Profit Implications Research Articles

The profitability implications of supplier concentration during economic recession and restoration: the moderating role of supply localization

Economic recessions and restoration change the dynamics of demand and supply in the supply chain. How to match supplier relationships with the dynamic changes to sharp profitability performance is pivotal for firms’ supply chain management during economic waves. Based on the Resource Dependence Theory, changes in demand-side and supply-side resources alter the power-balanced relationship between a firm and its concentrated supplier, affecting the implications of supplier concentration on a firm’s profitability performance in the economic recessions and restoration stages. Furthermore, we consider the moderating role of suppliers’ spatial location, exploring whether a higher proportion of intra-provincial suppliers (i.e., supply localization) helps improve the profitability implications of supplier concentration. Based on the sample of 3319 listed companies in China from 2020 to 2021, we find that: (1) in the economic recession stage, supplier concentration is positively correlated with firm profitability, and this positive relationship is amplified by a higher proportion of intra-provincial supplier transactions; (2) in the economic restoration stage, supplier concentration is negatively correlated with firm profitability, and the higher proportion of intra-provincial supplier transactions aggravates this negative relationship. The 2SLS method is applied to verify the main effects, and we used alternative variable measurements and different model settings to verify the robustness of the findings. The results provide a deeper reference for firms to consider appropriate supplier relationships in response to economic waves.

Decarbonizing a supply chain with an unreliable supplier: Implications for profitability and sustainability

The increasing emphasis on corporate social responsibility has led to a growing trend among firms to initiate decarbonization campaigns, aligning their sustainability efforts with profitability objectives. This paper explores the challenge of decarbonizing a supply chain wherein a buyer cooperates with an unreliable supplier that possesses private absorptive capacity and varying degrees of bargaining power. We develop models based on whether the absorptive capacity remains private information and whether the buyer has more bargaining power in determining the profit-maximizing price. Our findings indicate that the buyer may opt to avoid entering into contracts with the supplier for decarbonization if the absorptive capacity ratio falls below certain values. When contracting occurs, decarbonization has the potential to yield a mutually beneficial outcome for firms, customers, and the environment. Nevertheless, the presence of private information has negative implications for customers and the environment because it results in reduced consumer surplus and increased carbon footprint. As the buyer’s bargaining power strengthens, the likelihood of supply chain decarbonization increases, potentially leading to more consumer surplus and less carbon footprint. Finally, we discuss the effects of key model factors from a triple bottom line perspective (i.e., profit, people, and the planet).

182 Converting spring-born heifers into a summer-calving herd increases subsequent cow longevity and productivity

Abstract Developing replacement heifers is one of the most expensive and complex management decisions for a cow-calf producer, which also has long-term implications for profitability. The objective of this study was to determine the impact of converting spring-born heifers into a summer-calving herd on growth, reproductive performance, longevity, and productivity compared with early or late-born May heifers. Over a 3 yr period, Red Angus/Simmental crossbred heifers (n = 273) were utilized to determine the impact of converting March-born heifers (Convert; n = 90) to a May-calving herd compared with May-born heifers on reproductive performance, body weight (BW), and calf performance from a yearling to 5 yr of age. May-born heifers were retrospectively grouped into 2 different groups: heifers born in the first 21 d of calving as a heifer calf (Early; n = 123) or heifers born after the 21 d of calving as a heifer calf (Late; n = 60). Heifers were exposed to bulls for a 45-d breeding season with a bull-to-heifer ratio of 1:20. Heifers were synchronized with a single injection of prostaglandin F2α (5-mL i.m.; Lutalyse, Zoetis, Parsippany, NJ) 5 d after bulls were introduced in the pasture for breeding. Data were analyzed as a randomized design using the MIXED procedure (SAS Inst. Inc., Cary, NC, USA). All binomial data were analyzed using PROC GLIMMIX. Heifer served as the experimental unit with treatment and year developed set as fixed effects. Heifer BW at December, May, July, and pregnancy check (Oct) were greater (P < 0.01) for Convert heifers with no difference between Early and Late born heifers. Heifer BCS at pregnancy check was not different (P = 0.13) among heifer treatment groups. However, pregnancy rate tended (P = 0.08) to increase for Convert heifers with no difference between Early and Late born May heifers. After 5 yr of age, retention rate was increased (P = 0.04) in Convert cows compared with Early and Late May-born cows with no difference (P = 0.84) between the two May-born heifer groups. Total kilograms of calf weaned was greater (P = 0.04) in Convert cows than their counterparts with no differences (P = 0.94) between Early and Late May-born cows. This study implies that selecting replacement heifers from an earlier calving season for replacements in a later calving season increases the longevity and long-term productivity of the cowherd than selecting heifers within the same calving season. This may be even more important in resource-poor breeding environments that create reproductive challenges for heifers and rebreeding young cows.

