the effect of slack diversification and time to recall on stock market reaction to toy recalls abstract past toy recalls have led to an increase in consumer concerns while toy manufacturers and retailers increasingly outsource and create longer supply chains making it more challenging for them to ensure toy safety this article examines firms making toy recall announcements to assess the impact operational characteristics have on the negative stock market reaction to the announcement 135 toy recall announcements in the u s from 1979 to 2016 were analyzed using event study and cross sectional regression while a toy recall announcement results in a negative stock market reaction our results show that greater levels of business diversification inventory slack and a longer time to recall are all associated with a less negative stock market reaction in contrast greater capacity slack is associated with a more negative stock market reaction we find no evidence that geographic diversification or financial slack influences the stock market reaction nor have reactions changed appreciably over time this article contributes to the product harm and product recall literature by focusing on these operational elements managers should be aware of the benefits of greater slack and business diversification while planning their business and the impact of a longer time to recall

how firms respond to financial restatement ceo successors and external reactions although past studies have paid considerable attention to firms reputations few have investigated the actions that firms take following a reputation damaging event we identify firms involved in financial earnings restatements and examine whether naming a successor ceo with specific qualities serves to signal the seriousness of a firm s efforts to restore its reputation using theories of market signaling we argue that attributes of successor ceos significantly influence the reactions of key external constituencies in particular firms with more severe restatement tend to name successors who have prior ceo or turnaround experience and a more elite education the naming of such successors results in more positive reactions from the stock market financial analysts and mass media we argue that these attributes send messages to stakeholders and the broader public about the ceo s credibility and the firm s efforts

communicating excellence in innovation the innovation performance relationship is well studied in the literature but the effect of innovation based public recognitions is underresearched this article finds a positive effect whose magnitude is contingent upon the firm s growth experience and its service manufacturer character

divergent reactions to convergent strategies investor beliefs and analyst reactions during technological change an important outcome of technological change is industry convergence as a new technology spurs competition between established firms from different industries we study the reactions of securities analysts as important sources of institutional pressures for firms to the similar product market strategies undertaken by firms from different prior industries responding to industry convergence our empirical setting is the convergence between the wireline telecommunications and cable television industries in the period following the advent of voice over internet protocol technology controlling for firm financial performance and capabilities we find that analysts were consistently more positive toward the cable firms than toward the wireline telecom firms our findings further show that this divergence in reactions arises from differences in existing investor expectations and preferences concerning how firms create value stocks owned by investors with a greater preference for growth receive more positive reactions than those owned by investors with a greater preference for margins however this divergence in reactions shrinks over time as convergence unfolds and as investors shift their shareholdings in response to misalignment between their preferences and firms strategic changes reactions from analysts reflecting inertial expectations of investors may persist for a time despite changes to firms strategies thus creating challenges for some firms in responding to technological change and industry convergence while legitimating and enabling similar responses from their competitors

union rents as a source of takeover gains among target shareholders this paper tests the hypothesis that the substantial gains enjoyed by shareholders in target firms during the corporate acquisition boom of the 1980s reflected in part shareholders recouping of the value of rents in the form of wage premiums higher fringe benefits and constraints on managerial authority held by unionized labor analyzing data on the merger and acquisition experience of nearly 300 large publicly traded target firms during the period 1982 86 the author finds consistent with that hypothesis that shareholders average returns from takeover activity were higher in unionized target firms 41 than in nonunion target firms 35 for unionized workers these effects are equivalent to an annualized employee loss approaching 8 of annual earnings or 50 of the wage premium conventionally associated with union coverage

firm linkages to scandals via directors and professional service firms insights from the backdating scandal we examine market reactions to the stock options backdating scandal in a slightly unusual way but focusing on firms who were not perceived to have had a backdating concern but were instead linked to firms who did have a backdating concern these linkages can be found via board interlocks and the roles those directors perform in addition we examine the linkages which occur from shared professional services firms such as auditors and outside legal counsel that these potential conduits are available is not in question but rather do investors perceive the conduits are used to pass along information about backdating stock options we then ask if affiliation with dominant audit and legal services firms ameliorates or exacerbates those investor market reactions we find that firms linked to the scandalized firms also face negative reactions which are worsened when they also are serviced by professional services firms who are themselves are also linked to the managerial practice

three lenses on the multinational enterprise politics corruption and corporate social responsibility scholars who analyze multinational enterprises mnes recognize the complex relationship between international business ib and society however compared with other ib topics research on politics corruption and corporate social responsibility three lenses on the mne remains somewhat embryonic with unresolved issues regarding frameworks measurement methods and theory this presents unique opportunities for integration and extension of disciplinary perspectives which we explore in this article we provide an introduction to potential linkages across these three lenses an agenda for additional theoretical and empirical research and a review of the papers in the jibs focused issue

residual state ownership policy stability and financial performance following strategic decisions by privatizing telecoms we question previous research assuming that privatizing firm performance generally benefits from decreasing state ownership and the passage of time both of which purportedly align principal agent incentives promoting organizational decision making that increases shareholder value when state ownership shifts from majority and controlling to minority and non controlling the performance impact may be positive in the short run particularly where there is instability in the local investment policy environment consistent with this proposition we develop and test hypotheses derived from a minority and non controlling or residual state ownership framework grounded in credible privatization and institutional theory we propose that 1 residual state ownership positively affects shareholder returns after strategic decisions by privatizing firms because it signals state support for managerial initiatives 2 the passage of time since initial privatization negatively affects shareholder returns after strategic decisions by privatizing firms because initial undertakings in support of the privatizing firm are reversed and 3 home country investment policy stability moderates these two effects greater stability obviates the need for residual state ownership and slows policy reversals over time we find empirical support for our residual state ownership framework in event study analyses of cumulative abnormal returns cars associated with 196 major investments announced from 1986 to 2001 by 15 privatizing telecoms from around the world cars are positive at 5 25 state ownership levels but turn negative at higher state ownership levels cars turn sharply negative within 1 2 years from initial privatization dates increasing policy stability diminishes positive ownership and negative time effects on cars results confirm the potential supporting role that residual state ownership can play in enhancing strategic decision making and financial performance by privatizing firms particularly where there is instability in the home country investment policy environment

