We contribute to the theory of the firm by experimentally investigating a bilateral trade relationship in which standard theory assuming self-regarding preferences predicts that the seller will be better off by investing in the outside option to improve his bargaining position. The seller’s...

We study whether group identity helps mitigate inefficiencies associated with appropriable quasi-rents, which are often created by relationship-specific investments in bilateral trade relationships. Based on previous findings that group identity strengthens other-regarding preferences, we...

The hold-up problem has played a central role in the study of firm boundaries, which is a fundamental element of the economic study of organizations. We study a previously unex-plored mechanism by which integration between two parties could resolve the problem. Based on the social identity...

Groups, companies, and organizations identify themselves via symbols. Symbols have the potential to create group identity and at the same time create group boundaries, thus allowing for achieving the benefits of cooperation by ingroup members. We use a laboratory experiment to study the role of...

The hold-up problem has played a central role in the study of firm boundaries that originated with the pathbreaking essay by Coase (1937). This paper studies a previously unexplored mechanism through which integration could resolve the hold-up problem. Based on Tajfel and Turner’s (1979)...

This paper analyzes the links between cash flow rights, control rights and property rights in situations where a firm's security holders can manipulate earnings (intertemporal substitution). It is shown that the allocation of these rights a¤ects the incentives of claimholders when intertemporal...

Existing literature usually considers earnings manipulation to be a negative social phenomenon. We argue that earnings manipulation can be a part of the equilibrium relationships between firm's…insiders and outsiders. We consider an optimal contract between an entrepreneur and an investor where...

In recent years financing through the creation of an independent project company or financing by non-recourse debt has become an important part of corporate decisions. Shah and Thakor (JET, 1987) argue that project financing can be optimal when asymmetric information exists between firm's...

One of the fastest growing areas in empirical finance, and also one of the least rigorously analyzed, especially from a financial econometrics perspective, is the econometric analysis of financial derivatives, which are typically complicated and difficult to analyze. The purpose of this special...

This paper investigates the stock returns and volatility size effects for firm performance in the Taiwan tourism industry, especially the impacts arising from the tourism policy reform that allowed mainland Chinese tourists to travel to Taiwan. Four conditional univariate GARCH models are used...