Three essays in dynamic corporate finance

Summary Throughout my thesis, I elaborate on how real and financing frictions affect corporate decision making under uncertainty, and I explore how firms time their investment and financing decisions given such frictions. While the macroeconomics literature has focused on the impact of real frictions on investment decisions assuming all equity financed firms, the financial economics literature has mainly focused on the study of financing frictions. My thesis therefore assesses the join interaction of real and financing frictions in firms' dynamic investment and financing decisions. My work provides a rationale for the documented poor empirical performance of neoclassical investment models based on the joint effect of real and financing frictions on investment. A major observation relies in how the infrequency of corporate decisions may affect standard empirical tests. My thesis suggests that the book to market sorts commonly used in the empirical asset pricing literature have economic content, as they control for the lumpiness in firms' optimal investment policies. My work also elaborates on the effects of asymmetric information and strategic interaction on firms' investment and financing decisions. I study how firms time their decision to raise public equity when outside investors lack information about their future investment prospects. I derive areal-options model that predicts either cold or hot markets for new stock issues conditional on adverse selection, and I provide a rational approach to study jointly the market timing of corporate decisions and announcement effects in stock returns. My doctoral dissertation therefore contributes to our understanding of how under real and financing frictions may bias standard empirical tests, elaborates on how adverse selection may induce hot and cold markets in new issues' markets, and suggests how the underlying economic behaviour of firms may induce alternative patterns in stock prices.

Effect of irrigation water on the incidence of Salmonella spp. on lettuces produced by urban agriculture and sold on the markets in Dakar, Senegal

The aim of our survey was to assess the effect of irrigation water of the microbiological quality on the production chain of lettuce in the Dakar area. Microbiological analysis showed that 35% of irrigation water was contaminated by Salmonella spp. between the two water-types used for irrigation (groundwater and wastewater), no significant difference (p>0.05) in their degree of contamination was found. The incidence of different types of irrigation water on the contamination rate of lettuces from the farm (Pikine and Patte d'Oie) was not different either (p>0.05). However, the contamination rate of lettuce from markets of Dalifort and Grand-Yoff that were supplied by the area of Patte d'Oie was greater than those of Sham and Zinc supplied by Pikine (p<0.05). Comparison of serotypes of Salmonella isolated from irrigation water and lettuce showed that irrigation water may affect the microbiological quality of lettuce. Manures, frequently used as organic amendment in cultivating lettuce are another potential source of contamination. These results showed that lettuce may constitute effective vectors for the transmission of pathogens to consumers. Extensive treatment of the used wastewater and/or composting of manure could considerably reduce these risks.

Strategic behaviours in healthcare : evidence from primary care and pharmaceutical markets

We analyse the strategic behaviours of agents in a market through the appropriate¬ness of their skills to the market. If agents' skills are well adapted to market and they can reach their target, they will not need to adopt strategic behaviours. The agents will behave as selfish individuals. However, if their skills are not well adapted and they cannot attain their target alone, they will adopt strategic behaviours to reach their objectives. These behaviours will have a different impact on the utilities of other agents, depending on the skills and the objectives of the agent. If these agents need other agents to reach their objectives, they will behave as altruistic individuals who internalise the utilities of other agents in reaching their objectives and will adopt cooperative behaviours. However, if these agents fear that other agents could prevent them from reaching their target because they can foresee that the skills of other agents are better adapted than their own skills, the agents will then behave as predator individuals and will adopt destructive behaviours to attain their objective. It is in the interests of these agents to manipulate information to increase disorder and dissimulate their lack of skills. They will reproduce the strategies of animals that modify their appearance to escape predators or simulate being bait to attract their prey. These agents will seek to induce chaos into the behaviours of other agents to amplify the impact of their strategies. The appropriateness of skills to the market allows an understanding of the emer-gence of networks and associated strategies. The members of a networks are inputs who are excluded when their costs are higher than their benefits. A network simul-taneously allows cooperation and selfish, predatory behaviours among its members. A network may adopt informational strategies when seeking to become the leader in a market or when it cannot survive. The creation of networks and the manipulation of information are two overlapping evolutionary strategies, with the first strategy favouring the second. In our model, an agent does not behave like a firm that aims only to maximise the profits of the firm but rather as a member of a network who adopts strategic behaviours as a function of the interests of this network. If his skills are well adapted to the market and he can innovate, he will not invest in erroneous input; in contrast, if his skills are not adapted, the agent will invest in the erroneous input of information into the market in order to survive. Therefore, when any informational asymmetries between the agents and their principals characterise the market, the price cannot be the main element that allows equilibrium to be reached in the market; instead, the appropriateness of skills to the market enables equilibrium. We will now apply these hypotheses to explain the strategic behaviours of physicians and pharmaceutical companies.

Consistency and population sensitivity properties in marriage and Rrommate markets

We consider one-to-one matching markets in which agents can either be matched as pairs or remain single. In these so-called roommate markets agents are consumers and resources at the same time. Klaus (Games Econ Behav 72:172-186, 2011) introduced two new "population sensitivity" properties that capture the effect newcomers have on incumbent agents: competition sensitivity and resource sensitivity. On various roommate market domains (marriage markets, no-odd-rings roommate markets, solvable roommate markets),we characterize the core using either of the population sensitivity properties in addition to weak unanimity and consistency. On the domain of all roommate markets, we obtain two associated impossibility results.

