Browsing by Subject "Reputation"

Now showing 1 - 5 of 5
  • Thumbnail Image
    Item
    Analyst forecasts : the roles of price impact and reputational ranking.
    (2011-12) Banerjee, Sanjay
    In this dissertation, I develop analytical models to examine how price impact and reputational ranking incentives influence the forecasting behavior of sell-side analysts. First, I analyze the equilibrium behavior of an analyst when he is concerned with maximizing his short-term price impact and long-term reputational value in the market. Second, I discuss how the equilibrium forecasting behavior of an analyst changes in the presence of a second analyst, when each analyst is concerned with maximizing not only his own reputation, but also his relative reputation (i.e., reputational ranking) compared to the other analyst. Two key results emerge : (i) Positive role of short-term price-impact. Short-term price-impact motives, together with reputational concerns, provide better incentives for honest forecasting than reputational concerns or price-impact profits alone; (ii) Convexity of reputational ranking payoff function decreases the information content of analyst forecasts. The greater the ratio of reputational reward for being ranked higher to reputational penalty for being ranked lower is, the lesser the information content of analyst forecasts.
  • Thumbnail Image
    Item
    Essays on repeated games and reputations.
    (2010-07) Ozdogan, Ayca
    This dissertation is comprised of two papers, which use and aim to extend the tools of repeated games and reputations to analyze strategic interactions between two parties that can explain various economic phenomena. The first paper, "Reputation Effects in Two-Sided Incomplete-Information Games," studies reputation effects in a class of games with imperfect public monitoring and two long-lived players, both of whom have private information about their own type and uncertainty over the types of the other player. In particular, players may be either a strategic type who maximizes expected utility or a (simple) commitment type who finds it optimal to play a prespecified action every period. The strategic players may gain from opponent player's uncertainty about their types, by trying to convince the opponent that they are non-strategic. As in standard models, the (false) reputation of a strategic type of player for being the commitment type is established by mimicking the behavior of the commitment type. The distinct feature of my model is that both strategic players aim to establish a (false) reputation for being the commitment type. The class of games I consider, namely one-sided binding moral hazard at the commitment profile, encompasses a wide range of economic interactions between two parties that involve hidden-information (e.g. between a regulator and a regulatee) or hidden-action (e.g between an employer and an employee), where the reputation concerns of both parties are apparent. In both games, one party (principal) prefers that the other party (agent) play in a specific way and use costly auditing to enforce this behavior. The principal aims to establish a reputation for being diligent; whereas the agent want to build a reputation for being virtuous. Long-run equilibrium analysis requires to examine the evolution of reputations, i.e. what happens to false reputations in the longrun. Extending the techniques of Cripps, Mailath, and Samuelson (2004), I find that neither strategic player can sustain a reputation for playing a noncredible behavior, i.e. a behavior which is not optimal given that the opponent is best responding in the stage game. Hence, in this class, the true types of both players will be revealed eventually in all Nash equilibria uniformly and the asymmetric information does not affect equilibrium analysis in the long-run. The second paper, "Strategic Communication vs. Strategic Auditing with Reputation Concerns on Both Sides," studies misrepresentation of information, by a privately-informed agent, to an authority figure. Misrepresenting private information by agents, even under the existence of a regulator or monitor, is a common feature of many economic interactions. For instance, a bank who has private information about its financial health may misreport this information to a regulator; or a tax payer may fill out false income statements; or an investor may be engaged in fraudulent behavior by misrepresenting its books or have false fillings to a regulatory agency. Moreover, in most of such situations, the regulator or the monitor, who is supposed to detect deviations from the desirable behavior, may himself have an incentive to be engaged in moral hazard because of costly or timely monitoring. Moreover, both parties may have some prior or established beliefs about the other party and concerns about their reputation (for good behavior) or lack of it. The goal of this paper is to understand how private information can be manipulated by a strategic Sender (through false messages), in the presence of a strategic Receiver, who aims to deter the manipulation of information using costly auditing, when their