does acquisition of a cooperative generate profits for the buyer the dairyworld case this article examines the takeover of a cooperative dairyworld by an investor owned firm saputo that was not previously present in the industry determines if this takeover generates greater returns for the investor owned firms iof and on the basis of this evidence makes some inferences about the behavior and performance of cooperatives and iofs the empirical evidence strongly supports the conclusion that saputo s stock price rose with its takeover announcement this outcome is consistent with a number of explanations including that saputo was unaffected by hubris a factor often suggested as the reason that many firms overbid when they undertake acquisitions dairyworld s poor liquidity and capital shortage problems as well as a limited number of suitors may have weakened its bargaining position in its dealings with saputo the observed increase in saputo s stock price is also consistent with the possibility that by taking over a cooperative saputo was able to decrease competition and thus increase its profits a fruitful area for future research would be a rigorous theoretical and empirical determination of the impact that these various factors have on acquisition profitability such analysis is required before inferences about the behavior and performance of cooperatives and iofs can be fully answered

competitiveness through management of diversity effects on stock price valuation this study s premise is that firms that can lower their costs and enhance their differentiation through the effective management of their human resources have a competitive advantage using data fr

from hybrids to hierarchies shareholder wealth effects of joint venture partner buyouts this study examines the parent firm performance implications of joint venture jv partner buyouts which involve the conversion of a hybrid governance structure to an internal unit within the firm s hierarchy transaction cost theory as developed and applied in the international literature and market entry research is extended to the post entry investment setting to isolate sources of value creation or dissipation from the governance changes effected by jv partner buyouts the evidence complements recent research on jv longevity and its determinants copyright 2001 john wiley sons ltd

stock market valuation of joint venture sell offs this article examines the stock market performance implications of joint venture jv partner sell offs using a resource based view and an event study methodology more specifically it proposes hypotheses putting into evidence the stock market valuation of different reasons for jv sell offs refocusing of a business debt reduction and jv failure abnormal returns ars from jv sell offs are estimated for a sample of 151 european selling partners first the results show that stock market reactions observed around the date of announcement are significant and positive this finding is consistent with that of finance research literature on stock market reactions to ordinary asset sales this leads us to discount the idea that stock markets place a specific valuation on jv sell offs second the results indicate that the reasons for jv sell offs are a determinant of ars of selling partners

globalization derailed multinational investors response to the 1997 denial of fast track trade negotiating authority is globalization being derailed by opponents results of this event study analysis of the 1997 fast track denial suggest that investors 1 may have perceived fast track as a debate on globalization and 2 appear to have expected financial losses to result from the failure to enact fast track regression results further support the event study findings

misperceiving the beliefs of others how pluralistic ignorance contributes to the persistence of positive security analyst reactions to the adoption of stock repurchase plans we consider how a social psychological bias referred to as pluralistic ignorance occurs among security analysts and how this bias may lead to behavioral conformity and isomorphism in analysts reactions to the adoption of a particular organizational policy namely stock repurchase plans our theory suggests why 1 there may be a systematic tendency for analysts to underestimate the extent to which other analysts share their reservations about repurchase plans i e reservations about whether plans reflect well on the performance prospects of adopting firms such that 2 analysts conform to other analysts and issue more positive earnings forecasts and stock recommendations in response to the adoption of repurchase plans despite having private reservations about whether the plans reflect well on adopting firms we also contend that analysts are less likely to underestimate the extent to which others share their reservations about repurchase plans to the extent that they have frequent communication ties to other analysts whereas prior neoinstitutional research on conformity and isomorphism has primarily adopted a cognitive perspective in which actors conform to the behavior of others based on their understandings of a particular policy or practice i e they take the value of the policy for granted or infer the value of the policy from others prior decisions we develop a social psychological perspective on isomorphism wherein actors imitate others based on their biased perceptions of others beliefs about the policy we also extend perspectives on institutional persistence by explaining why constituents may continue to publicly endorse a policy despite having private reservations about the policy s efficiency benefits

corporate combinations and common stock returns the case of joint ventures the gain to stockholders from mergers is well documented however there is little evidence as to whether the source of the gain is due to synergy or management displacement merger is just one of an almost limitless variety of ways in which firms combine resources to accomplish some objective a joint venture is another in addition to being of interest as an independent phenomenon because the original managements of the parent firms remain intact under a joint venture investigation of wealth gains from joint ventures provides an opportunity to isolate the management displacement hypothesis from the synergy hypothesis as the source of gains in corporate combinations our results are 1 there are significant wealth gains from joint ventures 2 the smaller partner earns a larger excess rate of return while the dollar gains are more equally divided and 3 the gains scaled by resources committed yield premiums similar to those in mergers we are inclined to interpret our results as supportive of the synergy hypothesis as the source of gain from corporate combinations this paper is an empirical investigation of the common stock returns of u s companies that enter into joint ventures with other u s companies we consider joint ventures in the context of what is by now a burgeoning literature examining the security returns of companies involved in intercorporate mergers and tender offers 1 in this context our objective is to provide evidence as to the source of the well documented gains to stockholders of firms involved in mergers and tender offers in addition joint ventures are an interesting economic phenomenon in their own right they are undertaken by many of the largest u s companies involve billions of dollars in capital expenditures annually and are subject to considerable scrutiny in the popular press in this regard our analysis provides data on what is as yet a relatively unexplored area of economic activity 2 a corporate merger represents the joining together of all the resources of two companies under a single management to accomplish some set of objectives empirical studies have found that mergers generally result in significant increases in the total market values of the merging firms with the stockholders of the

