Abstract:This paper discusses the effects of gap between aspiration and performance on entrepreneur’s creative and destructive activities and explores the moderate effect of political ties. Using the data of Chinese listed family firms, several main conclusions are drawn as follows. First, entrepreneurs increase their creative and destructive activities with firms’ past performance above firm based aspiration (historical comparison) and firm’s performance below aspiration (both historical and social comparison) , but they reduce those risk-taking behaviors when performance is above social-based aspiration (social comparison). Second, marginal effect of conducting destructive activities with performance below aspiration is much higher than taking such activities with performance above aspiration. Marginal effect of taking creative activities with performance below social-based aspiration is lower than conducting creative actions with performance above aspiration, and which is even stronger in the model of historical comparison. Third, moderate effect of political ties on the relationship between aspiration gap and entrepreneur’s risk decision making is significant especially in the condition of negative gap between performance and aspiration. When performance is below aspiration, political ties decrease entrepreneur’s motivations of conducting creative activities and induce them to allocate more resources into destructive activities.

Abstract:The paper introduced equity sensitivity into the moral risk model with fairness preference, which can depict the diversity of fair understanding for agents, to analyze how equity sensitivity affects the contract structure and the optimal effort level of agents. The results with given parameters show that: the principal will pay a fixed payment correlated with the fair sensitivity coefficient with complete information; when agents’ effort level cannot be observed by the principal, the principal will eliminate unfairness by adjusting the fixed payment for agents with a certain equity sensitivity coefficient; when the sensitivity coefficient is also not observed, the principal makes decision according to expected equity sensitive coefficient.

Abstract:This paper studies whether an outside patent holder prefers to license its Quality-improving innovation as an external patentee or to merge with one of the firms by Stackelberg duopoly model. The findings are that, if the degree of innovation is high, the patent holder prefers vertical merger, and the new firm composed by the patent holder and the follower prefers licensing by means of a per-unit royalty to ad valorem royalty. Secondly, the paper finds if the degree of innovation is low, the patent holder directly licenses as an external patentee. Finally, the paper finds vertical merger benefits consumers, while licensing decreases consumer surplus, as contradicts our government preference for technology licensing.

Abstract:Assuming that there exists an electricity spot market, the contract between one wind power plant and one power grid company is studied. To effectively manage the fluctuation of the wind power supply, both the fixed supply contract and the forecast-commitment supply contract, where the latter transfers part of the supply fluctuation risk from the wind power plant to the power grid company, are studied; this reduces the dependence of the wind power plant on the electricity spot market. The optimal decisions of the wind power plant and the power grid company, as well as the sensitivity of the optimal decisions and profits to the spot market price and the risk attitudes are discussed. Finally, how the government subsidy policy affects the members’ decisions is analyzed and the conclusion is that to provide the subsidy to the wind power plant is always better and a Pareto improvment from the perspective of social welfare maximization. Providing the subsidy to the wind power plant can reduce the rate of the abandoning wind, and increase the dependence of the wind power plant on the electricity spot market.

Abstract:As an endogenous factor, the agency problem may deteriorate the firm’s credit risk. In this paper, the optimal contracting between the agent and equity holders is embed into the Leland-Toft endogenous default model to study the impact of moral hazard on credit risk and credit spreads. Our model shows that the agency cost induced by moral hazard can have significant impacts on credit spreads. The credit spreads are obviously larger when the moral hazard problem is considered, and our model highlights the role of the key parameters of the moral hazard in affecting the credit spreads. Thus the moral hazard could be used to explain the credit spread puzzle. The explicit formulae of the equity value and the endogenous bankruptcy barrier are also given.

Abstract:Focused on alternative energy vehicles, this paper measures the space and frontier of the new and old tech-economic paradigm in the three dimensions of product performance, selling price and subsequent spending. Under the assumption of heterogeneity, a model of consumer choice and firm investment decision is constructed to simulate the evolution of automobile industry by Matlab 7.0. The effects of government consumer subsidies and productive subsidies are investigated respectively. The results show that the conventional vehicles will dominate the market with the advantages of product performance and selling price, although the subsequent spending of alternative energy vehicles is comparatively less. The consumer subsidies can stimulate the purchase of alternative energy vehicles, and from the demand side force the firms producing alternative energy vehicles to improve the product performance and increase the production cost through R＆D activities, so as to increase the firms’ competitiveness. The productive subsidies from the supply side help the firms producing alternative energy vehicles enter into the market, but do not change the conditions of low market share and profitability. Further, the subsidies do not take effects in the support of emerging industries, but disturb market order to some extent.

Abstract:This paper provides novel evidences for the link between stock return reversals and stock liquidity. Using the data from Chinese A-share stock market for the period between January 1997 and November 2013, the paper examines the stock return reversal effect, the impact of stock liquidity on excess stock returns, and the liquidity-based explanation for stock return reversal effect, respectively. Consistent with previous studies, the paper finds that the stock return reversal effect is significant in Chinese stock market and stock liquidity has a positive effect on excess stock returns. However, inconsistent with the liquidity-based explanation for stock return reversals, our results suggest that stock liquidity is not likely a driver of stock return reversals in Chinese stock market. These results are explained with a demand-supply model, in which stock price manipulations by large institution investors lead to stock return reversals.

Abstract:A class of problems for manufacturers are proposed to minimize joint cost. Production and outbound distribution are combined to achieve a joint scheduling in supply chain. In the production process, the manufacturers have identical parallel batching machines to process arbitrary-size jobs. The machines have a fixed capacity in size and the total size of jobs in a batch cannot exceed the machine capacity. In the distribution process, the manufacturers deliver the products using their own vehicles and the vehicles have identical transport capacities. If there are no available vehicles to deliver the products, they should be put in inventory. The total cost consists of the production cost, the distribution cost and inventory cost. An integer programming model of the problem is presented and the problem under investigation is shown to be NP-hard in the strong sense. Then a polynomial time algorithm is provided. The time complexity and performance guarantee of the proposed algorithm are analyzed.

Abstract:The paper extracts the implied volatility skew and the risk-neutral skewness from the S＆P500 index option data and uses the logistic model to explore whether the volatility skew and the risk-neutral skewness are good estimators of future tail risk. The results show that both contain some information about future tail risk but cannot predict it accurately. Instead, the volatility skew and the risk-neutral skewness are both significantly correlated with investor sentiments.