digestibility and asymmetric information in the choice between acquisitions and joint ventures where s the beef in response to our empirical findings that contrary to the predictions of the information asymmetry hypothesis joint ventures are not more but instead less likely when parents belong to different industries balakrishnan and reurer argue that 1 the information asymmetry and the indigestibility hypotheses are theoretically complementary and 2 our results may be affected by the characteristics of our sample in fact the goal of our study was not to deny the theoretical validity of alternative theories of joint ventures but only to ascertain their relative explanatory power we therefore agree that both theories are complementary but show that our findings are not explained by our sample but instead by the way we test the information asymmetry hypothesis copyright 2000 john wiley sons ltd

the effects of human resource management practices on productivity a study of steel finishing lines the authors investigate the productivity effects of innovative employment practices using data from a sample of thirty six homogeneous steel production lines owned by seventeen companies the productivity regressions demonstrate that lines using a set of innovative work practices which include incentive pay teams flexible job assignments employment security and training achieve substantially higher levels of productivity than do lines with the more traditional approach which includes narrow job definitions strict work rules and hourly pay with close supervision their results are consistent with recent theoretical models which stress the importance of complementarities among work practices

when ethics are compromised by ideology the global competitiveness report the global competitiveness report raises ethical issues on multiple levels the traditional high ranking accorded the us is largely attributable to fallacies poor science and ideology the ideological bias finds expression in two ways the inclusion of indices that do not provide competitive advantage but that fit the anglo us ideology and the exclusion of indices that are known to offer competitive advantage but that do not fit the anglo us ideology this flaw is compounded by methodological problems that raise further doubt as to the reliability and validity of the survey results the resultant false high ranking of the us a strong proponent of anglo us capitalism pseudo legitimizes the propensity of us dominated institutions and entities to persuade coerce and in the worst case force other countries and their constituents to adopt anglo us practices and behaviours this is ethically reprehensible because research shows that these practices and behaviours when compared with other approaches are sub optimal in the results they produce for individuals corporations and nations the report also unjustly and unnecessarily stigmatizes entire groups of countries with little conceivable benefit to anyone given the report s gravitas through the profound global influence it exerts on the decisions of top government and business leaders these are serious ethical and economic issues

how much does country matter an analysis of firms growth options recent international strategy research emphasizes the importance of understanding the effects of geographic location on firms strategies and performance outcomes we contribute to this research by providing empirical evidence that the interplay of country and industry effects matters substantially in explaining the variation in the value of growth options of firms based in different countries our results show that country industry effects are the second largest source of variation following firm effects while industry and country effects are relatively small when considered in their own right that valuable growth options are tied to country and industry interactions has important implications for international strategy research and practice

making corporate self regulation effective in developing countries summary self regulation by multinational corporations of social environmental impacts has been advocated as a solution to the regulatory capacity problems faced by developing states market pressures can provide incentives for firms to implement codes and standards and also rely on widely available information about corporate behavior voluntary schemes attempt to provide reliable standardized reporting of information but government action in the north and south remains vital to effective regulation by setting social goals and upholding the freedom of civil society actors to organize and mobilize international organizations and legal instruments may be able to assist developing country governments in fulfilling these roles

negotiated block trades and corporate control we identify negotiated trades of large percentage blocks of stock as corporate control transactions when a block trades and the firm is not fully acquired cumulative abnormal returns average 5 6 and 33 of the chief executives are replaced within a year stock price increases are larger when control passes to the new blockholder when management does not resist the blockholder s effort to influence corporate policy and when the block purchaser eventually fully acquires the firm these findings suggest that the specific skills and expertise of blockholders and not just the concentration of ownership are important determinants of firm value we examine 106 negotiated trades of at least 5 of the common stock of new york stock exchange nyse and american stock exchange amex listed corporations our primary objective is to assess the impact of these transactions on the firms whose shares are traded we also investigate the importance of active block investor s specific managerial expertise and incentives for firm value the emerging literature on concentrated ownership focuses on how the level of ownership affects a blockholder s incentives to undertake a variety of corporate decisions although it has been recognized that a blockholder s identity also can be important less attention has been paid to this issue several recent studies however provide evidence that blockholders incentives and expertise are not homogeneous for example holderness and sheehan 1985 find that the stock market reacts more favorably to initial block accumulations by six controversial investors who are often portrayed in the press as raiders than to initial accumulations by a random sample of investors morck shleifer and vishny 1988 find that firm value tends to be lower when the firm is run by a member of the founder s family than when it is run by an officer unrelated to the founder brickley lease and smith 1988 document that institutional blockholders are less willing to vote against management on antitakeover amendments when they are likely to have business dealings with the firm when a block trades the concentration of ownership typically does not change but the blockholder s identity does

