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Targeted by an activist hedge fund, do the lenders care?
No full textDo banks worry about expropriation when an activist hedge fund targets their borrowers or are they reassured that their borrowers will perform better after such targeting? We study 1435 events during the 1996–2013 period in which an activist targeted a US corporation, to examine what happens to loan contract terms post-targeting. We present two new results. First, we show that when a firm is targeted by an activist hedge fund, the lenders of that firm charge a significantly higher rate on future loans and demand collateral more frequently than the loans made to risk- and industry-matched non-targeted firms. Second, we find that this increase in loan rate and the likelihood of collateral demand is limited only to those targets that experience a large positive announcement return when the news of an activist's involvement is first announced. We argue that higher interest rates and greater collateral requirements reflect the increased credit risk for these borrowers due, in part, to the possibility of wealth expropriation by the shareholders. Thus, we provide empirical evidence that an increase in equity value due to an activist's targeting may partially be due to wealth expropriation from creditors
Forecasting the Project Duration Average and Standard Deviation from Deterministic Schedule Information
No full textMost construction managers use deterministic scheduling techniques to plan construction projects and estimate their duration. However, deterministic techniques are known to underestimate the project duration. Alternative methods, such as Stochastic Network Analysis, have rarely been adopted in practical contexts as they are commonly computer-intensive, require extensive historical information, have limited contextual/local validity and/or require skills most practitioners have not been trained for. In this paper, we propose some mathematical expressions to approximate the average and the standard deviation of a project duration from basic deterministic schedule information. The expressions’ performance is successfully tested in a 4100-network dataset with varied activity durations and activity durations variability. Calculations are quite straightforward and can be implemented manually. Furthermore, unlike the Project Evaluation and Review Technique (PERT), they allow drawing inferences about the probability of project duration in the presence of several critical and subcritical paths with minimal additional calculation.The first author acknowledges the Spanish Ministry of Science, Innovation, and Universities for his Ramon y Cajal contract (RYC-2017-22222) co-funded by the European Social Fund. The first two authors also acknowledge the help received by the research project PIN-0053-2019 funded by the Fundacion Publica Andaluza Progreso y Salud (Junta de Andalucia, Spain). The first four authors also acknowledge the help received by the research group TEP-955 from the PAIDI (Junta de Andalucia, Spain). Finally, the fifth author, acknowledges the support from the National Natural Science Foundation of China (No. 71301013), the National Social Science Fund Post-financing projects (No.19FJYB017), the List of Key Science and Technology Projects in China's Transportation Industry in 2018-International Science and Technology Cooperation Project (No.2018-GH-006), and the Humanity and Social Science Program Foundation of the Ministry of Education of China (No. 17YJA790091)
The welfare and price effects of sector coupling with power-to-gas
No full textElectricity markets with high installed capacities of Variable Renewable Energy Sources (VRES) experience periods of supply and demand mismatch, resulting in near-zero and even negative prices, or energy spilling due to surplus. The participation of emerging Power-to-X solutions in a sector coupling paradigm, such as Power-to-Gas (PTG), has been envisioned to provide a source of demand flexibility to the power sector and decarbonize the gas sector. We advance a long-run equilibrium model to study the PTG investment decision from the point of view of a perfectly competitive electricity and gas system where each sector's market is cleared separately but coupled by PTG. Under scenarios combining PTG technology costs and electricity RES targets, we study whether or not there is a convergence in the optimal deployment of PTG capacity and what is the welfare distribution across both sectors. We observe that PTG can play an important price-setting role in the electricity market, but PTG revenues from arbitrage opportunities erodes as more PTG capacity is installed. We find that the electricity and gas sector have aligned incentives to cooperate around PTG, and instead find an issue of misaligned incentives related to the PTG actor. Although not the focus of our analysis, in some scenarios we find that the welfare optimal PTG capacity results in a loss for the PTG actor, which reveals some intuition that subsidizing PTG can make sense to reduce the cost of RES subsidies. Sensitivity analyses are conducted to contextualize these findings for system specificities
System 1 Is Not Scope Insensitive: A New, Dual-Process Account of Subjective Value
No full textAbstract
Companies can create value by differentiating their products and services along quantitative attributes. Existing research suggests that consumers’ tendency to rely on relatively effortless and affect-based processes reduces their sensitivity to the scope of quantitative attributes and that this explains why increments along quantitative attributes often have diminishing marginal value. The current article sheds new light on how “system 1” processes moderate the effect of quantitative product attributes on subjective value. Seven studies provide evidence that system 1 processes can produce diminishing marginal value, but also increasing marginal value, or any combination of the two, depending on the composition of the choice set. This is because system 1 processes facilitate ordinal comparisons (e.g., 256 GB is more than 128 GB, which is more than 64 GB) while system 2 processes, which are relatively more effortful and calculation based, facilitate cardinal comparisons (e.g., the difference between 256 and 128 GB is twice as large as between 128 and 64 GB)
Fluvius drives towards sustainability: A case on rare earth elements (Ree) supply integrity
No full textAs Supply Chain Manager at Fluvius, the Belgian distribution system operator, Gunther wants to formulate a plan that can generate incentives to move towards greater energy supply chain sustainability and resilience. The low-carbon energy transition relies on rare earth elements (REEs)-enabled technologies tainted by their harsh mining ecosystem effects and their Chinese policies dependence. Gunther, adopting a holistic approach, analyses the complexity of the global, green energy supply chain. What does a sustainable energy supply chain actually mean? How to create a cascade of sustainable practices that reaches first-tier suppliers? How to couple resilience and sustainability and contribute to sustainable development? This case is designed to be exposed in Business Administration, Energy Management, Supply Chain Management, Operations Management or Technology Management courses. The goal is to develop and practice skills in identifying trends and weaknesses in a dynamic supply chain and to formulate an action plan that can integrate sustainability and resilience across an organization's supply chain