interactions are not contractable and both parties have reputation concerns. More specifically, the Sender (`she') has noisy private information about an underlying state of nature and is able to misrepresent this information by sending false messages. There is a strategic Receiver (`he') who aims to deter this manipulation using costly auditing. The magnitude of the Senders cost of lying is governed by the auditing strategy of the Receiver, which determines the probability of an audit and detecting an undesirable behavior of the Sender. The Receiver, on the other hand, may have an inventive not to audit intensively if he thinks that the Sender is going to give the accurate information (since auditing is costly). Receiver believes that the Sender could be an honest type with some strictly positive probability. An honest type always sends the true message, whereas a strategic Sender maximizes expected payoffs. Similarly, the Sender believes that the Receiver could be a tough type with some strictly positive probability. A tough Receiver always chooses high auditing whereas a strategic Receiver maximizes expected payoffs. The fact that the private information of the Sender is imperfect and the auditing by the Receiver is random prevent players from learning each others true types (strategic). To model this environment, I use a simultaneous move version of an inspection game, with incomplete-information about the types of players, when their actions are not observable. This paper aims to analyze how uncertainty about each other's types and the concerns for (false) reputation pay of for both parties; and characterize the equilibria in the (1) one-shot game; (2) two-period game. The equilibrium strategies are determined by the parameters of the model, as well as the discount factors (in the two-period game). The infinitely-repeated game of strategic communication vs strategic auditing fits into the class of games analyzed in the first paper; and thus, none of the parties can fool the other party indefinitely, i.e. their true types will be revealed eventually.
  • Thumbnail Image
    Item
    Essays on reputation
    (2012-08) Saeedi, Maryam
    In the dissertation, we study the value of reputation in a market prone to adverse selection and also the incentives of the individuals in that market to participate in the reputation mechanism. Ever since [Akerlof, 1970], it is known that adverse selection can hinder trade. Reputation can be used as a possible mechanism in mitigating adverse selection problems, resolving the inefficiencies caused by asymmetric information and help the marketplace to thrive. There are a number of examples of such online markets which have been conceived, have survived and have thrived during the internet age. These markets have been kept alive by their built-in reputation systems. In this dissertation, I focus on the effects of reputation on eBay online market. In chapter 1, I study how actors in a marketplace can introduce mechanisms to overcome adverse selection, and I focus on one mechanism employed by eBay: sellers’ reputation. Using a unique data set that follows sellers on eBay over time, I show that reputation, according to various measures, is a major determinant of variations in the prices of homogeneous goods sold on eBay, in particular, for iPods. Inspired by this observation, I develop a model of firm dynamics where firms have heterogeneous qualities that are unobservable by consumers. Reputation is used as a signal of private information to buyers in order to improve allocations. I structurally estimate this model to uncover deep parameters of buyers’ utility and sellers’ costs as well as sellers’ unobservable qualities. The estimated model suggests that reputation has a positive effect on the expected profits of high quality sellers and their market shares. I perform a counterfactual to establish the value of reputation. Removing reputation mechanisms put in place by eBay will increase the profits of low quality sellers and will decrease the profits of high quality sellers. Moreover, removing reputation mechanisms significantly increases the market share of low quality sellers and decreases the market share of high quality sellers. Finally, buyers’ welfare is significantly improved as a result of the reputation mechanism. In chapter 2, we focus on incentives of buyers and sellers in leaving feedback and their effect on emergence of reputation systems in online markets. To do so, we analyze how such systems work and we turn our focus on eBay. We start by analyzing the feedback behavior of buyers and sellers over time. We use a key policy change, that sellers cannot leave negative feedback for buyers, as an identifier. Our data analysis points to the existence of retaliation between buyers and sellers before the policy change. Furthermore, we develop a model of feedback behavior as a dynamic game between buyers and sellers and structurally estimate the model. The structural estimation further establishes the existence of retaliation incentives between buyers and sellers. Finally, we perform various welfare and counterfactual analysis.
