Published on June 14, 2021–Updated on February 17, 2022
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Dimitrios Zormpas is a post-doc research fellow at the Department of Economics and Management of the University of Brescia since March 2020. He has been previously working at the Department of Mathematics of the University of Bologna (2019-2020) and at the Department of Mathematics of the University of Padova (2018-2019). He has been awarded with a PhD in Real Estate Appraisal and Land Economics from the University of Padova (2018) and holds a Master and a Bachelor in Economics from the University of Macedonia. His main research interests are in the fields of Investment Theory, Energy Economics and Industrial Organization. He is currently working on the effect of vertical relationships and agency conflicts on the timing and efficiency of investment projects. He is also interested in the analysis of public-private partnerships, land allocation problems, investments in the energy sector and the analysis of overlapping ownership arrangements.
Investment dynamics under agency conflicts and overlapping ownership arrangements
The assumption that entrepreneurial firms are self interested is central to most research in economics and finance. However, since overlapping ownership arrangements (OOAs) among firms are nowadays an important feature of firm ownership structures, treating firms as own-value maximizers may no longer properly capture strategic interactions among them.
This increasing trend of OOAs has recently attracted significant attention from the literature since these types of arrangements are expected to affect firms’ objectives and behavior. In particular, if a firm or a firm’s shareholders hold stakes in competitors, then the firm’s manager is naturally led to positively weigh the values of these competitors. Analysts and policy makers have expressed concern about the possible anticompetitive effects of the steady rise in OOAs.
While a substantial amount of literature analyzes how OOAs affect market competitiveness and price-setting, there are significantly fewer papers that discuss the impacts of these arrangements on other firm decisions such as market entry, product development and R&D. At the same time, an assumption that is almost ubiquitous in the literature is that firms are run by managers who act entirely in the interests of the shareholders.
In this work, I will discuss the exercise of an investment option delegated from a firm owner to a firm manager accounting both for agency conflicts (the manager has an informational advantage) and for OOAs (the owner holds shares in a competitor). My goal is to find how the interaction between the two parties is affected by the OOAs and how this is reflected in the investment timing and the value of the option to invest.
Seminar: June 8, 2021 from 12:30 to 13:30
"Optimal Investment in Flexible Combined Heat and Power Generation"
We find the optimal investment timing and capacity of flexible combined heat and power (CHP) units. We show that flexibility guarantees earlier investment but has an ambiguous effect in terms of optimal capacity with respect to investments in standard CHP units. A numerical exercise using data from the pulp and paper industry concludes the paper.