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In this paper, I examine the effects of debt structure on conservatism. The analysis is conducted in two steps. First, I examine the direction of causality between capital structure and conditional conservatism by using a unique sample of zero leverage firms that transition to non-zero leverage. Also I investigate whether off-balance-sheet leverage incrementally explains conditional conservatism. Second, I study whether the various characteristics of debt also affect conditional conservatism. Specifically, the characteristics I investigate include: (1) whether the debt is public or private, (2) maturity, (3) convertibility, (4) seniority, and (5) securitization. Since these different characteristics of debt affect agency costs to varying degrees, I predict that differences in the type of debt will lead to cross-sectional differences in conditional conservatism. I find that entering the debt market is an important factor driving demand for conditional conservatism, and that off-balance-sheet leverage incrementally increases conditional conservatism relative to on-balance-sheet leverage. Consistent with my predictions, I find that firms with greater levels of public debt, short-term debt, subordinate debt, and unsecured debt provide more timely loss recognition. After controlling for the likelihood of conversion, I also find firms with a greater level of convertible debt provide less timely loss recognition. Overall my results indicate that accounting conservatism not only varies with the presence of debt, but also with the contractual features of debt.

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The goal of the experiments was to evaluate an explanation of set-alternation costs based on episodic memory principles. The assumption is that performance of any task is a consequence of memory retrieval processes that involve representations of specific prior experiences (Kolers, 1976; Leboe, Whittlesea, & Milliken, 2005; Neill & Mathis, 1998; Tenpenny, 1995; Whittlesea, 1997; Whittlesea & Jacoby, 1990). When the Event 1 and 3 targets mismatch the retrieval of the Event 1 memory episode is not entirely appropriate for performing the Event 3 task. The interference due to a partial match between Events 1 and 3 might be the source of set-alternation costs. Results of Experiment 1 revealed larger costs in the high probability set-alternation condition. The high probability set-alternation condition encouraged retrieval of Event 1. However, because the targets of Event 1 and 3 mismatched the retrieval of Event 1 interfered with the processing of Event 3’s task-set. In other words, the interference due to a match in task-sets but a mismatch in targets generated costs. If set-alternations costs originate from a partial match between Events 1 and 3, increasing the amount of overlapping information between these events should reduce costs. The findings of Experiments 2 and 3 showed reduced set-alternation costs when there was a target identity match between Events 1 and 3. Lastly, Experiment 4 showed that set-alternation costs are larger when the retrieval of the Event 1 memory episode is obstructed. That is, costs were larger when there was a combination of obstructed Event 1 retrieval and a partial match between Events 1 and 3.

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The aim of this thesis is to explore the applicability of transaction cost theory to an emerging market context, and to complement it with institutional theory to achieve a closer fit. The research questions are: (1) Which causes of high transaction costs are perceived by firms in the research site? (2) How do they respond to these costs? The responses could range from internalisation, through cooperation, to the new concept of trading isolation, which is the first of two observed gaps in the literature. (3) Could an institutional perspective help to explain firms’ responses, if they differ from what is expected by theory? The consideration of informal institutions with regard to transaction costs in China addresses the second observed gap in the literature, which focuses mostly on formal institutions. Despite the strengths of transaction cost theory in identifying sources of friction in exchange and proposing resolutions, it has been criticised for making assumptions concerning behaviour and the strength of formal institutions that reduce the degree to which it applies in non-Western, emerging market research contexts. This thesis explores these limitations in the context of the inbound tourism sector in the Tiger Leaping Gorge, in rural Yunnan Province, Southwest China. The author’s exploratory study had suggested that some of these firms attempted to reduce transaction costs by decreasing the number of transactions conducted, resulting in their relative isolation from – rather than integration into – a trading network. This hinders the firms’ ability to develop and specialise, limiting their contribution to local economic growth in this relatively undeveloped region of China. In the principal field study, qualitative data were collected through interviews conducted with the proprietors of the population of tourism firms in the research site. The interviews sought to understand the transaction costs the proprietors perceived, their views of institutional strength or weakness (in areas including local government, legal system, financing, development of trust, kinship, guanxi and networks), and the ways they organised their firms. The data were explored first with a thematic analysis, then by coding into fuzzy sets for analysis with the Qualitative Comparative Approach to help identify causal associations between transaction costs, institutions, and responses of isolation from or integration into the market. The main causes of transaction costs were found to be opportunism, uncertainty and bounded rationality. High transaction costs were generally associated with a response of isolation, but they were not the sole causal factor: every isolated firm reported weak informal institutions combined with a variety of transaction cost and formal institutional conditions. The difficulty of establishing new trust relationships increased the isolation of the worst-affected firms, in an environment where weak formal protection from transaction risks confined many firms to personal exchange. A recommendation for local practice is made for firms to attempt to broaden the networks within which they develop trust, to reduce the constraint of personal exchange and consequent isolation. Two policy recommendations are made that could apply here and in emerging markets more generally: a mainstream recommendation to strengthen the enforcement of formal institutions, aiming to facilitate rule-based, impersonal exchange based on generalised trust, and an alternative approach deriving recommendations from the local context and including the consideration of informal institutions. This thesis contributes to theory by highlighting the critical influence of informal social structures on the cost and extent of exchange, and adapting transaction cost theory to better apply to this institutional context. It also constitutes a novel application of the Qualitative Comparative Approach to interview data.

