Operations Management and Information Systems (OMIS), Schulich School of Business, York University

Presents

Geng Sun, Ph.D. candidate

in Seminar on

Monday, December 16, 2019, 11:30am-1:00pm

W256 Seymour Schulich Building

Incentive Regulation and Capital Structure in Digital Networks: Theory, Evidence and Implications

Digital carriage network that enables the information age and digitalization of business has been featured by its unique characteristics that set it apart from other industries. In such context, a regulatory innovation influencing firms has seen ‘cost-plus’ rate of return regulation giving way to incentive-based ‘price-minus’ approaches, such as price caps. The impacts of such regulatory transitions on firm leverage have not been conceptually or empirically evaluated. We model whether the regulatory transition to a price caps regime, from a rate of return framework, would affect firms’ leverage. Thereafter, we evaluate our proposition with data for the United States telecommunications industry, in a quasi-experiment format, and find that price cap regulated firms have had lower leverage levels than firms regulated by the rate of return method. These results provide general implications on firm sustainability, consumer surplus, and social welfare.

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Geng Sun is a Ph.D. candidate of Information Systems at Naveen Jindal School of Management, University of Texas at Dallas. His primary research interests include the economics of Information Systems, such as online platform, multi-sided market, technology diffusion, incentive regulation, and sharing economy. He uses analytical modeling, econometrics analysis, and machine learning on various research projects. His work appears at major IS conferences and is under review in leading academic journals.