Game—The Beer Transportation Game: How to Decarbonize Logistics by Moving Freight to Sustainable Transport Modes
No full textMoving freight to sustainable transport modes is one of the most frequently mentioned suggestions to decarbonize logistics. Regrettably, even with regulation and technology developing over the past years, most of the freight volumes are still shipped via road, the least sustainable means of transport. This paper presents a beer transportation game to support logistics decarbonization via a modal shift from road to rail. In the game, student teams play the role of a logistics manager of a beer brewer and decide on the transport mode and shipment volume from the brewery to a distribution center. Their decisions are evaluated by the impact on total logistics costs and emissions. The game consists of two rounds, each with a student participation part and a lecturer debriefing part. The first round helps students understand why firms are often reluctant to shift freight from road to the low-emission transport mode (e.g., rail), and the second round encourages students to overcome the obstacles and helps them design practical approaches to alter the modal split in favor of rail transport. The game can be sealed into a 90-minute session and incorporated into any courses covering the topic of sustainable logistics or supply chain management
A decomposed branch-and-price procedure for integrating demand planning in personnel staffing problems
No full textThe personnel staffing problem calculates the required workforce size and is determined by constructing a baseline personnel roster that assigns personnel members to duties in order to cover certain staffing requirements. In this research, we incorporate the planning of the duty demand in the staff scheduling problem in order to lower the staffing costs. More specifically, the demand originates from a project scheduling problem with discrete time/resource trade-offs, which embodies additional flexibility as activities can be executed in different modes. In order to tackle this integrated problem, we propose a decomposed branch-and-price procedure. A tight lower and upper bound are calculated using a problem formulation that models the project scheduling constraints and the time-related resource scheduling constraints implicitly in the decision variables. Based upon these bounds, the strategic problem is decomposed into multiple tactical subproblems with a fixed workforce size and an optimal solution is searched for each subproblem via branch-and-price. Fixing the workforce size in a subproblem facilitates the definition of resource capacity cuts, which limit the set of eligible project schedules, decreasing the size of the branching tree. In addition, in order to find the optimal integer solution, we propose a specific search strategy based upon the lower bound and dedicated rules to branch upon the workload generated by a project schedule. The computational results show that applying the proposed search space decomposition and the inclusion of resource capacity cuts lead to a well-performing procedure outperforming different other heuristic and exact methodologies.The computational resources (Stevin Supercomputer Infrastructure) and services used in this work were provided by the VSC (Flemish Supercomputer Center), funded by Ghent University, FWO and the Flemish Government -department EWI
Is venture capital socially responsible? Exploring the imprinting effect of VC funding on CSR practices
No full textWe study how corporate social responsibility (CSR) is guided by ownership history, specifically whether a company receives venture capital (VC) funding or not. We argue that companies that receive VC funding are less likely to adopt CSR practices due to unique VC imprinting and that temporal and investment orientation moderate this relationship. We find that VC-backed companies have poorer CSR records, which do improve over time, but at a comparatively slower rate than non-VC-backed companies. However, when VC-backed companies receive funding from VC firms that have a responsible investment orientation and a broader stakeholder view, their CSR records are significantly better. This study contributes to our understanding of imprinting boundaries and related repercussions in stakeholder management strategies
The consequences of greater net price transparency for innovative medicines in Europe: Searching for a consensus
Get PDFThe merits of greater or lesser net price transparency (NPT) has been a topic for discussion for many years across business and industry in general. However, in the past few years, the debate on NPT of innovative medicines has intensified, with organisations such as the United Nations (UN), the World Health Organization (WHO) and the Organisation for Economic Co-operation and Development (OECD) leading calls for greater transparency in the pharmaceutical sector, specifically focused on prices. In May 2019 the World Health Assembly (WHA) approved a resolution to support the greater public disclosure of prices and research and development (R&D) costs for both medicines and other health products supported by several European and non-European governments. To contribute to the international debate on the transparency of medicine prices in Europe, Merck Sharp & Dohme (MSD) asked Charles River Associates (CRA) to curate a panel of experts to develop evidence on the impact of greater NPT of innovative medicines. Professor Walter Van Dyck1 and Professor Massimo Riccaboni2 were asked by CRA to lead this research, supported by a wider panel of 10 experts from a range of European markets. A structured literature review was first conducted to summarise the theoretical consequences of greater NPT. This was supplemented with a survey of national payers and payer experts3 from a range of European markets. This was used as pre-read information for an expert advisory board of 12 economic and health economic experts representing 12 countries selected to give a range of market sizes, national income and payer approaches. The debate and the consensus reached by the advisory board have been summarised in this report. In addition, a computational model has been developed by two key investigators to provide new, empirical evidence to illustrate the impact of NPT on different European markets
Do investors follow the herd in option markets?
No full textWe investigate the previously unexplored herding behaviour of investors in option markets, by examining equity option contracts traded in the US between 1996 and 2012. We document strong herding effects in option trading activity that are conditional on a set of systematic factors related to periods of market stress. More specifically, we find that option investors tend to herd during periods of high market volatility risk, on dates of macroeconomic announcements, during the financial crisis of 2008, when a large number of market option positions is either opened or closed, and during periods of a large average dispersion of analysts’ forecasts