exploring factors that influence social retail investors decisions evidence from desjardins fund most studies on the choices motivations and behavior of investors consist of segmentations focused on socio demographic characteristics such as age income education level etc such approaches seem to simplify even mutilate reality by aggregating data about observable variables and considering investors as homogeneous groups these perspectives are inspired by a scientific approach that consists of separating in order to better understand the observed phenomena by considering individual as a homo economicus that is to say a rational and autonomous individual who makes decisions motivated by material gains these studies fail to recognize all the complexity that shapes human behavior this paper argues that to understand the behavior and choices of investors in regards to socially responsible investing sri we must consider social investors as complex individuals in addition we should take into account influence that the institution may exercise throughout the role of advisors and sri promotion strategies our research builds on a multidimensional approach that explores to what extent demographic environmental social and governance esg issues the trade offs between financial return and social values the attitudes and the role of the institution throughout the role of the advisor and sri promotion strategies influence the decisions of individual social investors moreover it adopts a more open approach by exploring the characteristics and behaviors of individual social investors in relation to those of conventional investors our research provides evidence from the desjardins fund qualitative and quantitative data gathered by desjardins from online surveys are subjected to bivariate and multivariate analyses and are complimented by ten semi structured interviews with managers analysts and advisors who provided further insight into sri investment behavior and choice the results show that while demographic characteristics still remain important in understanding the behavior and attitudes of social investors it is their social values esg issues financial return considerations and the role played by the institution in mediating investment decisions that are significantly associated with sri portfolios our research highlights the complexity surrounding the phenomenon of sri and has several implications both in terms of theory and practice

industry divestiture waves how a firm s position influences investor returns because of the opaque nature of divestitures investors face considerable uncertainty in evaluating divestiture decisions and thus may look to a firm s social context defined in terms of the per

losses from failure of stakeholder sensitive processes financial consequences for large us companies from breakdowns in product environmental and accounting standards this article makes first use of a set of databases that are authoritative independent and consistent to examine an old research question do firms hurt their financial performance by damaging stakeholder interests the databases are us government on line listings of fines for environmental breaches unsafe workplaces fraudulent accounting standards and product recalls these measures are assumed to proxy for signals to stakeholders of the environmental social and governance esg risks in transacting with the firm and appear to have fewer biases than conventional measures of stakeholder standards using a sample of all non financial sp and shareholder return was significantly reduced by an epa or sec prosecution this study links the risk of transaction uncertainty information signaling theory and the resource based view of the firm to company financial performance results support the normative assumption that a firm s sales margin will be damaged by unethical treatment of stakeholders as evidenced by esg breaches presumably because risk averse customers and suppliers are alert to signals of counterparty risk

analysis of the effectiveness of the first european pollutant emission register eper abstract the aim of this paper is to examine the effectiveness of the first european pollution emissions register eper a regulatory instrument based on the publication of the environmental performance of firms exceeding specified pollution limits the multivariate regression model mvrm is applied to capture the disciplinary effect of the eper so we first perform an analysis to determine whether the publication of the eper has a negative effect on the market value of the listed firms secondly we consider the possibility of the publication of the eper affecting the market value of firms which could be included in the eper but are not because their emissions do not exceed the specified pollution limits finally we prepare an index to compare the environmental results of the firms and analyse whether the consequences of publishing the eper are worse for firms with high relative pollution records

the value of corporate philanthropy during times of crisis the sensegiving effect of employee involvement recent research suggests that philanthropy s value to the firm is largely mediated by contextual factors such as managers assumed motives for charity our article extends this contingency perspective using a sensegiving lens by which external actors interpretations of organizational actions may be influenced by the way in which the organization communicates about those actions we consider how sensegiving features in philanthropy related press releases affect whether investors value those donation decisions for the empirical investigation in this study we analyze abnormal returns to announcements by u s fortune 500 firms documenting their donations to hurricane katrina disaster relief in 2005 we expect that in general donation decisions would be controversial given the uncertainty surrounding the hurricane s economic effects at the time however we also propose that announcements emphasizing employee involvement in the donation send investors positive signals about the firm s ability to bounce back from the disaster s adverse effects we find empirical support for the proposed hypotheses and discuss the implications for theory and practice

foreign political connections liability of foreignness a firm s social and economic costs of operating in a foreign market is a major concern for multinational corporations and firms trying to enter new markets to reduce the liability of foreignness a firm may engage in strategic international political management via foreign political connections and thus lower barriers to entry faccio am econ rev 96 1 369 386 2006 suggests that political connections can be established by having large shareholders who are politicians or are politically connected this paper investigates the value of such foreign political connections for publicly listed firms we find that foreign political connections create large firm value and improve access to foreign markets one of the main channels of value creation is government contracts awarded to firms with direct foreign political connections our findings provide evidence of the effectiveness of having large and active foreign politically connected shareholders as part of a firm s international political corporate strategy