Navigating Platform-Led Affiliate Marketing: Implications for Content Creation and Platform Profitability

Practice- and Policy-Oriented Abstract Recently, some user-generated content (UGC) platforms have introduced shopping features to generate additional commission-based revenue from in-app transactions. These platforms allow creators to produce shoppable content, where promoted products are tagged with affiliate links, and in return, they earn a percentage of the commission the creators receive from merchants This paper aims to investigate the impact of this platform-led affiliate marketing business model on the key stakeholders. Employing a game-theoretic model, our study demonstrates that platform-led affiliate marketing can create a win-win situation for UGC platforms, creators participating in affiliate marketing, and consumers. Furthermore, even creators not participating in affiliate marketing can sometimes benefit indirectly from other creators’ participation. However, we find that platforms may not necessarily benefit from adopting this emerging business model because of potential losses in traffic revenue. These results carry significant managerial implications for platforms regarding whether and how to leverage affiliate marketing. Moreover, our findings suggest that creators may benefit from reducing their production efforts in the face of intensified competition. More importantly, optimal production decisions for creators can vary significantly, depending on specific factors contributing to heightened competition. These findings offer valuable insights that can guide creators in refining their production strategies.

A Study on the Relationship Between Leveraged Buyouts and Profitability

This article delves into the profitability of post-buyout subsidiaries resulting from Leveraged Buyouts (LBOs), focusing on prominent examples such as Blackstone, Hilton, Bain Capital, and Toys "R" Us. Through a comparative analysis of two scenarios, it scrutinizes the impact of LBOs on the profitability of these companies. Previous research predominantly concentrated on isolated aspects, lacking comprehensive cross-comparisons across various domains. This study addresses this gap by broadening the scope, aiming for a more holistic understanding. The paper examines notable instances such as the Blackstone Hilton lawsuit and Bain Capital's involvement with Toys "R" Us. It reveals that the success of LBOs hinges on several critical factors, including a robust underlying business model, an appropriate financing structure, and a well-defined exit strategy. By elucidating these key components, the research provides insights into the dynamics of LBOs and their implications for post-buyout profitability. The findings contribute to a deeper comprehension of the intricate relationship between LBOs and profitability, offering valuable guidance for stakeholders in the financial and corporate sectors.

Designing Loot Boxes: Implications for Profits and Welfare

We study the optimal prices and allocation probabilities for loot boxes and their implications for profits and social welfare.

Quality competition on markets: a socio-economic account

Abstract When, and for whom, does it pay to make high-quality products? This article models how quality competition incentivizes producers to make products of particular qualities. Quality is defined as an abstract property of products that explains relative markups on prices that buyers will pay for otherwise comparable goods. Relative differences in quality sustain interlinked quality niches whose appeal to producers vary. The ordering of niches by quality and its implications for profitability establish the market’s quality order of production. The model yields testable predictions for the locus of quality-related innovations. An analysis of the bottle closures used on 52 880 German wines by 1028 winemakers in three winemaking regimes supports the general claim that, and a specific claim as to how, quality competition incentivizes producers to pursue different quality-related strategies. The presented model situates quality competition and the socially embedded quality order of production at the heart of a socio-economic account of markets.

Predicting mean and variance in inventory order decisions

AbstractWe develop a simple forecast‐anchoring model to explain and predict the mean and variance of observed inventory order decisions in a newsvendor problem. The model assumes that people employ a two‐step decision heuristic. In the first step, a behavioral bias may gravitate the decision maker's point forecast toward a random forecast versus a constant unbiased forecast. In the second step, a behavioral bias of the same magnitude may cause the decision maker to treat the point forecast as if it is the mean of potential demand, and then make an upward or downward adjustment depending on the underage and overage costs. We evaluate the performance of this descriptive forecast‐anchoring model across five experimental newsvendor data sets. First, we fit the model to a setting with uniform demand. We then use the corresponding estimates to generate predictions in a secondary data set with uniform demand, as an out‐of‐sample test. We proceed to fit the model to three additional newsvendor data sets, two with normal demand and one with asymmetric two‐point demand. In all cases, the model predicts the mean and variance of inventory order decisions well. We further investigate the profit implications under the forecast‐anchoring model and find that the predictions match well with the experimental data. Through improved predictions, the model can help upstream supply chain parties anticipate inventory order decisions from buyers and improve profitability.

