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Modeling the „Visitors to Rome“ effect: Reputation Building in Anglo-Saxon Buyout Funds in Japan

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  • Blind, Georg
  • Stefania, Lottanti von Mandach

Abstract

Stereotypes pose a major challenge to agents entering a foreign market. In order to overcome these stereotypes, visitor agents may decide to emulate domestic behavior. We develop a simple model of reputation building in transactions where identities are revealed and show that this tendency may even imply over-assimilation if stereotypes are sticky and assimilation efforts are not overly costly. The model predictions are tested using data on private equity-led buyout transactions in Japan from 1998 to 2015. While early transactions by Anglo-Saxon investors display marked differences, there is a strong tendency toward approximation of domestic standards, which eventually leads to over-compensation.

Suggested Citation

  • Blind, Georg & Stefania, Lottanti von Mandach, 2017. "Modeling the „Visitors to Rome“ effect: Reputation Building in Anglo-Saxon Buyout Funds in Japan," MPRA Paper 77761, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:77761
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    More about this item

    Keywords

    Reputation building; stereotypes; strategically revealed preferences; buyout investments; heterogeneous preferences;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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