0000000000046704
AUTHOR
Gunther Friedl
showing 3 related works from this author
Incentive Properties of Residual Income when There is an Option to Wait
2005
Performance measures based on residual income are increasingly popular. The academic literature shows that residual income has important incentive properties when management bases investment decisions on the net present value (NPV) rule. My analysis focuses on the case in which investment decisions can be postponed, when management must extend the simple NPV rule by considering an option value. My analysis shows that some important incentive properties of residual income still hold when there is an option to wait, but only when the residual income measure is correctly adjusted. I also provide an incentive-based explanation of why the capital charge rate within firms is often significantly h…
Supplier switching decisions
2007
Abstract In order to maximize profit, a buying firm should continuously search for and access sources which offer more favorable prices. While the literature is replete with works on the formation and development of buyer–supplier relationships, there is surprisingly only scarce research on the termination of such relationships and supplier switching. Using the concept of switching costs in a principal-agent framework, we at first analyze whether a firm switches the entire or a partial quantity to an alternative supplier when there is either symmetric or asymmetric information about the alternative supplier’s cost structure. Information asymmetry results in inert supplier switching decision…
Discussion of “Optimal Debt Service: Straight vs. Convertible Debt”
2006
Corporate bond default plays a signifi cant role in today's business environment. According to Moody's, a leading provider of credit ratings, corporate bond issuers that it rated as of January 1, 2004, defaulted on a total of US $16 billion in 2004. Credit default not only affects the equity investors of a firm, but also the debt holders, who may loose part of their credit. Default can also have dramatic consequences for a firm's future operations. Therefore, the decision of if and when to default is important for both the firm and its stakeholders. There is a substantial body of literature on the determination of optimal default points as a strategic decision by the owners of a firm. Accor…