Alternative forms of buyer power in a vertical duopoly: implications for profits, welfare, and cost pass-through

Alternative forms of buyer power in a vertical duopoly: implications for profits, welfare, and cost pass-through

Asset pricing implications of firms' profit sharing

This study examines the asset pricing implications of a profit-sharing policy by measuring a profit-sharing coefficient (PSC) that captures the firm's tendency to share profits with its employees. We find that firms with a high PSC earn higher future stock returns than firms with a low PSC. This arises because investors underestimate the positive effects of PSC on worker productivity while overreacting to the potential costs due to the high PSC. We further reveal PSC to be inversely associated with firm risk by showing that the earnings and stock returns of high-PSC firms are less sensitive to aggregate risk than those of low-PSC firms.

Effect of Herbicides Mixture on Productivity and Profitability of Wheat (Triticum aestivum L.) Cultivation in Rainfed Subtropics

Wheat (Triticum aestivum L.) is a vital cereal crop contributing significantly to global food security. The cultivation of wheat in rainfed subtropical regions faces multifaceted challenges, with weed infestation being a primary concern. Herbicides are crucial tools for weed management, and the synergistic or antagonistic effects of herbicide mixtures have gained attention as potential strategies to enhance their efficacy. This review synthesizes existing literature on the effects of herbicides mixtures on the productivity and profitability of rainfed wheat cultivation in subtropical climates. The review systematically analyzes studies conducted globally, focusing on various herbicides combinations and their application methodologies. It encompasses investigations into the ecological impact, weed control efficiency, and effects on wheat yield when utilizing herbicides mixtures. Special emphasis is placed on understanding the interactions between herbicides, considering factors such as climate, soil characteristics, and cropping practices unique to rainfed subtropics. In addition to agronomic outcomes, this review critically examines the economic aspects associated with the use of herbicides mixtures. Cost-benefit analyses, return on investment, and considerations of long-term sustainability are explored to provide a comprehensive understanding of the profitability implications for farmers engaged in rainfed wheat cultivation. The synthesis of this information aims to guide future research directions, inform agricultural practices, and aid policymakers in formulating sustainable strategies for weed management in rainfed subtropical wheat cultivation. By consolidating the current state of knowledge, this review contributes to the development of evidence-based recommendations for optimizing productivity and profitability while ensuring environmental stewardship in rainfed subtropical wheat production systems.

Quantitative Analysis and Comparative Review of Dividend Policy Dynamics within the Banking Sector: Insights from Global and U.S. Financial Data and Existing Literature

This paper presents a comparative review of academic research on dividend policies and payments within the banking sector. Dividends represent a critical area of focus due to their implications for bank capital levels, profitability, regulatory compliance, and investor signaling. The literature reviewed spans pre- and post-2008 financial crisis periods and adopts both global and emerging market perspectives. Methodologies include regression analyses, causality tests, descriptive statistics, and financial ratio computations based on regulatory filings, financial statements, and market data datasets. Key findings demonstrate the multifaceted nature of bank dividend strategies, differences across countries, shifts during crises, and complex interplays with financial health metrics. The studies find evidence that dividends provide valuable signals to investors on earnings prospects, aligning with signaling theories. However, interpreting crisis-induced behaviors warrants caution due to short-term deviations. Opportunities exist for further analysis of cross-country variances, crisis responses, and linkages to bank stability. This comparative review enhances academic comprehension of bank dividend policies' motivations, outcomes, and determinants. It highlights the need for judicious balancing of stakeholder demands for returns and growth, an increasingly crucial endeavor amidst global uncertainty.

A machine learning-based Biding price optimization algorithm approach

Trading companies of used product market are struggling to gain customers attentaion and to sell the products. The aim of this research is to develop a mechanism that can maximize the sale of products while considering profit implications. The literature review classifies the procurement mechanism. Given the limited-supply nature, that also includes unpredictable quality levels and a procurement mechanism that perceives the company offering prices to suppliers on a single-item basis. The academic literature has not covered such a mechanism. Techniques like those that improve the required bidding strategy are reviewed and considered fit to be included in the support tool as the procedures intention to maximize an objective function depending on the bidding price and contain the probability of winning the auction and the profit made from the proceeding, the motivation laid on the approach that predicts the probability. It is determined that this assembles a Response to Reverse Request for Quotation that meets the assumptions of a First-Price Sealed-Bid(FPSD) auction that potentially includes a hidden reservation price.