Ownership matters. It affects residual rights under incomplete contracts and, therefore, incentives. The first chapter of this thesis analyzes in how far ownership can be substituted by other economic factors. Contrary to an assumption found in the literature market foreclosure can be achieved without vertical integration in the following scenarios: repeated games, reputation games, and also in a finitely repeated game when there are switching costs. The main chapter is concerned with implications of ownership in regulated industries where a monopolistic supplier of an essential input is required by a regulator to charge cost based prices. Our analysis focuses on the impact of ownership on the monopolist's incentives to exploit informational asymmetries about production costs. We conduct a comparative study of vertical integration, vertical separation, and joint ownership. Effects on welfare, investments incentives, and entry are analyzed for each ownership structure. Joint ownership performs best. Accounting separation is shown to be generally ineffective as regulatory instrument. We use an alternative model which allows to take into account network duplication. Starting from a free market analysis of equilibrium pricing and entry decisions we explore the relation between ownership and the degree of regulation required in order to ensure efficient outcomes. Two part tariffs, network duplication, price discrimination and a long-term commitment to fixed input prices induce reductions of final prices. The final part of this thesis investigates results in the theory of competitive market equilibrium. Many of these results rely on restrictive assumptions on consumer behaviour. We analyze in how far traditional equilibrium theory is robust against a relaxation of underlying assumptions. We do not assume agents to be rational in the sense that their choices arise from maximisation. Randomly fluctuating demand is allowed for and consequences for predictions made by traditional competitive equilibrium theory are re-examined.

No description available.

The goal of the experiments was to evaluate an explanation of set-alternation costs based on episodic memory principles. The assumption is that performance of any task is a consequence of memory retrieval processes that involve representations of specific prior experiences (Kolers, 1976; Leboe, Whittlesea, & Milliken, 2005; Neill & Mathis, 1998; Tenpenny, 1995; Whittlesea, 1997; Whittlesea & Jacoby, 1990). When the Event 1 and 3 targets mismatch the retrieval of the Event 1 memory episode is not entirely appropriate for performing the Event 3 task. The interference due to a partial match between Events 1 and 3 might be the source of set-alternation costs. Results of Experiment 1 revealed larger costs in the high probability set-alternation condition. The high probability set-alternation condition encouraged retrieval of Event 1. However, because the targets of Event 1 and 3 mismatched the retrieval of Event 1 interfered with the processing of Event 3’s task-set. In other words, the interference due to a match in task-sets but a mismatch in targets generated costs. If set-alternations costs originate from a partial match between Events 1 and 3, increasing the amount of overlapping information between these events should reduce costs. The findings of Experiments 2 and 3 showed reduced set-alternation costs when there was a target identity match between Events 1 and 3. Lastly, Experiment 4 showed that set-alternation costs are larger when the retrieval of the Event 1 memory episode is obstructed. That is, costs were larger when there was a combination of obstructed Event 1 retrieval and a partial match between Events 1 and 3.