valuation effect of emotionality in corporate philanthropy despite receiving a great deal of research attention the effect of corporate philanthropy on shareholder value remains inconclusive to address this issue the present paper examines emotionality as an important factor based on which investors infer about the firm s motive as well as the beneficiary s worthiness and react accordingly consistent with attribution theory our event study shows that announcements with more emotional expressions are associated with higher cumulative abnormal stock returns and the effect is stronger when investor attention is greater we further find that the positive interaction effect between emotionality and investor attention is more pronounced for scandal free firms than for firms with corporate social irresponsibility csi the empirical evidence remains consistent under various robustness tests the paper concludes with implications for future research and managerial practices

antitrust policy and mergers the wealth effect of supreme court decisions many believe that antitrust policy has had a dramatic impact on merger strategies in the united states for this to be true enforcement of antitrust laws must affect a wide range of firms not just those firms whose mergers are contested this study tests whether or not firms engaged in uncontested mergers are affected by antitrust enforcement as signalled by supreme court decisions using event study methodology we find that antitrust policy against mergers was binding during the 1960s and 1970s as it ulowered the value of targets in ucontested ongoing mergers

insider trading and the valuation of international strategic alliances in emerging stock markets because stock markets in emerging economies are relatively new under regulated and often segmented investors responses to public announcements by firms in these economies may differ from responses in developed economies stock markets we draw on the institutional and corporate governance literatures to explain investor reactions to announcements of international strategic alliances isas between foreign and emerging market firms we argue that emerging economies stock markets positively value isas however information leakages due to weak regulatory environments siphon off the good news before the isa announcement date the level of state ownership of publicly traded firms and the nationality of foreign partners both affect the size and timing of market reactions

using acquisitions to access multinational diversity thinking beyond the domestic versus cross border m a comparison prior research provides ambiguous results regarding the performance of international acquisitions drawing on a survey of 248 acquisitions we find that acquirers enhance their capabilities when they buy a target with a multinational geographic scope a financial event study uses a subsample of the acquisitions to show that the financial markets also value targets multinational scope both surveys and stock market based studies suggest that targets with access to heterogeneous resource environments provide the acquirer with greater potential for capability enhancement and financial performance in contrast simply acquiring firms across borders has less influence on post acquisition outcomes the study demonstrates greater value of the attributes of the target rather than of international expansion alone thus the multinational scope of the target is more likely to account for the resource diversity provided by the target than the country of origin of the target per se the study changes the emphasis on multinational acquisitions by shifting the focus from foreign market expansion country level emphasis to accessing geographically distributed resources that are embedded in target firms firm level emphasis

how do oil producers respond to giant oil field discoveries abstract the classical hotelling model predicts that the optimal extraction level rises immediately after an unexpected resource discovery whereas in reality there are substantial adjustment costs in petroleum production and an average lag of several years between a discovery and the start of production using a large panel of country level production data and a difference in differences identification approach i show that domestic production levels respond before a newly found oil field comes on line and that this increase is driven by non opec producers consistent with different responses of opec and non opec drilling activity offshore fields and exceptionally large super or mega giant fields are also more likely to raise country level production given that domestic petroleum consumption rises by less in response to a discovery at least part of the increase in production seems to go into net oil exports

the reaction of private interests to the 1934 reciprocal trade agreements act in recent research on the 1934 reciprocal trade agreements act rtaa there has been no examination of the reaction of private actors to the rtaa did producer groups and investors in 1934 believe the democratic rtaa was the solution to republican protectionism as institutional analyses of the rtaa claim or did they realize the rtaa was no magic bullet against a return of protectionism as skeptics argue archival data suggests that many producer groups believed the rtaa would result in durable liberalization but that fewer understood the likely effects of its specific features an event study of investor reaction to the rtaa reveals that export dependent firms experienced a significant positive stock return increase on news of the rtaa while heavily tariff protected firms experienced a significant stock decline albeit several months later

optimal consumption of a nonrenewable resource with stochastic discoveries and a random environment we present a general model for the optimal consumption of a nonrenewable resource under two kinds of uncertainties one source of uncertainty is in the resource discovery process and the other is in the economic environment that affects resource supply and demand conditions such as exhaustion and development of a substitute the problem is formulated as one of optimally controlling a storage process with markov additive discoveries the optimal value of the resource stock is characterized as the solution of a functional equation and the existence of an optimal consumption policy is established it is shown that in a given environment the optimal consumption rate is increasing and the resource price is decreasing in the level of proven reserves a counterexample is provided to show that better environments may in fact mean higher prices and lower consumption rates finally a variety of examples is given to illustrate the scope and applicability of the general model

politics matters regulatory events as catalysts for price formation under cap and trade this paper investigates how the political process of making cap adjustments has shaped market outcomes in the world s largest cap and trade system the eu ets capitalizing on an event study method that incorporates an econometric technique designed to handle parameter instability and model uncertainty we assess the news implied price response to 29 hand collected announcements about the eu ets supply schedule our findings document a high market responsiveness to political events and reveal how market participants view the evolution of cap stringency in the light of a particular announcement we provide evidence that a sequence of strong event induced price drops evolve in the backloading decision process which is consistent with the interpretation that market participant s confidence in the political support for reform and probably the eu ets in general has been unsettled we also document positive price reactions to the 2020 and 2030 policy packages but not the 2050 roadmaps

do international acquisitions by emerging economy firms create shareholder value the case of indian firms while overseas acquisitions by emerging economy firms are gaining increased attention from the business press our understanding of whether and why this inorganic mode of international expansion creates value to acquirer firms is limited we argue that international acquisitions facilitate internalization of tangible and intangible resources that are both difficult to trade through market transactions and take time to develop internally thus constituting an important strategic lever of value creation for emerging economy firms furthermore the magnitude of value created will be higher when the target firms are located in advanced economic and institutional environments country markets that carry the promise of higher quality of resources and therefore stronger complementarity to the existing capabilities of emerging economy firms an event study of 425 cross border acquisitions by indian firms during 2000 2007 supports our predictions

