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- Banerji, S., et al.
(författare)
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Money as a weapon: Financing a winner-take-all competition
- 2021
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Ingår i: Journal of Corporate Finance. - : Elsevier BV. - 0929-1199. ; 66
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Tidskriftsartikel (refereegranskat)abstract
- We investigate the capital structure of pioneering startup firms, which are frequently credited with opening new markets and niches in the digital era and often face the threat of the potential entry of successful, cash-rich firms from adjacent markets. Our analysis is made in the context of a winner-take-all competition in the form of an all-pay auction for the monopolistic position in a new market. We show that a pioneer's optimal capital structure exhibits widespread diversity and is determined by a tradeoff between entry deterrence and post-entry competition intensification. A pure-equity (a mixture of equity and risky debt) structure is optimal when (1) barriers to entry are small (large), (2) the future prospect of the new market is fairly certain and/or, (3) the new market is likely (unlikely) to create large externalities on the potential entrant's existing business. The post-entry competition is likely to engender large losses to both the winner and the loser. © 2020 Elsevier B.V.
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| 2. |
- Fang, Dawei, 1983, et al.
(författare)
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Meeting new peers: The effects of Morningstar category reassignment on fund flows and star ratings
- 2021
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Ingår i: International Review of Financial Analysis. - : Elsevier BV. - 1057-5219. ; 77
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Tidskriftsartikel (refereegranskat)abstract
- We investigate how the reassignment of a fund's Morningstar category affects fund flow and Morningstar star rating. We find that funds assigned to a different category gain positive abnormal flows and this effect is significant mainly for high-rated funds. Category reassignment does not improve a fund's star rating on average, and flows are less responsive to a star-rating change if the rating change is likely to be driven by category reassignment. The positive abnormal flows captured by high-rated funds after category reassignment are consistent with a visibility story: some investors filter funds by Morningstar category and star rating, and category reassignment makes a fund more visible to a new group of investors if the fund is highly rated. In contrast, a low-rated fund is likely to be selected only by investors who do not refer to the fund's Morningstar information and, hence, gains little visibility from category reassignment. We also find evidence that more sophisticated investors are more likely to consider not only fund rating but also fund category when evaluating fund performance.
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| 3. |
- Gärling, Tommy, 1941, et al.
(författare)
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Fast and slow investments in asset markets: Influences on risk taking
- 2021
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Ingår i: Journal of Behavioral Finance. - : Informa UK Limited. - 1542-7560 .- 1542-7579. ; 22:1, s. 84-96
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Tidskriftsartikel (refereegranskat)abstract
- © 2020, © 2020 The Author(s). Published with license by Taylor & Francis Group, LLC. The aim is to investigate whether elevated risk taking in asset market experiments driven by rank-based performance incentives decrease if removing a time limit on choices and minimizing complexity of strategic optimization. In a scenario experiment, business school students (n = 123) acting as investment managers in a fund company make investments at self-paced rates. The results show that investments are influenced by rank-based compensations implemented as a relative comparison standard but not that risk taking is elevated. The motive to minimize losses relative to others appear to counteract risk taking, particularly if poor performance is penalized by reducing the fixed income.
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| 4. |
- Gärling, Tommy, 1941, et al.
(författare)
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Financial risk-taking related to individual risk preference, social comparison and competition
- 2021
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Ingår i: Review of Behavioral Finance. - 1940-5979. ; 13:2, s. 125-140
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Tidskriftsartikel (refereegranskat)abstract
- Purpose – The purpose of this paper is to investigate how social comparison and motivation to compete account for elevated risk-taking in fund management corroborated by asset market experiments when performance depends on rank-based incentives. Design/methodology/approach – In two laboratory experiments, university students (n1 5 240/n2 5 120) make choices between risky and certain outcomes of hypothetical sums of money. Both experiments investigate in which direction risky choices in an individual condition (individual risk preference) are shifted when participants compare their performance to another participant’s performance (social comparison), being instructed or not to outperform the other (incentive to compete). Findings – In the absence of incentives to compete, participants tend to minimize the differences between expected outcomes to themselves and to the other, but when provided with incentives to compete, they tend to maximize these differences. An independent additional increase in risk-taking is observed when participants are provided with incentives to compete. Originality/value – Original findings include that social comparison does not evoke motivation to compete unless incentives are offered and that increases in risk-taking depend both on what the other chooses and the incentives.
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