Essays in general equilibrium asset pricing

ABSTRACT : Research in empirical asset pricing has pointed out several anomalies both in the cross section and time series of asset prices, as well as in investors' portfolio choice. This dissertation aims to discover the forces driving some of these "puzzling" asset pricing dynamics and portfolio decisions observed in the financial market. Through the dissertation I construct and study dynamic general equilibrium models of heterogeneous investors in the presence of frictions and evaluate quantitatively their implications for financial-market asset prices and portfolio choice. I also explore the potential roots of puzzles in international finance. Chapter 1 shows that, by introducing jointly endogenous no-default type of borrowing constraints and heterogeneous beliefs in a dynamic general-equilibrium economy, many empirical features of stock return volatility can be reproduced. While most of the research on stock return volatility is empirical, this paper provides a theoretical framework that is able to reproduce simultaneously the cross section and time series stylized facts concerning stock returns and their volatility. In contrast to the existing theoretical literature related to stock return volatility, I don't impose persistence or regimes in any of the exogenous state variables or in preferences. Volatility clustering, asymmetry in the stock return-volatility relationship, and pricing of multi-factor volatility components in the cross section all arise endogenously as a consequence of the feedback between the binding of no-default constraints and heterogeneous beliefs. Chapters 2 and 3 explore the implications of differences of opinion across investors in different countries for international asset pricing anomalies. Chapter 2 demonstrates that several international finance "puzzles" can be reproduced by a single risk factor which captures heterogeneous beliefs across international investors. These puzzles include: (i) home equity preference; (ii) the dependence of firm returns on local and foreign factors; (iii) the co-movement of returns and international capital flows; and (iv) abnormal returns around foreign firm cross-listing events in the local market. These are reproduced in a setup with symmetric information and in a perfectly integrated world with multiple countries and independent processes producing the same good. Chapter 3 shows that by extending this framework to multiple goods and correlated production processes; the "forward premium puzzle" arises naturally as a compensation for the heterogeneous expectations about the depreciation of the exchange rate held by international investors. Chapters 2 and 3 propose differences of opinion across international investors as the potential resolution of several international finance `puzzles'. In a globalized world where both capital and information flow freely across countries, this explanation seems more appealing than existing asymmetric information or segmented markets theories aiming to explain international finance puzzles.

Prediction markets supporting technology assessment

In this thesis, we study the use of prediction markets for technology assessment. We particularly focus on their ability to assess complex issues, the design constraints required for such applications and their efficacy compared to traditional techniques. To achieve this, we followed a design science research paradigm, iteratively developing, instantiating, evaluating and refining the design of our artifacts. This allowed us to make multiple contributions, both practical and theoretical. We first showed that prediction markets are adequate for properly assessing complex issues. We also developed a typology of design factors and design propositions for using these markets in a technology assessment context. Then, we showed that they are able to solve some issues related to the R&D portfolio management process and we proposed a roadmap for their implementation. Finally, by comparing the instantiation and the results of a multi-criteria decision method and a prediction market, we showed that the latter are more efficient, while offering similar results. We also proposed a framework for comparing forecasting methods, to identify the constraints based on contingency factors. In conclusion, our research opens a new field of application of prediction markets and should help hasten their adoption by enterprises. Résumé français: Dans cette thèse, nous étudions l'utilisation de marchés de prédictions pour l'évaluation de nouvelles technologies. Nous nous intéressons plus particulièrement aux capacités des marchés de prédictions à évaluer des problématiques complexes, aux contraintes de conception pour une telle utilisation et à leur efficacité par rapport à des techniques traditionnelles. Pour ce faire, nous avons suivi une approche Design Science, développant itérativement plusieurs prototypes, les instanciant, puis les évaluant avant d'en raffiner la conception. Ceci nous a permis de faire de multiples contributions tant pratiques que théoriques. Nous avons tout d'abord montré que les marchés de prédictions étaient adaptés pour correctement apprécier des problématiques complexes. Nous avons également développé une typologie de facteurs de conception ainsi que des propositions de conception pour l'utilisation de ces marchés dans des contextes d'évaluation technologique. Ensuite, nous avons montré que ces marchés pouvaient résoudre une partie des problèmes liés à la gestion des portes-feuille de projets de recherche et développement et proposons une feuille de route pour leur mise en oeuvre. Finalement, en comparant la mise en oeuvre et les résultats d'une méthode de décision multi-critère et d'un marché de prédiction, nous avons montré que ces derniers étaient plus efficaces, tout en offrant des résultats semblables. Nous proposons également un cadre de comparaison des méthodes d'évaluation technologiques, permettant de cerner au mieux les besoins en fonction de facteurs de contingence. En conclusion, notre recherche ouvre un nouveau champ d'application des marchés de prédiction et devrait permettre d'accélérer leur adoption par les entreprises.