Applying multi-criteria decision making method to analyze stability and mechanization patterns in small farms

This study aimed to analyze stability and mechanization patterns in small-scale farms in Khuzestan province, Iran, and their implications for productivity and profitability. The objectives were to assess the sustainability level of farmers, determine the stability level of the farms, identify the optimal mechanization pattern, and evaluate the implications of moving towards sustainability. To achieve these objectives, the research employed multi-criteria decision making (MCDM) methods, which allowed for the assessment of multiple criteria and the evaluation of various alternatives. The study focused on farmers and operators managing small farms below 5 ha in Karoon and Behbahan counties, with a sample size of 48 farmers. The findings of the study indicated that the majority of farmers (75.7%) fell into the “very little” sustainability group, indicating significant challenges in terms of stability and mechanization. Only a small percentage of farmers (0.5%) were classified as having a “high” sustainability level. The average stability level among the sample was 18.09, with a range from 7.98 to 79.89. The study also identified the optimal mechanization pattern for the study region, which required an increase in the availability of necessary tools. The ideal planning model suggested that moving towards sustainability would involve specializing in specific products that align with the region's facilities. This specialization would reduce tool variety and eliminate some tools from the current model. Additionally, the study found that implementing the optimal mechanization pattern would result in a gross return of 4.2 billion Rials, indicating increased productivity and profitability. In conclusion, small-scale farms in Khuzestan province face various obstacles that affect their productivity and profitability. By analyzing stability and mechanization patterns using MCDM methods, this study highlighted the need for increased sustainability and identified the optimal mechanization pattern for the region. The implications of moving towards sustainability include reduced tool variety, specialization in specific products, and increased gross returns. These findings can guide policymakers and farmers in improving the productivity and profitability of small-scale farms.

Targeted Advertising Placement in Video Platforms: Implications for Business Profitability

Advertising is an important tool used to deliver commercial messages with a strong economic purpose. With the development of online information, more and more companies or advertisers choose to advertise on large video platforms. However, the ambiguity of advertising positioning has led to a low tolerance of the audience population to the advertisements placed on video platforms. "Targeted advertising" and "precision marketing" have always been commercial buzzwords, and targeted advertising is one of the marketing strategies of precision marketing. In this paper, we explore the attitudes and preferences of different groups of people in terms of ad appearance, ad type and ad content, as well as the differences and connections between public service ads and commercial ads, using a large video platform in mainland China as a background. Among them, it is found that for the group of company employees, they prefer food-based ads, which is quite different from what is expected. For companies, placing more precisely targeted ads is conducive to positive communication in the bilateral market.

Employee Satisfaction, Labor Market Flexibility, and Stock Returns Around the World

Studying 30 countries, we find that the link between employee satisfaction and stock returns is significantly increasing in a country’s labor market flexibility. This result is consistent with employee satisfaction having greater recruitment, retention, and motivation benefits where firms face fewer hiring and firing constraints and employees have greater ability to respond to satisfaction. Labor market flexibility also increases the link between employee satisfaction and current valuation ratios, future profitability, and future earnings surprises, inconsistent with omitted risk factors and identifying channels through which employee satisfaction may affect stock returns. The findings have implications for the differential profitability of socially responsible investing strategies around the world—in particular, the importance of considering institutional factors when forming such strategies. This paper was accepted by Lin William Cong, finance. Funding: This work was supported by Deloitte Institute of Innovation and Entrepreneurship. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2023.4889 .

ASSESSMENT OF ECONOMIC WORTH OF GREEN ROOF: A CASE STUDY IN PUTRAJAYA

The current global temperature rise has affected local climate change issues and increased the energy usage for the building cooling process. Following this, the roof components have been identified to contribute the building heating effect due to exposure for more than 10 hours a day which at the same time secretes 70% of the sun's radiation. As an alternative, the green roof concept approach potentially reduces the effects of internal heat and operating costs of cooling the building while providing an investment return for the desired period. This study aims to measure the level of effectiveness of the building green roof concept on the building cooling rate and its profitability implications. Two objectives have been set. First, to compare the effects of concrete and green roof applications on energy consumption and operating costs for the cooling effects of air-conditioned buildings (active systems). Second, to evaluate the maintenance cost and profitability of applying the green-roofed building concept in terms of periodic return on investment. The findings of this study are seen to help the government and relevant agencies consider using the green roof concept in the physical construction of buildings in the future.

