Effects Of Organizational Form Research Articles

The effect of organizational form on quality: the case of franchising

The organizational form of franchising has been shown to yield higher profits and faster growth through reducing agency costs. Why then does anyone not franchise? In this paper I argue that the diffuse residual claims of the franchise system reduce overall system quality, and that this problem is inherent in the nature of franchising. The theory is tested by examining evidence from both the restaurant and the hotel industries, including chains that franchise and ones that own all of their units. In both industries, quality is negatively related to the percent franchising in the chain, controlling for size, growth in units, monitoring costs, market segment, ownership structure, multi-chain operation, and price. The results suggest that the franchise contract increases free-riding and decreases quality in decentralized service chains, and that quality is not contractible in this setting.

The Effect of Organizational form on Information Flow and Decision Quality: Informational Cascades in Group Decision Making

This paper identifies a disadvantage to decision making in a team. We show that in some cases available information is lost due to sequential communication that results in informational cascades. Although incentive contracts exist that prevent cascades, in some cases these contracts do not maximize shareholders' expected residual value and cascades are tolerated in equilibrium. Cascades never occur in hierarchies that exogenously prevent communication. However, when the firm is organized as a hierarchy (and the agents are given the optimal hierarchical contract), in some cases agents will collude and sequentially communicate, admitting the possibility of cascades. In these cases, the principals must monitor and enforce the hierarchical process. When monitoring costs exceed the cost of cascades, the team is the optimal organizational form.

The Effect of Organizational Form on Information Flow and Decision Quality: Informational Cascades in Group Decision Making

The Effect of Organizational Form on Information Flow and Decision Quality: Informational Cascades in Group Decision Making

The multibank holding company effect on cost efficiency in banking

This paper tests the hypothesis that differences in the organizational form embodied in independent banks, one-bank holding companies, and multibank holding companies result in differences in operating cost efficiency. The transaction and agency cost paradigms for analysis of organizational efficiency provide theoretical motivation for the hypothesis. The effects of organizational form on bank operating expenses for individual banks are evaluated on subsamples divided into quartiles based on total revenue. Results indicate that for banks having revenues in the lowest quartile, both one-bank and multibank holding company affiliates are cost efficient relative to independent banks. Multibank holding company affiliates are cost efficient relative to both one-bank affiliates and independent banks for banks in the interquartile range. No significant differences in cost efficiency are noted banks in the highest revenue quartile. Relative efficiency at the organizational level is also evaluated. Results provide evidence of lower operating costs for banking operations of both multibank and one-bank holding company organizations relative to independent banks. Taken as a whole, the results imply that holding company affiliation conveys cost advantages to banking units below the 75th revenue percentile.

An Examination of Cost Economies in the United States Life Insurance Industry

Using an industry sample of 423 U.S. life insurers, this study reports estimates of overall and product specific scale economies, as well as, pair-wise cost complementarities for a wide variety of products. Estimates of these cost characteristics are provided for numerous output vectors since theory suggest that the magnitude of scale economies and cost complementarities may vary with the scale and mix of outputs. In contrast, previous studies only provide a single point estimate of industry cost characteristics using the sample mean output vector. This study, therefore, provides a more complete representation of the industry's cost characteristic and, in turn, new insights into decisions related to the optimal scale and mix of outputs. Potential cost savings arising from economies of scale and scope in the life insurance industry are important to both firm managers and regulators. The potential for economies of scale and scope affects managerial decisions regarding the scale and mix of outputs. Substantial cost economies may result in a highly concentrated industry that would facilitate collusive pricing behavior. In a multiproduct industry, however, a concentrated market structure may only be one of many possible equilibria. Another equilibrium may entail a large number of firms producing only a small range and scale of outputs. In either case, regulators would be interested in the existence of cost economies and their effects on market structure.(1) Early studies of the life insurance industry limit their analysis to the estimation of single-product scale economies (e.g., see Geehan, 1986, for a review of studies using a single output measure). These studies' methodologies do not explicitly incorporate the multiproduct nature of most life insurance firms, and estimates of scale economies are provided for only the sample mean level of output. More recent studies (e.g., Fields, 1988, Fields and Murphy, 1989, and Kellner and Mathewson, 1983) use a multiproduct methodology to derive estimates of economies of scaled and scope for the industry sample mean vector of outputs. Economic theory, however, suggests that the magnitude of cost economies varies with the scale and mix of outputs. Hence, previous studies' estimates of cost economies which are derived solely from the sample mean vector of outputs provide only limited insights into the cost characteristics of firms away from the sample mean firm. A thorough analysis of the cost structure of the life insurance industry, therefore, requires estimates of cost economies for firms varying in both the scale and mix of outputs. Such an analysis is essential to the study of the life insurance industry since the industry is comprised of many firms exhibiting substantial variation in the scale of outputs and the range of product offerings. Using a multiproduct cost function and an industry sample of 423 U.S. life insurers this study reports e estimates of overall and product-specific scale economies as well as pair-wise cost complementarities for a wide variety of products. Estimate of these cost characteristics are provided for a number of output vectors varying in the scale and mix of outputs, organizational form (stock versus mutual), and production/distribution structure (agency versus non-agency). This study, therefore, provides a more complete representation of the industry's cost structure than previous studies. The results show increasing overall scale economies for all but the largest agency firms which display approximately constant returns to scale. Significant increasing product specific scale economies are found for accident and health and investments products for all companies, and ordinary life for agency companies. The results do not support the hypothesis of cost complementarities being the raison d'etre for multi-product production among life insurers. Regarding the effects of organizational form, mutuals are not shown to incur higher costs than stock companies for a given scale and mix of outputs. …

PROJECT FINANCE: RAISING MONEY THE OLD‐FASHIONED WAY

Journal of Applied Corporate FinanceVolume 1, Issue 3 p. 69-81 PROJECT FINANCE: RAISING MONEY THE OLD-FASHIONED WAY John W. Kensinger, John W. Kensinger Assistant Professor of Finance at the University of Texas at Austin*. His research interests include the corporate applications of option pricing theory, the efficiency of the options market and related regulatory issues, and the effect of organizational form on the market values of firms.Search for more papers by this authorJohn D. Martin, John D. Martin First Republic Bank Professor of Finance at the University of Texas at Austin*. Professor Martin has written four books, including Theory of Finance (Dryden Press), as well as a number of articles on financial management. His research interests include financial planning and the impact of legal and organizational issues on financial management.Search for more papers by this author John W. Kensinger, John W. Kensinger Assistant Professor of Finance at the University of Texas at Austin*. His research interests include the corporate applications of option pricing theory, the efficiency of the options market and related regulatory issues, and the effect of organizational form on the market values of firms.Search for more papers by this authorJohn D. Martin, John D. Martin First Republic Bank Professor of Finance at the University of Texas at Austin*. Professor Martin has written four books, including Theory of Finance (Dryden Press), as well as a number of articles on financial management. His research interests include financial planning and the impact of legal and organizational issues on financial management.Search for more papers by this author First published: Fall 1988 https://doi.org/10.1111/j.1745-6622.1988.tb00474.xCitations: 35Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat Citing Literature Volume1, Issue3Fall 1988Pages 69-81 RelatedInformation

The Effect of Organizational Form On Performance in the Savings and Loan Industry

The Effect of Organizational Form On Performance in the Savings and Loan Industry

Patterns of Company Control and Regional Development in New Zealand

Patterns of Company Control and Regional Development in New Zealand