  • Thumbnail Image
    Item
    The roles of reputation in organizational response to public disclosure of health care quality
    (2011-12) Leerapan, Borwornsom
    Policy analysts have argued that public disclosure of health care quality stimulates quality improvements in health care delivery organizations. One proposed mechanism for such an effect is the organization's reputation: Provider organizations improve their quality after public reporting because the reported information affects their reputation. However, research evidence to date is mixed on whether and how reputation affects an organization's response to public disclosure of health care quality data. Drawing from organizational theory and social psychology literature, this dissertation examines the role of reputation in organizational response to public reporting of health care quality. In particular, it examines whether quality improvement is more likely in organizations whose performance ranking are inconsistent with their prior reputations. The study employs observational data sets and a non-equivalent control group quasi-experimental research design. The unit of analysis is the primary care clinic. The sample includes 156 clinics in the state of Minnesota that publicly disclosed quality performance information on the Minnesota Community Measurement (MNCM) Health Care Quality Reports from 2007 to 2010. The dissertation improves on previous studies by using longitudinal data and by adopting more comprehensive measures of reputation. Optimal Diabetes Care (ODC) is used as a proxy measure of clinical quality performance, and the data are drawn from MNCM Health Care Quality Reports of 2007-2010. The reputation measures are constructed from several other sources of data that represent the reputation of clinics during the period of 2000-2006, including endorsement from Minneapolis-St. Paul Magazine's Top Doctors 2000-2005 and recipients of Buyer Health Care Action Group's PatientChoice Excellence in Quality Awards 2000-2006. Analysis examines the effects of reputation and public performance ranking on subsequent quality improvement, as well as the interaction effects between reputation and public performance ranking. The fixed effects (FE) estimator and the two-stage least squares (2SLS) estimator are used to address the endogeneity issues in the data set. The findings are also compared with those obtained from the traditional ordinary least square (OLS) estimator. The results show that an organization's low ranking on public performance reports leads to a greater degree of quality improvement, and public performance ranking has heterogeneous effects on quality improvement based on the prior reputations of organizations. Health care organizations do not only learn about their quality performance relative to peers and competitors, but also relative to their organization's prior reputation. The dissonance between prior reputations and public performance rankings of organizations is a predictor of quality improvement. The findings expand the empirical evidence on the influence of organizational reputation on subsequent change in health care quality. The findings also advance knowledge of the role of an organization's reputation in quality management theories and practices and have implications for how policymakers and health care administrators can more effectively make use of public reporting to promote quality improvement in health services organizations.
  • Thumbnail Image
    Item
    Strategic Sustainability: Leading Corporate Change for Greenhouse Gas (GHG) Emissions Reductions through Reputation, Dynamic Capabilities and Interorganizational Relationships.
    (2021-08) Heyn, Michelle
    A primary concern of business scholars is to understand and discuss how companies manage risk in this new paradigm of sustainability where the risk of not addressing climate change outweighs the risk of addressing climate change. Climate change presents many challenges for companies. Companies will have to work with others to understand expectations. Scientists maintain that greenhouse gas (GHG) must be addressed by industry and industry must report their emissions, and reduce GHG emissions below 2 degrees Celsius above preindustrial levels. In order for companies to address GHG reduction throughout their global operations, the risk of climate change needed to be understood financially. Substantive and material understanding of the impacts that climate change strategies have on all business operations is a long term change that involves innovation, culture, supply chain operations, human resources, capital investment and more. My dissertation tells this story of how multinational corporations (MNCs) have learned strategic sustainability. Chapter one focuses on the comparison between company statements about sustainability and their environmental performance. Most large companies have a climate change strategy. Having a climate change strategy could be a signal meant to increase a company’s reputation but one that does not necessarily translate into reductions in greenhouse gas (GHG) emissions. Exploring symbolic versus substantive communication, I use longitudinal data for 163 companies from 13 industries over the years 2008-2013, from the list of Fortune 1000 companies. The results show that decreases in greenhouse gas emissions are correlated with return on invested capital (ROIC) and two of the ten subcategories tested of corporate social responsibility (CSR). However, the CSR subcategories environmental policy and reporting, and diversity and labor rights, along with the variable climate change strategy correlate with increased levels of GHG emissions. Furthermore, reporting