Articles

Better Safe than Sorry: Subsidiary Performance Feedback and Internal Governance in Multiunit Firms

T. OBLOJ, m SENGUL

Journal of Management

Forthcoming

Departments: Strategy & Business Policy, GREGHEC (CNRS)


This paper explores the link between subsidiary performance feedback and internal governance mechanisms in multiunit firms. A central premise of performance feedback models is that performance below aspirations is associated with increased risk tolerance and thereby with a higher likelihood of taking excessive risks in resource allocation decisions. Building on this observation, we contend that the headquarters of multiunit firms take this association into account in the design of internal (i.e., headquarters-subsidiary) governance mechanisms. Accordingly, a subsidiary’s performance-aspiration gap (below aspirations) is positively associated with the headquarters’ oversight of its resource allocation decisions and negatively associated with the provision of incentive schemes that promote risk taking. Regression results, using data on subsidiaries in France between 1998 and 2004, support our hypotheses and show that subsidiaries performing below historical and social aspirations are less likely to be given discretion in investment decisions and incentivized by cash bonuses. In the supplementary analyses we also provide suggestive evidence that subsidiary performance problems in multiunit firms trigger structural adaptation in the internal governance mechanisms in pursuit of regaining fit

Better together: using meta-analysis to explore complementarities between ecological and institutional theories of organization

M. LANDER, P. HEUGENS

Organization Studies

Forthcoming

Departments: Management & Human Resources, GREGHEC (CNRS)


Beyond the Target Customer: Social Effects of CRM Campaigns

E. ASCARZA, P. EBBES, O. NEDZER, M. DANIELSON

Journal of Marketing Research

Forthcoming

Departments: Marketing, GREGHEC (CNRS)

Keywords: Customer Relationship Management (CRM), Field experiments, Targeting, Churn, Retention, Mobile


Customer Relationship Management (CRM) campaigns have traditionally focused on maximizing the profitability of the targeted customers. We demonstrate that, in business settings that are characterized by network externalities, a CRM campaign that is aimed at changing the behavior of specific customers propagates through the social network, thereby also affecting the behavior of non-targeted customers. Using a randomized field experiment involving nearly 6,000 customers of a mobile telecommunications provider, we find that the social connections of targeted customers increase their consumption and are less likely to churn due to a campaign that was neither targeted at them nor offered them any direct incentives. We estimate a social multiplier of 1.28. That is, the effect of the campaign on first-degree connections of targeted customers is 28% of the effect of the campaign on the targeted customers. By further leveraging the randomized experimental design we show that, consistent with a network externality account, the increase in activity among the non-targeted but connected customers is driven by the increase in communication between the targeted customers and their connections, making the local network of the non-targeted customers more valuable. Our findings suggest that in targeting CRM marketing campaigns, firms should consider not only the profitability of the targeted customer, but also the potential spillover of the campaign to non-targeted but connected customers

Blockholder Exit Threats in the Presence of Private Benefits of Control

Ole-Kristian HOPE, H. WU, Wuyang ZHAO

Review of Accounting Studies

Forthcoming

Departments: Accounting & Management Control

Keywords: Exit-Threat Theory, Private Benefits of Control, Liquidity, China, Split-Share Structure Reform, Operating Performance, Quasi-Experiment

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2572724


Exit theory predicts a governance role of outside blockholders’ exit threats; but this role could be ineffective if managers’ potential private benefits exceed their loss in stock-price declines caused by outside blockholders’ exit. We test this prediction using the Split-Share Structure Reform (SSSR) in China, which provided a large, exogenous, and permanent shock to the cost for outside blockholders to exit. Using a difference-in-differences design combined with propensity-score matching, we find that firms whose outside blockholders experience an increase in exit threats have a greater improvement in performance than those whose outside blockholders experience no increase. Moreover, the governance effect of exit threats is ineffective in the group of firms with the highest concern for private benefits of control. Finally, a battery of theory-motivated tests show that the documented effects are unlikely explained by outside blockholder intervention or some well-known intended effects of SSSR.

Catching Falling Knives: Speculating on Liquidity Shocks

J. E. COLLIARD

Management Science

Forthcoming

Departments: Finance, GREGHEC (CNRS)


Many market participants invest resources to acquire information about liquidity rather than fundamentals. I show that agents using such information can reduce the magnitude of short-lived pricing errors by trading against liquidity shocks. However, the short-run stabilizing effect of this behavior also makes it more difficult to identify liquidity shocks, a signal-jamming effect that slows down price discovery in the long run. As more agents invest in nonfundamental information, market prices become more resilient to liquidity shocks but also recover more slowly from temporary price deviations.


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