The dynamics of preemptive and follower investments with overlapping ownership
| Autor: | Richard Ruble, Dimitrios Zormpas |
|---|---|
| Přispěvatelé: | CY Cergy Paris Université (CY) |
| Jazyk: | angličtina |
| Rok vydání: | 2021 |
| Předmět: |
JEL: C - Mathematical and Quantitative Methods
Economics and Econometrics 050208 finance Control and Optimization Product market Applied Mathematics media_common.quotation_subject 05 social sciences Enterprise value Preemption Common ownership Investment (macroeconomics) [SHS.ECO]Humanities and Social Sciences/Economics and Finance JEL: G - Financial Economics Microeconomics Incentive 8. Economic growth 0502 economics and business Economics 050207 economics Volatility (finance) Welfare ComputingMilieux_MISCELLANEOUS media_common |
| Zdroj: | Journal of Economic Dynamics and Control Journal of Economic Dynamics and Control, Elsevier, 2021, 129, pp.104175. ⟨10.1016/j.jedc.2021.104175⟩ |
| ISSN: | 0165-1889 |
| DOI: | 10.1016/j.jedc.2021.104175⟩ |
| Popis: | We study how overlapping ownership affects investments in a preemption race with market uncertainty. Internalization of rival payoffs delays follower entry if product market effects are moderate, implying longer incumbency which intensifies the race to lead. Preemptive and follower investment thresholds increase with volatility as in standard real option models but firm value can decrease, and greater volatility makes internalization more profitable. From a welfare perspective there is a tradeoff between a dynamic benefit and a static cost of overlapping ownership. Whereas it is socially optimal not to have any overlapping ownership in some markets, at low volatility levels we find firms have an insufficient incentive to internalize. |
| Databáze: | OpenAIRE |
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