Value-based Performance Measures Research Articles

Consumer Reaction to Measures of Poor Quality: Evidence from the Mutual Fund Industry

U NLESS quality is apparent at the point of sale, the market must find ways to ensure the delivery of high-quality products; otherwise, producers have incentives to sell low-quality goods at high-quality prices, thereby assuring a degenerate equilibrium.1 Various solutions to this problem have been proposed, most revolving around bonding mechanisms.2 For bonds to work, however, consumers must react to the delivery of less-than-promised quality.3 In general, the faster consumers detect and react to delivery of low-quality products, the more efficient the market is in delivering high-quality products.4 Despite its prominence in the theoretical literature, direct evidence of consumer response to less-than-promised quality is rarely measured. This is a shortcoming presumably attributable to the difficulty of measuring both the difference between expected and actual product quality and

The Structure of Corporate Ownership: Causes and Consequences

This paper argues that the structure of corporate ownership varies systematically in ways that are consistent with value maximization. Among the variables that are empirically significant in explaining the variation in ownership structure for 511 U.S. corporations are firm size, instability of profit rate, whether or not the firm is a regulated utility or financial institution, and whether or not the firm is in the mass media or sports industry. Doubt is cast on the Berle-Means thesis, as no significant relationship is found between ownership concentration and accounting profit rates for this set of firms.