ISO 14001 has a positive correlation with GHG emissions which implies that even ISO 14001 claims are symbolic and not substantive. The focus of chapter two is to understand the relationship between sustainability reporting and company reported environmental performance (measured as greenhouse gas (GHG) per unit of revenue) through the lens of building dynamic capabilities. Dynamic capabilities are developed through absorbing the capacity to learn what is material. Materiality is defined as “likely to affect the financial condition or operating performance of companies” (SASB, 2020). As material environmental reporting is learned, companies absorb this capacity and use it for strategic advantage. The four stages of building environmental reporting capacity are acquisition, assimilation, transformation, and exploitation stages which have parallel stages in the evolutionary theory which are variation, selection, retention, and struggle. Together, these stages help to explain the dynamic change within companies that allows them to build a capacity for environmental reporting. The first two stages are defined as intended which means the company has newly discovered the capability and has not yet purposefully applied the material capability. The second two stages are defined as realized meaning the company has developed the material capability consciously and used this learning purposefully in advance of sustainability reporting. Based on this theoretical foundation I examine 163 companies, from 13 industries, listed in the 2014 Fortune 1000 list using data for the years 2008-2013. In the first two stages I find that R&D is related in a statistically significant manner to higher GHG emissions per unit of revenue; and that Sustainability Accounting Standards Board (SASB) is related in a statistically significant manner to lower GHG emissions per unit of revenue. In the second two stages I find that greenhouse gas (GHG) Assurance (verification by a third party) and Return on Invested Capital (ROIC) are related in a statistically significant manner to lower GHG emissions per unit of revenue, and that Climate Change Strategy is related in a statistically significant manner to higher GHG emissions per unit of revenue. My contribution in this chapter is to map out the stages needed to build capacity for environmental performance through learning about what is material for sustainability reporting. Lastly, chapter three discusses how companies are organized to address climate change challenges understood through the Paris Agreement. In the Paris Climate Agreements, governments around the world agreed to reduce greenhouse gas (GHG) emissions to avoid dangerous levels of anthropogenic climate change by keeping the increase in global mean temperature to remain below 2 degrees Celsius above preindustrial levels. To meet this goal, companies will need to play a major role. Companies need to understand how to lower greenhouse gas (GHG) emissions. To do this, companies may need to work with others to gain the needed knowledge to lower emissions while maintaining profitability. Companies can partner with NGOs and other companies to form a type of strategic alliance called an interorganizational relationship (IOR) that can assist in learning about ways to lower GHG per unit of revenue (also referred to as environmental performance), apply sustainability frameworks, and report environmental performance metrics. In this paper, I empirically test whether engagement in sustainability focused IORs is related to lower GHG emissions per unit of revenue, and whether this relationship is influenced by corporate social responsibility (CSR) governance metrics, and company financials. I find some evidence that companies who participate in sustainability IORs have lower GHG emissions per unit of revenue. With no governance interactions, membership in five out of the six IORs show lower GHG emissions per unit of revenue. Participation in the World Economic Forum (WEF), the Sustainability Accounting Standards Board (SASB), and the United Nations Global Compact (UNGC) are correlated with lower GHG emissions per unit of revenue but not statistically significant. Participation with the Coalition for Environmentally Responsible Economies (CERES) is correlated with lower GHG emissions per unit of revenue and is statistically significant. However, participation in the World Business Council for Sustainable Development (WBCSD) is correlated with higher GHG emissions per unit of revenue and is statistically significant. Only two of the fifteen IOR interactions with governance variables are correlated with lower GHG emissions per unit of revenue and statistically significant, and one interaction is statistically significant and is correlated with higher emissions. Additionally, ROIC, and time, are statistically significant and correlated with lower GHG emissions per unit of revenue. Results may indicate that there is a difference between socially constructing sustainability expectations and making sense of the information gained internal to the company. Together, my three chapters explore the real-life phenomenon that I saw as I worked in a sustainability program at the University of Minnesota. My work was centered on building a sustainability program for and with stakeholders that included MNCs, non-profits, non-governmental organizations (NGOs), and individuals. Reflecting on my experience, I wondered if what I saw and learned could be tested empirically and supported. Each chapter, therefore, is representative of a specific and important activity, that when taken together, become an approach to building sustainable corporate strategy considering the natural environment.