Equity finance, adverse selection and product market competition

This paper analyses the effect of asymmetric information between a firm and its outside investors on the firm's competitive position in a model where first-period competition is followed by a financing stage a la Myers and Majluf (1984). In our model, interim profit generated by the competition stage takes the role of financial slack and determines the extent to which external equity finance is required for a new investment opportunity. I consider the full set of equilibria in our version of the Myers and Majluf model and formally analyse financial slack as a comparative statics variable. Using this, I derive the firm's first period objective from first principles. In contrast to models of predatory behavior, I find that in the presence of an adverse selection problem the need to finance externally may provide a strategic benefit rather than a strategic disadvantage. The reason is that the adverse selection problem may induce speculative behavior, which will make the firm more aggressive vis a vis its rival

Endogeneity in Panel Data Models with Time-Varying and Time-Fixed Regressors: To IV or not IV?

We analyse the problem of parameter inconsistency in panel data econometrics due to the correlation of exogenous variables with the error term.A common solution in this setting is to use Instrumental-Variable (IV) estimation in the spirit of Hausman-Taylor (1981). However, some potential shortcomings of the latter approach recently gave rise to the use of non-IV two-step estimators. Given their growing number of empirical applications, we aim to systematically compare the performance of IV and non-IV approaches in the presence of time-fixed variables and right hand side endogeneity using Monte Carlo simulations, where we explicitly control for the problem of IV selection in the Hausman-Taylor case. The simulation results show that the Hausman- Taylor model with perfect-knowledge about the underlying data structure (instrument orthogonality) has on average the smallest bias. However, compared to the empirically relevant specification with imperfect-knowledge and instruments chosen by statistical criteria, the non-IV rival performs equally well or even better especially in terms of estimating variable coefficients for timefixed regressors. Moreover, the non-IV method tends to have a smaller root mean square error (rmse) than both Hausman-Taylor models with perfect and imperfect knowledge about the underlying correlation between r.h.s variables and residual term.This indicates that it is generally more efficient.The results are roughly robust for various combinations in the time and cross-section dimension of the data.Endogeneity, instrumental variables, two-step estimators, Monte Carlo simulations

Psychological and physiological adaptations to sperm competition in humans

Postcopulatory competition between males, in the form of sperm competition, is a widespread phenomenon in many animal species. The extent to which sperm competition has been an important selective pressure during human evolution remains controversial, however. The authors review critically the evidence that human males and females have psychological, behavioral, and physiological adaptations that evolved in response to selection pressures associated with sperm competition. The authors consider, using evidence from contemporary societies, whether sperm competition is likely to have been a significant adaptive problem for ancestral humans and examine the evidence suggesting that human males have physiological and psychological mechanisms that allow for “prudent” sperm allocation in response to variations in the risk of sperm competition

Combining forecasts based on multiple encompassing tests in a macroeconomic core system

Copyright © 2010 John Wiley & Sons, Ltd. This is the accepted version of the following article: Costantini, M. and Kunst, R. M. (2011), Combining forecasts based on multiple encompassing tests in a macroeconomic core system. J. Forecast., 30: 579–596, which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1002/for.1190/abstract.This paper investigates whether and to what extent multiple encompassing tests may help determine weights for forecast averaging in a standard vector autoregressive setting. To this end we consider a new test-based procedure, which assigns non-zero weights to candidate models that add information not covered by other models. The potential benefits of this procedure are explored in extensive Monte Carlo simulations using realistic designs that are adapted to UK and to French macroeconomic data, to which trivariate vector autoregressions (VAR) are fitted. Thus simulations rely on potential data-generating mechanisms for macroeconomic data rather than on simple but artificial designs. We run two types of forecast ‘competitions’. In the first one, one of the model classes is the trivariate VAR, such that it contains the generating mechanism. In the second specification, none of the competing models contains the true structure. The simulation results show that the performance of test-based averaging is comparable to uniform weighting of individual models. In one of our role model economies, test-based averaging achieves advantages in small samples. In larger samples, pure prediction models outperform forecast averages

Effect of competitive cues on reproductive morphology and behavioral plasticity in male fruitflies

Phenotypic plasticity will be favored whenever there are significant fitness benefits of responding to environmental variation. The extent and nature of the plasticity that evolves depends on the rate of environmental fluctuations and the capacity to track and respond to that variability. Reproductive environments represent one arena in which changes can be rapid. The finding that males of many species show morphological, physiological, and behavioral plasticity in response to premating and postmating reproductive competition (RC) suggests that plasticity is broadly beneficial. The developmental environment is expected to accurately predict the average population level of RC but to be a relatively poor indicator of immediate RC at any particular mating. Therefore, we predict that manipulation of average RC during development should cause a response in plasticity “set” during development (e.g., size of adult reproductive structures), but not in flexible plasticity determined by the immediate adult environment (e.g., behavioral plasticity in mating duration). We tested this prediction in Drosophila melanogaster males by manipulating 2 independent cues of average RC during development: 1) larval density and 2) the presence or absence of adult males within larval culture vials. Consistent with the prediction, both manipulations resulted in the development of males with significantly larger adult accessory glands (although testis size decreased when males were added to culture vials). There was no effect on adult plasticity (mating duration, extended mating in response to rivals). The results suggest that males have evolved independent responses to long- and short-term variation in RC