signaling through private equity placements and its impact on the valuation of biotechnology firms abstract this paper investigates how young publicly held technology firms contend with information asymmetry and the hazards it introduces to acquire the capital necessary for future growth we ascribe to the view that firms issuing private equity signal the marketplace that managers believe their growth opportunities are undervalued consistent with this view we find significant positive abnormal returns to announcements of private equity placements we develop theory suggesting that returns are determined by the timing of previous signals we also argue that the characteristics of the private placement signal specifically whether private equity is bundled with research partnerships influence the strength of the signal our results largely support our expectations

concession bargaining the impact on shareholders equity this analysis of bargaining settlements in 1982 83 shows that on average shareholders in those firms that negotiated concessionary settlements enjoyed an 8 to 10 percent increase in the value of their holdings the author interprets this result to mean not that the value of the firm increased but rather that concessions enlarged the shareholders portion of the firm s value at the expense of the workers portion on the other hand concession bargaining does not seem to have reallocated business risk between shareholders and labor finally the evidence suggests that firm specific sources of risk can explain in part not only the magnitude of the concession effects but also the probability that concession bargaining will occur

the influence of voluntarily disclosed qualitative information we examine the voluntary disclosure of qualitative information about actions involving governmental agencies and managerial intentions or beliefs in r d project announcements in the wall street journal our analysis indicates that information regarding government approval and managerial intentions beliefs voluntarily disclosed in r d project announcements interacts with industry firm variables to provide significant incremental explanatory power in both the innovation and commercialization stages of r d projects our data also indicate that the biggest impact is from managerial intentions especially an intent to increase market share when coupled with being a larger firm copyright 2000 john wiley sons ltd

framing controversial actions regulatory focus source credibility and stock market reaction to poison pill adoption we contribute to the research on organizational accounts by examining the role of different framing languages and the credibility of the frame articulator on justifying controversial organizational actions drawing on regulatory focus theory and the literature on source credibility we develop novel arguments as to how a gains versus nonlosses framing and the perceived credibility of the speaker influence stakeholder responses as well as how the effectiveness of these aspects is influenced by context we test our arguments using data on the framing of the adoption of poison pills by u s firms between 1983 and 2008 using content analysis and an event study we find that a gains framing aligned with the dominant institutional logic leads to a positive stock market reaction while statements emanating from speakers with potentially self serving interests negatively affect the stock market reaction our findings further show that the effectiveness of framing and source credibility are dependent on contextual attributes such as speaker visibility prior performance and practice prevalence

talk softly but carry a big stick transfer pricing penalties and the market valuation of japanese multinationals in the united states corporate income tax law in oecd countries requires multinational enterprises mnes to set their transfer prices according to the arm s length standard in 1990 the united states us government introduced a transfer pricing penalty for cases where mnes deviated substantially from this standard more than two dozen other governments have followed suit our paper uses event study methodology to assess the impact of the us transfer pricing penalty on the stock market valuation of japanese mnes with us subsidiaries in the 1990s we find that the penalty caused a drop in their cumulative market value of 56 1 billion representing 12 6 of their 1997 market value

corporate perceptions of the business case for supplier diversity how socially responsible purchasing can pay in exploring corporate perceptions of the business case for supplier diversity sd this paper reports on a cross national study of large purchasing organisations lpos that had introduced or were in the process of introducing purchasing initiatives aimed at ethnic minority businesses embs the research investigates how lpos portray the benefits of this form of socially responsible purchasing and suggests a business case construct based on four component elements it also highlights a number of contextual factors that appear to have shaped business case rationales the paper concludes with a discussion of issues of cost and contingent influences affecting sd programmes and points to possible areas for future research

signaling sustainability leadership empirical evidence of the value of djsi membership we explore the relationship between corporate sustainability reputation and firm value by asking whether signaling sustainability leadership through membership on a recognized sustainability index is value generating increasingly stakeholders are demanding that firms demonstrate their commitment to sustainability one signal that companies can send to stakeholders to indicate that they are sustainability leaders is membership on a recognized best in class sustainability index this article explores both the short term and the intermediary impact on north american firms of being included or removed from the dow jones sustainability world index djsi our results provide evidence that being added to the djsi results in a sustained increase in a firm s share price suggesting that the benefits of being included on the djsi outweigh the costs associated with applying this article also notes a temporary decrease in the value of firms for the first 10 days after their removal from the djsi however this effect is eliminated within the next ten trading days

taking stock of work family initiatives how announcements of family friendly human resource decisions affect shareholder value this study examines share price reactions to 231 work family human resource policies adopted by fortune 500 companies and announced in the wall street journal between 1971 and 1996 consistent with

on corporate governance a study of proxy contests abstract this paper examines a sample of firms experiencing proxy contests for seats on their board of directors dissident shareholders usually fail to obtain a majority of board seats nevertheless they capture some seats via mechanisms such as cumulative voting in over half of the sample contests regardless of proxy contest outcome positive and statistically significant share price performance is associated with the contest that finding is predicted by the standard economic analysis of proxy contests in which the challenges benefit shareholders by improving corporate performance the finding runs counter to the claim of berle 1962 that the economists view of proxy contests is a wholly imaginary picture a portion of the positive share price changes taking place in the early stages of some proxy contests is not permanent however and as suggested by manne 1962 is at least partially attributable to temporary increases in the market value of the vote attached to corporate shares

effect of announcements of withdrawal from south africa on stockholder wealth in this study we analyzed investor reaction to corporate announcements of withdrawal from south africa to determine whether such announcements increased or reduced firms market value we also exa

