Product market efficiency / Thomas H. Noe in Management science, Vol. 58 N° 11 (Novembre 2012)  

Public ISBD [article]  inManagement science > Vol. 58 N° 11 (Novembre 2012) . - pp. 2019-2036 Titre : Product market efficiency : The bright side of myopic, uninformed, and passive external finance Type de document : texte imprimé Auteurs : Thomas H. Noe, Auteur ; Michael J. Rebello, Auteur ; Thomas A. Rietz, Auteur Année de publication : 2013 Article en page(s) : pp. 2019-2036 Note générale : Management Langues : Anglais (eng) Mots-clés : Adverse selection Financing Reputation Résumé : We model the effect of external financing on a firm's ability to maintain a reputation for high-quality production. Producing high quality is first best. Defecting to low quality is tempting because it lowers current costs while revenue remains unchanged because consumers and outside investors cannot immediately observe the defection. However, defection to low quality impairs the firm's reputation, which lowers cash flows and inhibits production over the long term. Financing via short-term claims discourages defection to low quality because the gains from defection are mostly captured by outside investors through an increase in the value of their claims. Therefore, if the firm relies on short-term external financing, it is more likely to produce over the long run, produce high-quality goods, and enjoy high profitability. The aggregate results from a laboratory experiment generally accord with these predictions. ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/58/11/2019.abstract [article] Product market efficiency : The bright side of myopic, uninformed, and passive external finance [texte imprimé] / Thomas H. Noe, Auteur ; Michael J. Rebello, Auteur ; Thomas A. Rietz, Auteur . - 2013 . - pp. 2019-2036. Management Langues : Anglais (eng) in Management science > Vol. 58 N° 11 (Novembre 2012) . - pp. 2019-2036 Mots-clés : Adverse selection Financing Reputation Résumé : We model the effect of external financing on a firm's ability to maintain a reputation for high-quality production. Producing high quality is first best. Defecting to low quality is tempting because it lowers current costs while revenue remains unchanged because consumers and outside investors cannot immediately observe the defection. However, defection to low quality impairs the firm's reputation, which lowers cash flows and inhibits production over the long term. Financing via short-term claims discourages defection to low quality because the gains from defection are mostly captured by outside investors through an increase in the value of their claims. Therefore, if the firm relies on short-term external financing, it is more likely to produce over the long run, produce high-quality goods, and enjoy high profitability. The aggregate results from a laboratory experiment generally accord with these predictions. ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/58/11/2019.abstract

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