environmental disclosure and stock market liquidity evidence from arab mena emerging markets abstractthe objective of this study is to examine the impact of environmental disclosure levels on the stock market liquidity of arab middle eastern and north african mena companies for that a self constructed disclosure index was applied to the annual reports for the years 2010 2011 and 2012 and the bid ask spread was used as a proxy for stock market liquidity results indicate that levels of environmental disclosure in mena companies are quite low in addition using a sample of 276 firm year observations multivariate analysis shows that the higher the level of environmental disclosure provided in the annual reports the lower the spread between the market bid and ask prices thereby indicating an increase in stock market liquidity

initial shareholdings and overbidding in takeover contests within the context of takeovers this paper shows that in private value auctions the optimal individually rational strategy for a bidder with partial ownership of the item is to overbid i e to bid more than his valuation this strategy however can lead to i an inefficient outcome and ii the winning bidder making a net loss further the overbidding result implies that the presence of a large shareholder increases the bid premium in single bidder takeovers at the expense of reducing the probability of the takeover actually occurring

solving theoretical and empirical conundrums in international strategy research linking foreign entry mode choices and performance several theoretical and empirical developments in the literature on foreign entry mode and performance and on international strategy more generally were influenced or prefigured by brouthers 2002 jibs decade award winning paper regarding theory brouthers is an archetype of the integration of transaction cost and institutional perspectives i argue that it is also relevant to the growing literature that aims at synthesizing these and other perspectives methodologically brouthers 2002 contributed several uniquely direct and rich measures furthermore it not only displayed awareness of endogeneity specifically self selection issues but also was among the pioneers in the comparative analysis of governance choices for a given firm or transaction i elaborate on the promising if challenging use of such what if imputation to identify the impact of more or less well aligned choices overall i argue that such methodological advances cannot be decoupled from the conceptual advances that enable them and which they reinforce

competitor analysis and foothold moves a foothold is a small position that a firm intentionally establishes within a market in which it does not yet compete we extend theory on competitive dynamics to examine relationships between comp

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

real options theory in international business the last quarter century has witnessed substantial growth in applications of real options theory rot to international business ib research in this review we explicate the core rot concepts in the ib context and discuss the contributions of rot based research to three core ib issues timing and scale of market entry or exit entry mode and governance form and the role of multinational networks based on our review we propose a holistic rot view of the multinational enterprise that synthesizes the insights of existing studies finally to move the field forward we highlight key questions and challenges in current rot based work provide a more precise definition of exogenous and endogenous uncertainty suggest empirical designs to test unique rot predictions and explore areas where rot can be combined with other theoretical perspectives to better understand ib phenomena

a real options perspective on sequential acquisitions in china we examine how firms in an emerging market address their information disadvantage in takeovers one strategy is to complete the acquisition sequentially rather than as a one time deal in contrast to firms in developed economies that enjoy relatively easy access to information emerging market firms face differential access to information on target firms owing to institutional weaknesses and constraints in those markets sequential acquisitions are conceptualized as a real option based strategy whereby the sequential acquirer resolves valuation uncertainty through information gathering and learning after making a toehold purchase the value of a sequential acquisition strategy increases for firms that are at an information disadvantage statistical analysis based on 272 completed acquisitions of chinese listed firms between 1995 and 2003 shows that the sequential method is more likely to be chosen over a single transaction mode when the acquirer is a private firm or when the acquirer is diversifying into a new business area thus we offer a new way of viewing real option strategies in emerging economies by treating sequential acquisitions as information and learning mechanisms as opposed to tools for hedging

top executive pay and firm performance in china the sensitivity of executive pay to share price performance has been the main focus of western executive pay studies reflecting shareholders efforts to reduce agency problems by better aligning the rewards of executives with their own however these studies have ignored motivational effects and possible two way pay performance causation this paper reports chinese executive pay performance sensitivity with international comparisons to examine whether china s unique institutional environment has produced outcomes consistent with those for western market economies this same unique environment makes possible the first estimates of two way causation based on panel data analysis the results show that executive pay and firm performance mutually affect each other through both reward and motivation

market liberalization and firm performance during china s economic transition this paper examines the impact of market liberalization on firm performance through institutional changes during the economic reform in china the conceptualization focuses on the decentralization of control ownership restructuring and industrial policy as the primary institutional changes to implement market liberalization in china these institutional changes affect firm performance by shaping managerial incentives affecting transaction and agency costs and making selective resource allocations across and within industries using a large scale data set including 23 577 firms between 1992 and 1996 the study examines how market liberalization affects the profitability and productivity of chinese firms and the relationship between ownership change and the performance of state owned enterprises