the role of policy in the great recession and the weak recovery it s been nearly five years since the recession of 2007 2009 ended by all accounts this very severe recession was followed by an extremely disappointing recovery economic growth dur ing the recovery has been far too slow to raise the employment to population ratio from the low levels to which it fell during the recession or to close materially the gap between real gdp and potential gdp in marked contrast to the rapid recovery from the previous severe recession in the early 1980s or from earlier severe recessions in us history when you include both the periods of the recession and the slow recovery economic instability has more than tripled according to a common measure of performance used by macroeconomists the standard deviation of the percentage gap between real gdp and potential gdp rose from 1 percent during 1984 2006 to 5 percent during 2007 2012 taylor 2013 in this paper i consider the role of economic policy in this poor economic performance i the shift in policy in evaluating the role of policy it is important to consider actions taken before during and after the financial panic in the fall of 2008 a careful look at the full decade from five years before to five years after the panic reveals that there was a significant shift in policy away from what worked reasonably well in the decades before broadly speaking monetary policy regulatory policy and fiscal policy each became more discretionary more interventionist and less predictable in the years leading up to the

the social construction of market value institutionalization and learning perspectives on stock market reactions this study advances a social constructionist view of financial market behavior the paper suggests that the market s reaction to particular corporate practices such as stock repurchase plans are not as financial economists contend simply a function of the inherent efficiency of such practices rather stock market reactions are also influenced by the prevailing institutional logic and the degree of institutionalization of the practice the theory first predicts that the emergence of the agency perspective on corporate governance in the mid 1980s represented a powerful new institutional logic that would lead the market to reverse its prior aggregate reaction to stock repurchase plans in the united states the paper then considers the potential for institutional decoupling of repurchase plans and develops competing hypotheses about how the market value of these policies might have changed as more firms formally adopted but did not implement the plans over time in contrast to a financial economic pers

what determines the inclusion in a sustainability stock index a panel data analysis for european companies this paper examines the determinants of the inclusion of european companies in the dow jones sustainability world index and the dow jones stoxx sustainability index in doing so the paper contributes to the micro econometric literature analyzing the determinants and economic effects of sustainability performance in three respects first it examines a broad measure of corporate sustainability behavior and thus does not only apply narrow measures of environmental performance such as toxic releases which is common in other studies second the paper examines the effect of internal assessment processes regarding corporate sustainability performance by an independent financial service institution finally it analyzes the influence of unobserved heterogeneity in the framework of panel data models the analysis shows that the probability for an inclusion in the sustainability indexes strongly decreases if a company does not respond to the written survey of the assessing institution furthermore time invariant random effects and an autoregressive structure in the stochastic components are important factors in contrast a significant influence of past economic performance cannot be confirmed robustly

on the efficiency of least squares regression with security abnormal returns as the dependent variable monte carlo procedures are used to compare the finite sample performance of several estimators that may be used in cross sectional regressions with security abnormal returns as the dependent variable alternative models of event induced increases in stock return variance are examined for the event clustering scenario event clustering implies crosssectional correlation and heteroskedasticity in market model prediction errors violating one of the fundamental ordinary least squares ols assumptions i i d disturbances nonetheless provided that the conditions for asymptotic validity derived by greenwald 1983 are met the ols estimator is well specified in finite samples further for sufficiently large cross sections there is no advantage to several other more complex estimators

the outsourcing of r d through acquisitions in the pharmaceutical industry abstract we examine the performance of 160 pharmaceutical acquisitions from 1994 to 2001 and find evidence that on average acquirers realize significant positive returns these returns are positively correlated with prior acquirer access to information about the research and development activities at target firms and a superior negotiating position a unique desperation index is employed to determine the current status of a firm s internal productivity we find that firms experiencing declines in internal productivity or which are more desperate are more likely to engage in an outsourcing type acquisition in an effort to replenish their research pipelines

operational risk and its impact on north american and british banks abstractthis study examines the financial impact of operational risk and its loss announcements on the value of publicly traded banks in united states uk and canada there are three main findings 1 on average the market reacts more negatively to a loss s initial announcement than its settlement news 2 operational loss events cause strong reputational damage to the announcing banks and 3 the market is particularly sensitive to the announcement of losses caused by internal fraud of a large magnitude resulted in the order of restitution and that are the rulings of a regulatory investigation

corporate reputation s invisible hand bribery rational choice and market penalties drawing upon rational choice and investor attention theories we examine how accusations of corporate bribery and subsequent investigations shape market reactions using event study methodology to measure loss in firm value for public firms facing bribery investigations from 1978 to 2010 we found that total market penalties amounted to 60 61 billion we ran moderated multiple regression analysis to examine further the degree to which the unique characteristics of bribery explain variations in market penalties companies committing bribery in less corrupt host countries and with the involvement of compromised executives experienced greater market penalties than did other companies after partitioning share value losses into components for regulatory penalties class action settlements and loss to reputation we found that reputational penalties account for 81 8 of every dollar of share value loss omission of reputational penalties in rational choice calculus underestimates bribery costs by 4 5 times the results suggest that firms should not underestimate the importance of market imposed reputational penalties by merely considering regulator imposed fines and sanctions

value event studies this paper discusses appropriate methodology for measuring the effect of an event on the value of a firm s equity th e key points are 1 cumulative abnormal returns do not measure the effect of an event on firm value if there are dividends during the event window 2 it is generally appropriate to use pre event parameters of the return generating process even if the event alters the parameters during the event window and 3 controlling for fact ors other than the return on the market portfolio improves the power of the estimation the formula for the effect of an event on the value of a firm when there are dividends during the event window is developed a nd applied to a study of the effect of the bhopal disaster on the value of union carbide copyright 1992 by mit press

