Managerial Objectives, the R-Rating Puzzle and the Production of Violent Films

54 Pages Posted: 6 Jun 2003

See all articles by S. Abraham Ravid

S. Abraham Ravid

Yeshiva University - Syms School of Business

Suman Basuroy

SUNY Buffalo

Date Written: May 2003

Abstract

We analyze project choice in the motion pictures industry and find evidence consistent with revenue maximization and excessive hedging. We focus on the production of violent films and films that feature sex and violence. We find that such movies do not provide excess returns, but they increase revenues, particularly in the international market. Further, they tend to lose money less often and their returns are more predictable, even though there are never mega-hits. Our findings are consistent with studies of other industries, and they also partially explain the R-rating puzzle that is, the fact that most films produced are R-rated in spite of much evidence suggesting that G and PG films perform better.

JEL Classification: G31, G34

Suggested Citation

Ravid, S. Abraham and Basuroy, Suman, Managerial Objectives, the R-Rating Puzzle and the Production of Violent Films (May 2003). Available at SSRN: https://ssrn.com/abstract=413582

S. Abraham Ravid (Contact Author)

Yeshiva University - Syms School of Business ( email )

United States

Suman Basuroy

SUNY Buffalo ( email )

12 Capen Hall
Buffalo, NY 14260
United States
716-645-3845 (Phone)
716-645-3261 (Fax)

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