flexibility versus commitment mnes ownership strategy in china we investigate the following important questions in international business how do multinational enterprises mnes choose ownership strategies when facing strong uncertainty in foreign market entries how are the choices affected by industry contingencies following the key tenets of real options theory we propose that under a high level of market uncertainty mnes choose more flexible rather than more committed ownership strategies that allow adjustment of investment decisions in future we further suggest that using flexible strategies in response to uncertainty becomes less valuable for mnes when the industry they enter in the host country enjoys strong sales growth potential requires less irreversible investments and has intense competition empirically we analyze the ownership strategies ownership structure and equity share of over 5000 new foreign investments in manufacturing industries in china during 2000 2006 we find qualified support for our hypotheses and discuss the industry boundary conditions of adopting flexible ownership strategies in foreign market entries

environmental disclosures regulatory costs and changes in firm value abstract union carbide s chemical leak in bhopal india during december 1984 resulted in approximately 4 000 deaths and 200 000 injuries this study examines the market reaction of chemical firms other than union carbide to this catastrophe evidence indicates that a significant negative intra industry reaction occurred however firms with more extensive environmental disclosures in their financial report prior to the chemical leak experienced a less negative reaction than firms with less extensive disclosures this result suggests that investors interpreted such disclosures as a positive sign of the firm managing its exposure to future regulatory costs

property rights and stratification in socialist redistributive economies in socialist economies work organizations differ widely in the compensation they provide employees despite the absence of key product and labor market processes thought to ex plain such inequalities in market economies existing theories of stratification in socialist economies focus on the power and privilege of elites but inequalities among organizations are not created by political particularism or elite power in this paper i sketch elements of an institutional theory of stratification anchored in a conception of property rights the right to derive income from productive assets two aspects of property rights guide the analysis 1 the dispersion of property rights across a hierarchy of governmentjurisdictions and 2 the exercise of these rights by government jurisdictions as they extract revenues primarily through taxation extraction of revenues from a work organization varies with the budgetary resources of a government jurisdiction and the dependence of that jurisdiction on the out puts of the organization variation in revenue extraction in turn creates inequalities among work organizations in their abilities to provide benefits to employees an analysis of survey data on the provision of housing and benefits by work organizations in the large industrial city of tianjin china provides provisional support for these ideas s tudents of communist states have had little reason to dispute lenski s 1966 claim that the distribution of rewards in a society is a func tion of the distribution of power p 63 as ex emplified in szelenyi s wedding of elite theory to institutional economics this idea has been de veloped primarily in terms of the power of class es or occupational groups szelenyi 1978 be gan with the observation that planned economies operate according to redistributive rather than market principles however the process of re

the effect of three mile island on electric utility stock prices a note the impact of events on the time series properties of common stock returns has been the subject of numerous articles in the finance literature most studies have shown that capital markets are highly efficient in the sense that prices quickly adjust to publicly available information as investors act to receive a return commensurate with the level of perceived risk this note examines the effect on the stock returns of public utility firms of the three mile island tmi nuclear accident in stock valuation models based on investor rationality permanent price declines are brought about either by a decline in expected cash flows or by an increase in the rate used to discount future cash flows such a nuclear accident may directly affect investors perceptions of both the expected cash flows of utilities and their risk these future cash flows are affected because a nuclear accident may cause additional costs due to extended shutdowns or abandonment of nuclear plants expenses of responding to a nuclear accident and costs of purchasing replacement power the response of utility returns to tmi is analyzed at three levels first the risk adjusted returns for the utility experiencing the nuclear accident general public utilities gpu are measured over monthly time periods surrounding tmi the same analysis is performed on an aggregate sample of electric utility firms to assess the direction and magnitude of tmi s impact on other firms in the industry lastly the sample is divided into utilities with significant nuclear generating capacity at the time of tmi and utilities with no nuclear generating capacity so that the differential impact of the nuclear accident on nuclear and non nuclear public utilities may be assessed both a single and two index market model are used to estimate risk adjusted returns the latter index model includes an interest rate index as well as an equity market index