parent firm performance across international joint venture life cycle stages the benefits that firms obtain from investing in international joint ventures ijvs can be reinforced or reduced by the management of later stages of collaboration this paper presents an analysis of the shareholder wealth effects of ijv formation and five types of ijv termination the empirical findings challenge common assumptions in the ijv literature contrast prior evidence on the performance implications of market entry and exit through acquisitions and divestitures and demonstrate the value of integrating ijv life cycle stages in future research

glass houses market reactions to firms joining the un global compact we examine market reactions to publicly held multinational firms announcing their affiliation with the united nations global compact ungc the ungc is a voluntary initiative to support four areas of united nations viz human rights labor environmental and anti corruption because firms must file annual communication on progress cop reports toward these initiatives we argue this creates a differentiating transparency of interest to stakeholders using a sample of 175 global firms we find support to the theory for joining the ungc returns differ markedly however between multinational firms headquartered in the united states negative and europe positive we also find that failing to complete the annual cop generates a negative market reaction

predictable events and excess returns the case of dividend announcements abstract this paper hypothesizes that the risk per unit of time and the required rate of return are higher than normal during an event period whose timing can be predicted consistent with this hypothesis this paper presents empirical evidence indicating that the unconditional mean rate of return the variance of stock returns and their systematic risk are higher than usual during dividend announcement periods however the documented increases in the systematic risk are not large enough to fully explain the excess returns this finding is puzzling and hard to reconcile with existing theory

do hostile takeovers reduce extramarginal wage payments hostile takeovers may have significant implications for long term employment contracts if they facilitate the opportunistic expropriation of extramarginal wage payments we test the expropriation hypothesis by studying the relationship between proxies for extramarginal wage payments and subsequent hostile takeover activity this paper improves on existing research by using firm and establishment level data from a salary survey of employers in addition we observe characteristics of wage and employment structures both before and after the occurrence of a hostile takeover and hence can see whether the data are consistent with reductions in extramarginal wage payments following such takeovers results from this ex post experiment provide evidence consistent with the hypothesis that hostile takeovers result in reductions of extramarginal wage payments to more tenured workers mostly through cutbacks in senior positions at firms with relatively steep wage profiles

timing order and durability of new product advantages with imitation this research examined the effects of timing order and the durability of first mover advantages by analyzing the stock market reactions to new product introductions and imitations the major findings are that both timing and order of moves are important and that rival reactions undermine the durability of first mover advantages more specifically 1 early and fast movers achieve greater gains than late and slow movers and 2 first movers suffer at the time of new product imitations copyright 2000 john wiley sons ltd

market reactions to corporate environmental performance related events a meta analytic consolidation of the empirical evidence research on the relationship between corporate environmental performance cep and corporate financial performance cfp has consistently grown and is gaining widespread attention given the vast body of cep cfp studies recently scholars have begun to take stock of the cumulative results however no study so far has meta analyzed the findings yielded by event studies assessing the stock market reactions to corporate environmental performance related events cep related events this paper sets out to close this gap by synthesizing previous empirical results regarding the stock market impact of positive and negative cep related events results indicate a positive relationship across studies in terms of positive market reactions to positive events and negative reactions to negative events furthermore the findings show that the market reactions are stronger for negative events than for positive events i e asymmetry in the stock market reaction finally this study examines whether methodological artifacts i e differences in the study designs may explain the differences in the findings of the analyzed event studies

corporate social responsibility in the banking industry motives and financial performance abstract the current study investigates the association between corporate social responsibility csr and financial performance fp and discusses the driving motives of banks to engage in csr three motives namely strategic choices altruism and greenwashing suggest that the relationship between csr and fp is positive non negative and non existent respectively we obtained our sample which covered 2003 2009 from the ethical investment research service eiris databank and bankscope database the data consists of 162 banks in 22 countries we then classified the banks into four types based on their degree of engagement in csr this study proposes the use of an extended version of the heckman two step regression in which the first step adopts a multinomial logit model and the second step estimates the performance equation with the inverse mills ratio generated by the first step the empirical results show that csr positively associates with fp in terms of return on assets return on equity net interest income and non interest income in contrast csr negatively associates with non performing loans hence strategic choice is the primary motive of banks to engage in csr

event studies in management research theoretical and empirical issues we examined the use of event studies in management research and found that there was inadequate attention paid to theoretical and research design issues this lack of attention may lead to false in

institutional interest ownership type and environmental capital expenditures evidence from the most polluting chinese listed firms this study empirically examines whether firms environmental capital expenditures impact institutional investors investment decisions in the chinese market we particularly examine the impact of ownership type on the relationship of environmental capital expenditures and the behavior of different types of institutional investors by classifying institutional investors into two categories short term and long term investors in addition this study further investigates whether environmental capital expenditures related to ownership type increase firm value we find that long term institutional investors tend to invest in state owned firms soes making environmental capital expenditures results also indicate that with governmental backing and encouragement the market value of soes making more environmental capital expenditures is likely to increase however no similar results are found for non soes

testing equity market efficiency around terrorist attacks this article uses the nine major bombings since 1998 that have been attributed to al qaida to examine market efficiency including a test of rumours that investors traded with advance knowledge of attacks analysis of these related but individually unexpected events confirms markets are semi strong efficient it now takes well under a trading day to fully price in a completely unexpected attack on balance markets also proved strongly efficient with no conclusive evidence of insider trading