The impact of discriminatory pricing based on customer risk: an empirical investigation using indirect lending through retail networks

PurposeThe purpose of this study is to understand the profit implications of analytics-driven centralized discriminatory pricing at the headquarter level compared with sales force price delegation in the purchase of an aftermarket good through an indirect retail channel with symmetric information.Design/methodology/approachUsing individual-level loan application and approval data from a North American financial institution and segment-level customer risk as the price discrimination criterion for the firm, the authors develop a three-stage model that accounts for the salesperson’s price decision within the limits of the latitude provided by the firm; the firm’s decision to approve or not approve a sales application; and the customer’s decision to accept or reject a sales offer conditional on the firm’s approval. Next, the authors compare the profitability of this sales force price delegation model to that of a segment-level centralized pricing model where agent incentives and consumer prices are simultaneously optimized using a quasi-Newton nonlinear optimization algorithm (i.e. Broyden–Fletcher–Goldfarb–Shanno algorithm).FindingsThe results suggest that implementation of analytics-driven centralized discriminatory pricing and optimal sales force incentives leads to double-digit lifts in firm profits. Moreover, the authors find that the high-risk customer segment is less price-sensitive and firms, upon leveraging this segment’s willingness to pay, not only improve their bottom-line but also allow these marginalized customers with traditionally low approval rates access to loans. This points out the important customer welfare implications of the findings.Originality/valueSubstantively, to the best of the authors’ knowledge, this paper is the first to empirically investigate the profitability of analytics-driven segment-level (i.e. discriminatory) centralized pricing compared with sales force price delegation in indirect retail channels (i.e. where agents are external to the firm and have access to competitor products), taking into account the decisions of the three key stakeholders of the process, namely, the consumer, the salesperson and the firm and simultaneously optimizing sales commission and centralized consumer price.

Determinants of goodwill: Empirical study from emerging economies

Goodwill is increasingly receiving the interest of investors, auditors and other users of financial statements, therefore the need for comprehensive information on this topic has grown over time. The aim of this article is to analyze the determinants of goodwill in companies from emerging economy countries. The research is structured in two stages. The first stage of the research consists of a bibliometric analysis of the literature that is focused on the goodwill topic. The second part of the research consists in building an econometric model in order to assess the determinants of goodwill based on data reported by firms in emerging economy countries in 2021, namely the data reported by 21,977 companies from 100 emerging economy countries, structured into 94 industries. The obtained results are represented by the development of an econometric model that shows the implications of net profit, Economic Value Added (EVA), Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) and of research and development (R&D) expenses on goodwill fluctuations and vice versa. The results of our research highlight the fact that goodwill fluctuation is generated by the fluctuation of net profit, EVA, EBITDA and less by the R&D expenses. This study adds value to the literature by treating the subject differently, analyzing and evaluating the relationship between net profit, EVA, EBITDA, R&D expenses and goodwill.

Economics of field size and shape for autonomous crop machines

Field size and shape constrain spatial and temporal management of agriculture with implications for farm profitability, field biodiversity and environmental performance. Large, conventional equipment struggles to farm small, irregularly shaped fields efficiently. The study hypothesized that autonomous crop machines would make it possible to farm small, non-rectangular fields profitably, thereby preserving field biodiversity and other environmental benefits. Using the experience of the Hands Free Hectare (HFH) demonstration project, this study developed algorithms to estimate field times (h/ha) and field efficiency (%) subject to field size and shape in grain-oil-seed farms of the United Kingdom using four different equipment sets. Results show that field size and shape had a substantial impact on technical and economic performance of all equipment sets, but autonomous machines were able to farm small 1 ha rectangular and non-rectangular fields profitably. Small fields with equipment of all sizes and types required more time, but for HFH equipment sets field size and shape had least impact. Solutions of HFH linear programming model show that autonomous machines decreased wheat production cost by €15/ton to €29/ton and €24/ton to €46/ton for small rectangular and non-rectangular fields respectively, but larger 112 kW and 221 kW equipment with human operators was not profitable for small fields. Sensitivity testing shows that the farms using autonomous machines adapted easily and profitably to scenarios with increasing wage rates and reduced labour availability, whilst farms with conventional equipment struggled. Technical and economic feasibility in small fields imply that autonomous machines could facilitate biodiversity and improve environmental performance.