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Recently Published

Impact of Allocation Schemes on Sales, Profits, and Capacity Decisions book-cover

Magnitude of financial alignment relationship between CEO and shareholder returns plays positive role in predicting subsequent firm performance

By Barry Gerhart and Mason Carpenter, and co-authors Nyberg and Fulmer
Agency theory suggests that there may be managerial mischief when the interests of owners and managers (agents) diverge; one possible solution to this agency problem is the alignment of owner and agent interests through agent compensation and equity ownership. Gerhart, Carpenter and co-authors Nyberg and Fulmer develop the theoretical concept of CEO returns, and empirically estimate the magnitude of financial alignment, as measured by the relationship between CEO returns and shareholder returns. Results, based on this new conceptualization and corresponding measurement, suggest stronger alignment than reported in previous work. Findings show the magnitude of this alignment relationship plays a positive role in predicting subsequent firm performance; however, it does so in ways not clearly articulated or tested in prior CEO compensation research.

Barry Gerhart and Mason Carpenter, along with their co-authors Nyberg and Fulmer, published a paper entitled "Agency Theory Revisited: CEO Returns and Shareholder Interest Alignment" in the Academy of Management Journal (53), 1029-1049. 

Impact of Allocation Schemes on Sales, Profits, and Capacity Decisions book-cover

Impact of Allocation Schemes on Sales, Profits, and Capacity Decisions

By Greg DeCroix
This paper considers an assemble-to-order system in which multiple products are assembled from a common component and a set of product-dedicated components. Findings show that profit gains from delayed allocation tend to be higher in systems in which the optimal capacity portfolio is highly unbalanced when the allocation decision is made after observing all demands. Insights are developed into what detailed system parameters lead to the largest gains from demand aggregation. The paper also analyzes trade-offs associated with the choice of an allocation scheme when customers exhibit impatience if the allocation scheme forces them to wait to be served.

Greg DeCroix published a paper entitled "Impact of demand aggregation through delayed component allocation in an assemble-to-order system" in Management Science (57), 1154-1174. 

Impact of Allocation Schemes on Sales, Profits, and Capacity Decisions book-cover

Long-run relationship between money and unemployment

By Randy Wright, and co-authors Berentsen and Menzio
Wright and co-authors Berentsen and Menzio study the long-run relation between money (inflation or interest rates) and unemployment. They document positive relationships between these variables at low frequencies. They develop a framework where money and unemployment are modeled using explicit microfoundations, providing a unified theory to analyze labor and goods markets. They calibrate the model and ask how monetary factors account for labor market behavior. Wright and co-authors can account for a sizable fraction of the increase in unemployment rates during the 1970s, and show how it matters whether one uses monetary theory based on the search-and-bargaining approach or on an ad hoc cash-in-advance constraint.

Randy Wright, along with his co-authors Berentsen and Menzio, published a paper entitled "Inflation and Unemployment in the Long Run" in the American Economic Review (101), 371-396. 

Impact of Allocation Schemes on Sales, Profits, and Capacity Decisions book-cover

The effects of intermediaries and kickbacks on fund size, flows, performance and investor welfare 

By Youchang Wu, and co-authors Stoughton and Zechner
Intermediaries such as financial advisers serve as an interface between portfolio managers and investors. A large fraction of their compensation is often provided through kickbacks from the portfolio manager. Wu, and co-authors Stoughton and Zechner provide an explanation for the widespread use of intermediaries and kickbacks. Depending on the degree of investor sophistication, kickbacks are used either for price discrimination or aggressive marketing. They explore the effects of these arrangements on fund size, flows, performance, and investor welfare. Kickbacks allow higher management fees to be charged, thereby lowering net returns. Competition among active portfolio managers reduces kickbacks and increases the independence of advisory services.

Youchang Wu, along with his co-authors Stoughton and Zechner, published a paper entitled "Intermediated Investment Management" in the Journal of Finance (66), 947-980.