the policy impact of unified government evidence from 2000 to 2002 do the outcomes of government action differ between periods of unified and divided government using event study methodology this articles addresses the question by looking at sudden shifts between divided and unified government bush v gore the jeffords switch and the 2002 election the results show that oil and gas stocks i e republican constituent firms rose abruptly as republicans took unified control while renewable energy stocks i e democratic constituent firms fell the pattern reversed however when democrats took back control of the senate these outcomes call into question non partisan theories of law making

security price reactions around corporate spin off announcements abstract we examine security price reactions around the announcements of 123 voluntary spin offs by 116 firms between 1963 and 1981 involving a pro rata distribution of the common stock of a subsidiary to the stockholders of the parent firm the median spin off in the sample is 6 6 of the original equity value and is associated with an abnormal return of 7 0 from 50 days prior to the announcement through completion of the spin off no evidence is found to indicate the gains to stockholders represent wealth transfers from senior securityholders over the entire event period we find positive gains for firms engaging in spin offs to facilitate mergers or to separate diverse operating units but negative returns to firms responding to legal and or regulatory difficulties in the two day interval surrounding the first press announcement we find positive average excess returns for all groups

un principles for responsible investment signatories and the anti apartheid sri movement a thought experiment there appears to be a growing disquiet amongst academics surrounding the ascendancy of responsible investment that is egoist or self interested in character business case responsible investment this ascendancy has in no small measure been associated with the uptake of united nations principles for responsible investment pri as a de facto standard for mainstream responsible investment this article contributes to this disquiet it does this by examining how egoist responsible investors as endorsed by the pri might have behaved had they been around in the 1970s 1980s and early 1990s during days of the anti apartheid socially responsible investment sri movement armed with near perfect hindsight grade enhanced analytics it is clear that the signals that such egoist responsible investors would have sent to company management in terms of the apartheid issue would have been highly muddled and therefore ineffective the net conclusion is that there is nothing inherently or inevitably responsible about egoist investment and that the aversion to behaving ethically amongst institutional investors must be challenged and not swept under a carpet of rhetoric

the economics of exploration for non renewable resources abstract the literature on exploration for non renewable resources is surveyed following a brief synopsis in section 2 section 3 focuses on issues related to the world market for resources section 4 considers more microeconomic supply related issues linked to the exploration of the small region or play section 5 turns to the small but growing literature on exploration as a learning process related to r d the latter sections pay particular attention to empirical and policy aspects

information and exhaustible resources a bayesian analysis abstract we develop a continuous time bayesian model of investment in information about an exhaustible resource because of the way that information affects expectations the deterministic hotelling rule turns out to be more appropriate as a description of how resource owners forecast the value of their stocks than as a predictor of observed changes in the resource price a flow of information generates both unanticipated changes in expectations which cause the mean rate of change in the resource price to deviate systematically from the deterministic hotelling rule and reductions in uncertainty which do not affect the hotelling prediction

the impact of strikes on shareholder equity from an analysis of data for 1962 82 the authors find that strikes substantially affect shareholder equity as measured by the change in stock prices associated with strikes over that period the a

safety crises and r d outsourcing alliances which governance mode minimizes negative spillovers abstract this study examines how r d alliance governance affects both the probability and magnitude of negative spillovers triggered by a partner s safety crisis i show that hierarchical governance leads to a lower probability that a partner will suffer a crisis and thus trigger a negative spillover yet this governance mode leads to negative spillovers of greater magnitude should they happen because expected spillover costs are calculated as the probability of occurrence times the magnitude of such costs it is not clear which governance mode best minimizes expected spillover costs i combine transaction costs economics and signaling theory to develop a contingency model that identifies which effect is more likely to dominate as a way to address the reported dilemma i found evidence in support of the described dilemma and the contingency model in a sample of 296 r d outsourcing alliances in the biopharmaceutical industry

the financial impact of product recall announcements in china abstract a product recall can be viewed as a firm s worst nightmare although the long term damage to brand equity and company reputation may be difficult if not impossible to quantify the short term impact on shareholders wealth is readily estimable while many studies have examined this issue in the western context little is known about the financial impact of a product recall announcement in china to advance the knowledge about the financial impact of a product recall announcement we explore this issue using event study methodology in general our findings are congruent with previous research that product recalls result in negative abnormal returns interestingly however we found that chinese companies suffered from greater financial losses than their western counterparts did this study also provides evidence that the chinese food industry experiences a more severe stock market reaction than the automobile industry and that a passive recall strategy was associated with a more negative stock market reaction than a proactive recall strategy we conclude with several future research avenues for global research on product recalls

corporate environmental initiatives in the chinese context performance implications and contextual factors although a number of studies have been conducted on the relationship between environmental management and firm performance most of them are conducted in the western context due to the unique social and economic environments in china the performance implications of environmental management might be quite different in the chinese context we examine the impact of corporate environmental initiatives ceis on the market value of firms in china we find that in contrast to the findings in the western context chinese investors react negatively to cei announcements the negative reaction is more significant when the announcements are related to processes rather than products and for state owned enterprises rather than privately owned corporations however there is no difference whether the cei is self declared or third party endorsed overall our research indicates that chinese investors consider ceis to be in conflict with shareholder interest in particular ceis in state owned enterprises might be considered by investors as signals that firms need to sacrifice profits to shoulder more social responsibility

investor response to health care cost containment legislation is american health policy designed to fail two failed congressional attempts to control escalating health costs are examined the data show that investors apparently anticipated their failure with the implementation of a policy encouraging market competition however investors expected larger firms to benefit and firms with previously high profit growth rates to lose from the viewpoint of the politics of structural choice it appears that identifiable structural flaws were deliberately designed into both laws in ways that would promote failure and protect key interest groups