger