Capital Structure with Opportunistic Stakeholders' Coalitions

This paper shows that stakeholders' multilateral opportunistic behaviour during financial distress may lead to premature liquidation of the firm. Consequently, the firm will use its capital structure to mitigate the costs of such opportunism. Specifically, the firm will reduce its debt so that the probability of multilateral opportunism is zero; namely, it will use only safe debt. The paper predicts that the debt-equity ratio will decrease with risk, the number of contracts, the difficulty in writing them and in achieving franchising arrangements, the supplier's importance in opportunistic coalitions and a decrease in the firm's size, or the supplier's adjustment costs.Incomplete Contracts, Opportunistic Behaviour, Bankruptcy, Capital Structure.

Tax uniformity: A commitment device for restraining opportunistic behaviour.

We investigate whether and to what extent uniform and differentiated tax systems diverge in their propensity to create distortionary opportunistic behavoiur. The set-up in which we carry out our analysis features polluting firms that are confronted with existence a Pigovian emission tax. Firms can invest in pollution abatement. We first show that the existence of emmission taxes, although optimally chosen, create strategic incentives for firms to distort their abatement investment. Second, we find that a system of differentiated emission taxes has a greater propensity to foster strategic distortions in abatement investment than a uniform emission tax regime.Uniform tax, Differentiated taxes, Emission tax, Short-run policy commitment, Pollution-abating investment, Strategic investment.

Opportunistic behaviour by private irrigators within a capacity-sharing regime

The concept of capacity-sharing (as a specific type of demand-orientated water management strategy) is a relatively newcomer on the South African water management regime and much debate is currently under way regarding the viability of the concept for the South African context. One of the main features is that it decentralises and integrates water management to a much greater degree than state-dominated management regimes. However, as the concept of capacity-sharing allows a greater degree of decision-making autonomy to the private decision-maker, the question could be asked to what extent the management of a capacity-sharing regime would be exposed to opportunistic behaviour from private irrigators. If it is heavily exposed, there are considerable scope for opportunistic decision-making behaviour under private decision-makers and therefore problems of moral hazard / adverse selection and rent seeking could present itself. Therefore, the question arises what safety features do capacity sharing present to confine possible opportunistic decision-making practices. This article discusses two areas within a capacity-sharing regime that are likely to be exposed to opportunistic decision-making behaviour. Possible safety-features from capacity sharing to account for this type of behaviour are identified and discussed briefly. This article concludes with the notion that capacity sharing does feature some properties that could minimise opportunistic behaviour from private decision-makers.Resource /Energy Economics and Policy,

Fiscal Rules and the Opportunistic Behaviour of the Incumbent Politician: Evidence from Italian Municipalities

Previous studies on electoral competition show that fiscal variables are manipulated by incumbent politicians in order to be re-elected. This phenomenon has been addressed by the literature on electoral budget cycle and, in a decentralised economy, by the literature on yardstick competition. Our objective is to consider the effect of the introduction of a fiscal rule on the opportunistic behaviour of incumbent politicians. We conduct a panel data analysis on the current expenditures of 246 Italian municipalities. The introduction of the domestic stability pact (DSP) seems to change the electoral cycle, by increasing the magnitude of the expenditures during pre-electoral periods. Moreover, our results show that municipalities affected by the DSP are more sensitive to changes in neighbouring jurisdictions’ fiscal policies, during pre-electoral periods. We conclude that the introduction of the DSP, besides significantly reducing the level of local public spending, strengthens the opportunistic behaviour of incumbent politicians in pre-electoral years.fiscal rules, electoral budget cycle, yardstick competition, system GMM, spatial econometrics

A trust-driven financial crisis. Implications for the future of financial markets

The financial crisis has brought to light diffuse opportunistic behaviour and some serious frauds.Because of this trust towards banks, bankers, brokers and the stock market has collapsed to unprecedented levels and there are so far no signs of recovery. This paper uses survey-based information to document the collapse of trust, show its link to the emergence of frauds in the financial industry and discuss its consequences for the demand of financial instruments, investors portfolios and more generally investors reliance on financial markets. It argues that unless serious changes happen in the behaviour of the financial industry, the move towards safer portfolios and away from ambiguous securities that lack of trust entails, will have adverse effects on the availability and cost of equity financing. Accordingly a number of proposals to restore trust are discussed. Their common feature is to restore trust – a belief – by limiting the scope for opportunistic behaviour through a transfer of power from financial intermediaries to investors.

Opportunistic Behaviour

Reading the newspapers and listening to the media news channels for the last decade, one makes the observation that cheating has increased, or at least accusations of such behaviour. This is commonly called “corruption”, but there are several kinds of cheating to be distinguished and analysed apart. Two approaches to cheating are conceivable. First, the micro approach attempts to account for why individual persons cheat – the reason and their calculation of benefits and costs. Here, we can now draw upon new results in game theory. Second, in the macro approach one tries to explain or understand why cheating seems to augment over the entire society, in both the public and private sectors. This paper looks at one form of cheating more closely, namely corruption, as well as suggests a few hypotheses about the increase in so-called “affairs” in several capitalist economies

The economic organisation of specific assets

In the international offshore industry we find that the oil companies and their main suppliers usually operate with separate ownership. But the main contractors manage a capital stock, and produce inputs, that are highly specific to the oil companies. Within the traditional theory of the firm this organizational solution emerges as a puzzle. Asset specificity is usually considered as an argument for vertical integration. The idea is that integration reduces the problem of opportunistic behaviour. In this article I show that asset specificity actually can be an argument for separate ownership. While an integrated supplier considers the asset specificity as unimportant for his strategic behaviour, disintegrated parties find that a high degree of specificity makes opportunistic behaviour less profitable than if the assets enjoyed a low degree of specificity. Asset specificity can thus function as a buffer against opportunistic behaviour. This buffer can create room for strong incentive schemes

A Conceptual Analysis of Relational Contracts in Agribusiness Supply Chains: The Case of the Sugar Industry in Swaziland

This study examines the nature of the relationship between cane growers and millers and how it affects cane growersÂ’ perceptions of the value added in the sugar supply chain. Drawing from relational exchange theory, the study utilised the perceptions of 124 smallholder cane growers in the Swaziland sugar industry. Factors measured in terms of a likert type scale were used to measure each relational construct within the miller-grower contract relationship. The unpacks the trust relationship between large agribusiness companies and smallholder out growers, and shows that relationships characterised by social factors like trust, commitment, and cooperation enhance mutual benefit and quality relationships between parties. This study found that farmers perceive an element of opportunistic behaviour and a lack of cooperation by millers and therefore have limited trust in the millers. Consequently it was also found that satisfaction by cane growers on their relationship with millers has a positive relationship with their level of trust, level of commitment, relative dependence, perception of opportunistic behaviour by millers and perceived cooperation between themselves and the millers. The results point to a number of aspects both growers and millers need to attend to which could contribute to improved relationship and in turn efficiency and returns in the sugar industry in Swaziland.Agribusiness,

The role of structural embeddedness in an IT outsourcing network

The design of governance to safeguard against a vendor's opportunistic behaviour is one of the critical issues in information technology outsourcing (ITO) since this behaviour causes cost escalation and service debasement. The roles of structural embeddedness underlying network governance have been gaining its importance as complementary or substitutable governance in ITO. Our research attempts to reveal how structural embeddedness can affect the decision-makings of clients and vendors and their resulting outcomes in an ITO network and how these effects are moderated by various ITO network structures according to outsourced IT services. An agent-based simulation and game-theoretic approach are adopted to build a simulation model to describe ITO networks with various structures and ITO transactions between clients and vendors. Finally, the future research directions are discussed

The Mediating Effect of Emotive Factor on the Constructs That Influence Entrepreneurial Failure

This paper examines the presence of emotive factor that mediates the variables of voluntaristic, deterministic and opportunistic behaviour that impact entrepreneurial failure. The study is a quantitative study and uses causal analysis as its research approach. It relates the constructs of voluntaristic factor, deterministic factor, and opportunistic behaviour with the mediation of emotive factor to entrepreneurial failure. Sample of the study is 1541 nascent entrepreneurs in West Sumatra Province, Indonesia, who have experienced business failures. Analysis was undertaken by using causal step analysis in which the statistical protocol and rule were operated. The study found and argue that emotive factor of entrepreneurs is identified as individual psychological construct that partially mediates voluntaristic, deterministic and opportunistic behaviour in causing entrepreneurial failure experienced by nascent entrepreneurs. Originality and value of the study lies in the framework used – which considers the construct of opportunistic behaviour of entrepreneurs as an independent variable that can cause entrepreneurial failure. Other is related to the consideration that emotive factor that mediates the voluntaristic, deterministic and opportunistic behaviour in causing entrepreneurial failure.Abstrak dalam Bahasa Indonesia Penelitian ini membahas tentang keberadaan faktor emosi yang memediasi variabel voluntaristic, deterministic dan perilaku opportunis yang mengakibatkan terjadinya kegagalan berwirausaha. Studi ini merupakan studi kuantitatif dan menggunakan analisa kausal sebagai pendekatan penelitian. Sampel penelitian sebanyak 1541 orang wirausahawan pemula di Provinsi Sumatera Barat, Indonesia yang sebelumnya pernah mengalami kegagalan dalam berwirausaha. Analisa dilakukan dengan menggunakan causal step analysis yang menggunakan prosedur statistik tertentu. Studi ini menemukan dan lebih lanjut berpendapat bahwa faktor emotsi wirausahawan diidentifikasi sebagai konstruk psikologis individu yang secara parsial memediasi hubungan faktor voluntaristic, faktor determiniastic dan perilaku opportunis sebagai penyebab terjadinya kegagalan berwirausaha yang dialami oleh wirausahawan pemula. Keaslian dan nilai dari studi ini terletak pada kerangka penelitian yang digunakan, yang menempatkan faktor perilaku opportunis sebagai variabel bebas yang dapat mengakibatkan kegagalan berwirausaha. Hal lainnya terletak pada adanya unsur faktor emotsi yang memediasi faktor voluntaristic, faktor determiniastic dan perilaku opportunis sebagai penyebab kegagalan berwirausah