ALBERT

Description: The increasing importance of online distribution channels is paralleled by a rising interest in gaining insights into the customer journey and browsing behavior. We evaluate several machine learning methods (latent Dirichlet allocation, correlated topic model, structural topic model, replicated softmax model) with respect to their ability to reproduce the browsing behavior of households across websites. In addition, we compare these machine learning methods to a related classical technique, singular value decomposition. In our study, the replicated softmax model outperforms latent Dirichlet allocation, but the correlated topic model attains the overall best performance. Compared to singular value decomposition both the correlated topic model and the replicated softmax model lead to a more efficient compression of web browsing data. On the other hand, singular value decomposition surpasses latent Dirichlet allocation. We interpret results of the correlated topic model and the replicated softmax model by determining combinations of topics or hidden variables that are heterogeneous with respect to visited websites. We show that decision makers should not rely on bivariate measures of site visits, as these do not agree with measures of interdependences between sites that can be inferred from the correlated topic model or the replicated softmax model. We investigate how well topics or hidden variables measured by these methods predict yearly household expenditures. The correlated topic model leads to the best predictive performance, followed by the replicated softmax model. We also discuss how the replicated softmax model can be used to support online marketing decisions of websites.

Description: This paper investigates whether and how social-psychological mechanisms, namely reciprocity, demographic similarity, and similar experiences, affect CEO compensation packages with respect to the levels of total, fixed, and short- and mid-term compensation and the variable proportion of the compensation package. We use evidence from Germany as it is considered a prototype of a two-tier board system. Given the primary roles of both the CEO and the chair of the supervisory board, we especially highlight social-psychological mechanisms in the process leading to the final compensation package. Using a hand-collected sample of non-financial constituents of the German HDAX, we find that reciprocity can lead to a compensation package that is more favorable for the CEO. Results on similarity are ambivalent such that the effects of similarity on CEO compensation—both positive and negative—may depend on the dimension of similarity. Finally, the chair’s CEO experience, both inside and outside the focal company, also plays an essential role in shaping CEO compensation. More specifically, CEO experience in general is associated with more favorable compensation. However, having a chair that has been CEO at the focal company correlates with less favorable compensation packages except for when the CEO has also been recruited internally.

Description: The following field experiment analyzes the effect of payments in a setting of shared social responsibility where charitable giving is incorporated into a pay-what-you-want scheme as a share of the payment. The field experiment involved free walking tours. Within a timeframe of 10 weeks, tours operated as usual, while every second week a Donation Week was implemented. During Donation Week, 5% of the tips were donated to a charitable organization by the tour firm. Results reveal that tips are significantly higher in the Donation Week compared to the Baseline and that the rise in tips roughly outweighs the cost of the donation payment. Thus, while tour guides’ profits do not differ between treatments donations to charity may be generated additionally in Donation Week.

Description: Corporations have recently started incorporating employees’ prosocial preferences into their incentive schemes, including charitable donations (corporate giving). These donations are mainly discussed in conjunction with the external effects of a firm’s CSR strategy. However, this experiment examines the effect of donations on internal firm operations. Specifically, we investigate whether the presence and structure of corporate giving influences employees’ excessive risk-taking. Such prosocial activities may remediate misaligned incentives often cited as drivers for employees to take excessive risks. Contrary to widespread practice, our experimental evidence suggests that firms could constrain employees' excessive risk-taking by linking existing contributions to project rather than corporate performance, thus providing boundaries around an employee’s involvement in CSR initiatives. We identify project-level giving as an unexplored CSR benefit and infer that personal responsibility effectively changes an employee’s incentive package. Our findings suggest an inverted U-shape curve of effectiveness.

Description: This paper examines which valuation approaches financial analysts use to value a company and whether the chosen valuation approach affects the target price accuracy. To address these questions, we conduct content analyses of 867 hand-collected analyst reports on German publicly listed companies published between January 2014 and June 2017. We find that sell-side analysts more frequently use the single-period market approach when formulating target prices, followed by the multi-period income approach, and a mixture of both by combining the results, the so-called hybrid valuation approach. Additionally, we show that 612 of the analyzed analyst reports are based on a holistic valuation methodology instead of a sum of the parts valuation technique. Both univariate and multivariate analyses emphasize that the choice of valuation approach is significantly associated with the accuracy of price targets. Specifically, the income and market approach lead to significantly more accurate target prices compared to the hybrid approach. We also find that the target price accuracy is higher when analysts apply the holistic rather than the sum of the parts valuation approach to determine the fundamental value of the company. Additional results emphasize that target price accuracy improves when analysts use the sum of the parts valuation that bases solely on market or income approaches rather than hybrid approaches. Hence, we contribute to theory and practice by providing evidence on the link between the choice of valuation approach and the analysts’ target price accuracy as well as on the performance of certain valuation techniques.

