Faculty of Business

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Open Access
Captive jump processes for bounded random systems with discontinuous dynamics
(Elsevier, 2024-01) Macrina, A.; Mengütürk, L. A.; Mengütürk, Murat Cahit; Business Administration; MENGÜTÜRK, Murat Cahit
Stochastic captive jump processes are explicitly constructed in continuous time, whose non-linear dynamics are strictly confined by bounded domains that can be time-dependent. By introducing non-anticipative path-dependency, the framework offers the possibility of generating multiple inner tunnels within a master domain, such that a captive jump process is allowed to proceed either within a single inner tunnel or jump in between tunnels without ever penetrating the outermost shell. If a captive jump process is a continuous martingale or a pure-jump process, the uppermost confining boundary is non-decreasing, and the lowermost confining boundary is non-increasing. Under certain conditions, it can be shown that captive jump processes are invariant under monotonic transformations, enabling one to construct and study systems of increasing complexity using simpler building blocks. Amongst many applications, captive jump processes may be considered to model phenomena such as electrons transitioning from one orbit (valence shell) to another, quantum tunnelling where stochastic wave-functions can “penetrate” inner boundaries (i.e., walls) of potential energy, non-linear dynamical systems involving multiple attractors, and sticky concentration behaviour of pathogens in epidemics. We provide concrete, worked-out examples, and numerical simulations for the dynamics of captive jump processes within different geometries as demonstrations.
Open Access
The effects of foreign acquisitions on the value of industry peers
(Cambridge University Press, 2023-03) Yılmaz, Ümit; International Finance; YILMAZ, Ümit
This paper studies how industry peers' stock prices respond when another firm in the industry is acquired by a foreign firm. The average stock price reactions of industry peers in horizontal foreign acquisitions around deal announcements are significantly negative. Peers' returns are more negative in growing, less specialized, and competitive industries. Moreover, the negative stock price reactions of industry peers are related to future decreases in their operating performance. Overall, these results suggest that foreign acquisitions have strong competitive effects for the industry peers of U.S. target companies.
Open Access
Foreign acquisition and credit risk: Evidence from the U.S. CDS market
(Cambridge University Press, 2023-06-17) Yılmaz, Ümit; International Finance; YILMAZ, Ümit
This article empirically analyzes the effect of foreign block acquisitions on U.S. target firms' credit risk as measured by their credit default swap (CDS) spreads. Foreign block purchases lead to a greater increase in the target firms' CDS premia post-acquisition compared to domestic block purchases. This effect is stronger when foreign owners are geographically and culturally more distant, and when they obtain majority control. The findings are consistent with an asymmetric information hypothesis, in which foreign owners are less effective monitors due to information barriers.
Open Access
From grassroots to international markets: A qualitative study of marginalized entrepreneurs in India
(Elsevier, 2023-10) Saiyed, Abrarali Mohammadusmanali; Wierenga, M.; Fernhaber, S. A.; Nummela, N.; Entrepreneurship; SAIYED, Abraralı Mohammadusmanalı
Much of the growing literature on international entrepreneurship focuses on how positive circumstances, such as having prior international experience, business networks, or formal institutions lead to international entrepreneurial action and overlooks the role more challenging circumstances might play. In this study, we extend and refine challenge-based entrepreneurship theory to explore what influences international entrepreneurial action undertaken by marginalized entrepreneurs in an emerging economy. Despite widening economic and social disparities in emerging economies, little is known about entrepreneurs who have traditionally been “left behind.” Our findings suggest that these marginalized entrepreneurs have not only a set of liabilities but also advantages, including creative problem solving and perseverance, as well as local knowledge and networks. To spur the first-person international opportunity belief associated with international entrepreneurial action, an intermediary with resources and networks is needed to offset the liabilities. These intermediaries act as gatekeepers, helping some marginalized entrepreneurs but holding back others.
Open Access
Games with switching costs and endogenous references
(Wiley, 2022-05-25) Güney, Begüm; Richter, M.; Economics; GÜNEY, Begüm
We introduce a game-theoretic model with switching costs and endogenous references. An agent endogenizes his reference strategy, and then taking switching costs into account, he selects a strategy from which there is no profitable deviation. We axiomatically characterize this selection procedure in one-player games. We then extend this procedure to multiplayer simultaneous games by defining a Switching Cost Nash Equilibrium (SNE) notion, and prove that (i) an SNE always exists; (ii) there are sets of SNE, which can never be a set of Nash equilibrium for any standard game; and (iii) SNE with a specific cost structure exactly characterizes the Nash equilibrium of nearby games, in contrast to Radner's (1980) ε-equilibrium. Subsequently, we apply our SNE notion to a product differentiation model, and reach the opposite conclusion of Radner (1980): switching costs for firms may benefit consumers. Finally, we compare our model with others, especially Köszegi and Rabin's (2006) personal equilibrium.