Effect of competitive cues on reproductive morphology and behavioral plasticity in male fruitflies

Phenotypic plasticity will be favored whenever there are significant fitness benefits of responding to environmental variation. The extent and nature of the plasticity that evolves depends on the rate of environmental fluctuations and the capacity to track and respond to that variability. Reproductive environments represent one arena in which changes can be rapid. The finding that males of many species show morphological, physiological, and behavioral plasticity in response to premating and postmating reproductive competition (RC) suggests that plasticity is broadly beneficial. The developmental environment is expected to accurately predict the average population level of RC but to be a relatively poor indicator of immediate RC at any particular mating. Therefore, we predict that manipulation of average RC during development should cause a response in plasticity “set” during development (e.g., size of adult reproductive structures), but not in flexible plasticity determined by the immediate adult environment (e.g., behavioral plasticity in mating duration). We tested this prediction in Drosophila melanogaster males by manipulating 2 independent cues of average RC during development: 1) larval density and 2) the presence or absence of adult males within larval culture vials. Consistent with the prediction, both manipulations resulted in the development of males with significantly larger adult accessory glands (although testis size decreased when males were added to culture vials). There was no effect on adult plasticity (mating duration, extended mating in response to rivals). The results suggest that males have evolved independent responses to long- and short-term variation in RC

New size measurements in population ecology

In organizational ecology, we find the analysis of the impact exerted by competition between populations on vital ratios to be relatively under-developed. This paper intends to address this issue by developing new competition measurements whose common denominator is to give importance to organizational size. The application of these measurements in the case of competition between organizational forms in a population and their impact on mortality rates, demonstrates the usefulness of modelling competition on them. More specifically, results show how competition levels between firms in a population can be more adequately estimated when rival population mass is used (that is, the aggregate size of the organizations of which it is made up)

Mixed Motives? Explaining the Decision to Integrate Militaries at Civil War\u27s End

Book Summary: Negotiating a peaceful end to civil wars, which often includes an attempt to bring together former rival military or insurgent factions into a new national army, has been a frequent goal of conflict resolution practitioners since the Cold War. In practice, however, very little is known about what works, and what doesn\u27t work, in bringing together former opponents to build a lasting peace.Contributors to this volume assess why some civil wars result in successful military integration while others dissolve into further strife, factionalism, and even renewed civil war. Eleven cases are studied in detail—Sudan, Zimbabwe, Lebanon, Rwanda, the Philippines, South Africa, Mozambique, Bosnia-Herzegovina, Sierra Leone, Democratic Republic of the Congo, and Burundi—while other chapters compare military integration with corporate mergers and discuss some of the hidden costs and risks of merging military forces. New Armies from Old fills a serious gap in our understanding of civil wars, their possible resolution, and how to promote lasting peace, and will be of interest to scholars and students of conflict resolution, international affairs, and peace and security studies. Chapter Summary: Civil war peace settlements increasingly call for rebel groups and government forces to integrate their troops following the end of a conflict. This chapter tests several models in an effort to account for a number of different potential explanations for this trend

The usefulness of private and public information for foreign investment decisions

Using a specially designed survey of Japanese firms planning investments in Asia, the authors emphasize the importance of privately held information in making foreign investment decisions. Information on operating conditions based on direct experience in a country is likely to be the most credible information, but for investors new to a country, information inferred from observing others investing in that country may be more influential. Initially, in fact, observing the actions of competitors seems to lead to cascading investments in that country, apparently through herd behavior (as in China and Vietnam). Countries which do not draw a critical mass of investors are in danger of being bypassed for significant periods. Publicly available information is important in helping shape average perceptions about a country,leading potential investors to view particular locations favorably. Privately held information complements that pubic information, and accounts for important variations in investment plans. Subjective perceptions about policy on foreign direct investments are also important. Policy designed to attract investors -for example, special zones for foreign investors- have been successful in many instances, especially in East Asia, but have also been a waste of scarce investment resources when not appropriately planned. And such policy is of little value in attracting those already investing in a country, or those who already perceive rivals to be active there.International Terrorism&Counterterrorism,Environmental Economics&Policies,Labor Policies,ICT Policy and Strategies,Decentralization,Environmental Economics&Policies,International Terrorism&Counterterrorism,ICT Policy and Strategies,Financial Intermediation,General Technology