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

governance and uncertainty the trade off between administrative control and commitment this study elaborates upon the motives for initiating equity based collaborations vs acquisition of another firm already having a desired technology we characterize both minority direct investments and joint ventures as options to defer either internal development or acquisition of a target firm in domains where learning about growth opportunities dominates investment activity this incremental mode of governance economizes on the cost of committing resources to a technology with an uncertain value using a sample of 402 transactions in the biotechnology industry we find strong support for the theoretical model the findings suggest that the cost of commitment in the face of technological uncertainty may offset the administrative benefits of hierarchical governance 1998 john wiley sons ltd

capital structure in transition the transformation of financial strategies in china s emerging economy during economic transition firms must dramatically reduce their financial dependence on the state and begin to borrow from nonstate capital sources this paper draws on institutional and resource dependence theories to examine this fundamental transformation of firm capital structure during china s transition i propose that managers borrowed from external sources even when internal funds were available because retained earnings were considered state assets firms used retained earnings to signal financial health but borrowed externally to reduce dependence on the state uncertainty during transformation produced interfirm imitation of borrowing strategies particularly imitation of local and high status others i argue that the dynamics of market development shaped firm borrowing strategies and that these strategies are best viewed as trajectories over time analysis of survey data on the 1980 1989 capital structure of formerly state owned firms provides support for these arguments and highlights the importance of institutional context in understanding corporate borrowing and strategic decision making

intraindustry information transfers associated with management forecasts of earnings this study documents information transfers associated with the sign and magnitude of the changes in earnings expectations conveyed by management forecasts that is the management forecast of one firm discloser generates unexpected price reactions for firms nondisclosers similar to the forecaster the results are consistent with information transfers documented for releases of actual earnings foster 1981 and sales announcements olsen and dietrich 1985 1 these results build on prior management forecast research that has documented a link between the sign and magnitude of the changes in earnings expectations conveyed by management forecasts and the unexpected share returns price reactions of forecasting firms ajinkya and

cross sectional dependence and problems in inference in market based accounting research this paper provides a framework and some empirical evidence to evaluate the seriousness of problems in inference that arise in stockreturn based studies when the data are cross sectionally dependent the study is motivated on the grounds that statistical procedures designed to address such problems are often infeasible and even when they can be implemented they sometimes introduce other more serious difficulties thus researchers have frequently adopted an approach that ignores the cross sectional dependence e g ordinary least squares ols the objective of this paper is to help identify the contexts in which ignoring the dependence would lead to serious misstatement of significance levels cross sectional dependence in stock returns data is likely to exist when at least some of the returns are sampled from common time periods this would be the case in all studies of the reaction of stock prices to a

the tylenol incident ensuing regulation and stock prices the much publicized tylenol incident in 1982 led to stringent packaging regulations for over the counter pharmaceutical drugs the sudden incident and the swift progression of associated events offer a unique opportunity to assess the wealth effects of the resultant regulations the market value of common stock of johnson johnson makers of tylenol declined by approximately 29 percent amounting to 2 31 billion although other firms in the industry also suffered significantly their share price decline did not occur around the tylenol incident but occurred around the subsequent packaging reg ulation proceedings on average 28 other pharmaceutical firms analyzed in this study experienced a decline of 310 million per firm or a total of about 8 68 billion the results suggest that the regulation had a significant negative effect on the common stock prices of firms in the pharmaceutical industry

the trade off between supervision cost and performance based pay does gender matter the study adds to the literature by providing new empirical evidence consistent with efficiency wage theory and by providing estimates of the average cost of supervising a worker by industry this research uses the 1996 wave of the nlsy and incorporates estimates of supervision cost computed from industry classifications we further detect presence of no gender differences neither in risk averseness nor in productivity gains associated with cost of supervision and performance based pay while the findings imply that employers should consider the incentive effects of supervision and performance based pay when constructing pay schemes there is no need for employers to devote resources to constructing gender specific payment mechanisms our evidence suggests that profit maximizing firms should treat males and females equally and develop gender neutral pay schemes

intra industry information transfers associated with earnings releases abstract the impact that a firm s earnings releases have on the stock prices of other firms in its industry is examined for an identifiable sub set of firms the results are consistent with a significant information transfer occurring between the earnings release firm and the other firms in its industry this subset is identified by examining the impact of the release on the stock price of the announcing firm the magnitude of this impact is more significant for a sample of firms which have a larger percentage of their revenues in the same line of business as the earnings release firm vis a vis a sample with a lower percentage of their revenues from the same line of business alternative interpretations of the empirical results are also discussed the research findings have implications for information content and market efficiency research and for research on policy issues associated with disclosure regulation

market reactions to accounting regulations in the savings and loan industry abstract this paper addresses whether events leading to three regulatory accounting principles issued by the federal home loan bank board affected the market value of savings and loan associations s ls the market reaction to these regulations is predicted to be positive since they effectively eased minimum regulatory net worth requirements a significant market reaction is observed for the regulation that allowed s ls to increase regulatory net worth by permitting appraised equity capital however results are inconsistent with the alternative hypothesis associated with the regulations permitting deferral of loan losses and net worth certificates