Open Access
How do line extensions impact brand sales? The role of feature similarity and brand architecture
(Springer, 2023-11) Sezen, B.; Pauwels, K.; Ataman, Mehmet Berk; Business Administration; ATAMAN, Mehmet Berk
Brand architecture decisions have important performance implications but have seen little quantitative research. In particular, there is little empirical evidence on how the strength of the link established among clusters of products within the company’s portfolio impact the sales effects of typical marketing actions such as line extensions. This paper quantifies the effect of different brand architecture choices and product feature similarity in moderating the impact of line extensions on brand sales. Based on categorization theory, the authors hypothesize that brand name similarity and feature similarity, both independently, and in interaction, increase brand cannibalization. The empirical analysis in three consumer packaged-goods categories shows that it is more critical to minimize the feature similarity than brand name similarity to limit cannibalization and generate higher incremental sales from line extensions. Controlling for feature similarity, line extensions introduced under sub-brands cause greater cannibalization.
Open Access
Numerical discretization of stochastic oscillators with generalized numerical integrators
(Vinča Institute of Nuclear Sciences, 2021) Sirma, A.; Kosker, R.; Akat, Muzaffer; International Finance; AKAT, Muzaffer
In this study, we propose a numerical scheme for stochastic oscillators with additive noise obtained by the method of variation of constants formula using generalized numerical integrators. For both of the displacement and the velocity components, we show that the scheme has an order of 3/2 in one step convergence and a first order in overall convergence. Theoretical statements are supported by numerical experiments.
Open Access
On approximate Nash equilibria of the two-source connection game
(TÜBİTAK, 2022) Çaşkurlu, B.; Açikalin, U. U.; Kizilkaya, F. E.; Ekici, Özgün; Economics; EKİCİ, Özgün
The arbitrary-sharing connection game is prominent in the network formation game literature [1]. An undirected graph with positive edge weights is given, where the weight of an edge is the cost of building it. An edge is built if agents contribute a sufficient amount for its construction. For agent i, the goal is to contribute the least possible amount while assuring that the source node si is connected to the terminal node ti. In this paper, we study the special case of this game in which there are only two source nodes. In this setting, we prove that there exists a 2-approximate Nash equilibrium that is socially optimal. We also consider the further special case in which there are no auxiliary nodes (i.e., every node is a terminal or source node). In this further special case, we show that there exists a 3/2 -approximate Nash equilibrium that is socially optimal. Moreover, we show that it is computable in polynomial time.
Open Access
Price of regulations: Regulatory costs and the cross-section of stock returns
(Oxford University Press, 2024-01) Ince, B.; Özsöylev, Han Nazmi; International Finance; ÖZSÖYLEV, Han Nazmi
Regulations introduce significant fixed costs and add to operating leverage. Fixed regulatory costs that contribute to operating leverage should generate a risk premium. To explore whether such a premium exists, we introduce a measure of "regulatory operating leverage" that reflects the importance of fixed regulatory costs in a firm's cost structure. Regulatory operating leverage predicts stock returns in the cross-section, and a zero-cost high-low regulatory operating leverage strategy generates positive and significant risk-adjusted return. Finally, the impact of regulatory operating leverage on returns is due to the (systematic) risk contribution of fixed regulatory costs.
Open Access
Understanding household healthcare expenditure can promote health policy reform
(Cambridge University Press, 2023) Best, R.; Tuncay Alpanda, Berna; Economics; ALPANDA, Berna Tuncay
Studies of health care expenditure often exclude explanatory variables measuring wealth, despite the intuitive importance and policy relevance. We use the Household, Income and Labour Dynamics in Australia Survey to assess impacts of income and wealth on health expenditure. We investigate four different dependent variables related to health expenditure and use three main methodological approaches. These approaches include a first difference model and introduction of a lagged dependent variable into a cross-sectional context. The key findings include that wealth tends to be more important than income in identifying variation in health expenditure. This applies for health variables which are not directly linked to means testing, such as spending on health practitioners and for being unable to afford required medical treatment. In contrast, the paper includes no evidence of different impacts of income and wealth on spending on medicines, prescriptions or pharmaceuticals. The results motivate two novel policy innovations. One is the introduction of an asset test for determining rebate eligibility for private health insurance. The second is greater focus on asset testing, rather than income tests, for a wide range of general welfare payments that can be used for health expenditure. Australia's world-leading use of means testing can provide a test case for many countries.

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