Description: The Pareto/NBD model is one of the best-known models in customer base analysis. Extant literature has brought up three different Markov Chain Monte Carlo (MCMC) procedures for parameter estimation of this model. Nevertheless, three main research gaps remain. Firstly, the issue of hyper parameter sensitivity for these procedures has been disregarded even though this is crucial when dealing with small sample sizes. Secondly, present research lacks a performance comparison between the different MCMC procedures as well as with Maximum Likelihood Estimates (MLE). Thirdly, existing minimal data set requirements for this model neglect MCMC estimation procedures as they only refer to MLE. To tackle these gaps, we perform two extensive simulation studies. We demonstrate that the algorithms differ in their sensitivity towards the hyper distributions and identify one algorithm that outperforms the other procedures in all respects. In addition, we provide deeper insights into individual level forecasts when using MCMC and enhance extant data set limitation guidelines by considering not only the cohort size but also the length of the calibration period.

Description: Along with incentive schemes, another well-established way to align the interests of principals and agents and, consequently, to reduce and eliminate biases and errors is the practice of monitoring. Considering the monitoring of experts, we evaluate the introduction of the most recent monitoring technology in football, the virtual assistant referee (VAR). Focusing on the German Bundesliga and the Italian Serie A, we analyse whether VAR has changed referees’ decision-making behaviour and, in particular, whether this led to changes in referees’ well-documented preferential treatment of home teams. By doing so, we use the introduction of VAR as a natural experiment to examine whether VAR can help overcome inefficiencies in referees’ decision-making and whether it exposes any inefficiencies in the referee selection system. Ex ante (in-)efficiency would imply that few (many) changes in referee decisions are seen after the VAR introduction. Our results suggest, generally, that VAR impacts referees’ decision-making. We confirm current research and conclude that prior to the introduction of the VAR, the home team tends to be favoured with respect to awarded penalty kicks, red cards and the amount of added time in games containing either penalty kicks or red cards. However, because the home bias only partially decreased with the introduction of VAR, it seems that the bias emerges more as a result of the advantages of playing in one’s local surroundings than of the referees’ decisions. We further show that VAR interventions do not correlate with referees’ experience levels. Overall, these modest findings and even non-existent differences indicate that home bias occurs for reasons other than referees, suggesting that the process for training, promoting, and selecting referees at the highest league works well. Finally, our findings suggest that the VAR implementation is aimed at purposes other than classic agent monitoring.

Description: We assess whether and how VC investors’ education and experience influence their screening decisions of potential investee candidates. Empirically, we perform an experimental choice-based-conjoint (CBC) analysis with 564 individual VC investors. Our results highlight that the level and field of education, as well as the decision maker’s investment and entrepreneurial experience, moderate the relative importance of different screening criteria. More specifically, we find that international scalability seems to become more important for decision makers with higher education and those with entrepreneurial experience. Whereas decision makers with a background in natural science focus on the value-added of the product or service, engineers seem to value a break even profitability and focus less on the management team. Investment experience, on the other hand, leads to a stronger focus on the management team. Our study contributes to the literature investigating the influence of human capital characteristics of the decision maker in venture financing. Practical implications exist for entrepreneurial ventures seeking financing and for risk capital investors making investments in such ventures.

Description: Executives are increasingly facing various challenges associated with digitalisation, especially the simultaneous handling of many topics, loads of information flushing in via digital channels, rapid changes, and finding the right balance between the old and the new. Building on a growing body of research suggesting and systematising leadership skills, we conduct an online-survey with executives to investigate the connection between selected skills and the ability to cope with specific challenges. We find that a strong ability to think and act entrepreneurially, (self-)organisation and IT skills, a profound ability to motivate others, and a high degree of flexibility, commitment, and creativity are positively linked to the ability to cope with several digitalisation-related challenges. Surprisingly, being a strong team player does not seem to be necessarily advantageous. Moreover, many executives desire more calmness, which suggests that being able to decelerate is important in the digital age.