CAPM for estimating the cost of equity capital: Interpreting the empirical evidence

We argue that the empirical evidence against the capital asset pricing model (CAPM) based on stock returns does not invalidate its use for estimating the cost of capital for projects in making capital budgeting decisions. Because stocks are backed not only by projects in place, but also by the options to modify current projects and undertake new ones, the expected returns on stocks need not satisfy the CAPM even when expected returns of projects do. We provide empirical support for our arguments by developing a method for estimating firms' project CAPM betas and project returns. Our findings justify the continued use of the CAPM by firms in spite of the mounting evidence against it based on the cross section of stock returns.     

Innovativeness in family firms: a family influence perspective

This paper investigates the relationships between family influence and family firm performance. Specifically, we investigate how generational ownership dispersion, family management involvement, and family member reciprocity affect firm performance. We also consider the moderating role of innovativeness. Our findings indicate that family firm influence can have both positive and negative consequences for family firm performance. Implications and areas for future research are discussed.     

An empirical investigation of environmental performance and the market value of the firm

This paper analyzes the shareholder value effects of environmental performance by measuring the stock market reaction associated with announcements of environmental performance. We examine the market reaction to two categories of environmental performance. The first category includes 417 announcements of Corporate Environmental Initiatives (CEIs) that provide information about self-reported corporate efforts to avoid, mitigate, or offset the environmental impacts of the firm's products, services, or processes. The second category includes 363 announcements of Environmental Awards and Certifications (EACs) that provide information about recognition granted by third-parties specifically for environmental performance. Although the market does not react significantly to the aggregated CEI and EAC announcements, we find statistically significant market reactions for certain CEI and EAC subcategories. Specifically, announcements of philanthropic gifts for environmental causes are associated with significant positive market reaction, voluntary emission reductions are associated with significant negative market reaction, and ISO 14001 certifications are associated with significant positive market reaction. The difference between the market reactions to the CEI and EAC categories is statistically insignificant. Overall, the market is selective in reacting to announcements of environmental performance with certain types of announcements even valued negatively.     

Determinants of a lasting purchase: The case of the tattoo patron

Evidence suggests that both cognitive and emotive factors elucidate consumer decision processes; yet, research exploring such factors jointly (i.e., a dual-process approach) as antecedents of high-involvement, lasting purchases is lacking. To address this paucity, we developed two studies, each with a unique dual-process model for explaining consumers’ intention to get a tattoo. Study 1 explores anticipated regret about getting a tattoo, emotional response before and now regarding a tattoo purchase, and self-expression via tattoo acquisition. Study 2 examines perceived trust in the tattoo artist, self-esteem, attitude toward art paintings, and age as determinants of intention to get a tattoo. Data collected for testing these models support dual-process theory in the tattoo context. Implications and future research directions are offered.     

Resource Configuration in Family Firms: Linking Resources, Strategic Planning and Technological Opportunities to Performance

abstract    We apply the resource-based view of the firm to the study of family firms by investigating how a family specific resource (reciprocal altruism) and a firm specific resource (innovative capacity) contribute to family firm performance. We then examine how the impact of these resources is moderated by strategic planning and technological opportunities. Our findings suggest that family firms can benefit from emphasizing the positive aspects of kinship and from developing innovative capacities. As such, we demonstrate that not only do firm specific resources contribute to family firm performance, but also that family relationships can be a source of competitive advantage for a family firm. In addition, we found a heightened importance of reciprocal altruism in environments rich in technological opportunities, and that strategic planning is more important for those family firms that lack innovative capacities.     

Sibling brands, multiple objectives, and response to entry: The case of the marion retail coffee market

A new brand entering a market often finds itself in competition with sibling brands (those owned by the same parent company). In a case study of a retail coffee market, the authors examine how these brand relationships might influence the sibling and competitor brands' responses to entry. Using an empirically validated brand-share attraction model, the authors compare the actual responses to entry with the optimal responses under different incumbent objectives. The authors find that the responses by sibling brand are more accommodating than those of unrelated brands whose responses are consistent with the preservation of preentry levels of sales. Thomas S. Gruca (Ph.D., University of Illinois) is a Lloyd J. and Thelma W. Palmer Research Fellow and an associate professor of marketing in the Tippie College of Business at the University of Iowa. His research on defensive marketing strategy has appeared in the International Journal of Research in Marketing, the Journal of Marketing, the Journal of Marketing Research, Marketing Management, and Marketing Science. His research on health care has appeared in Contemporary Accounting Research, Health Care Management Science, and Strategic Management Journal. He is currently working on electronic prediction markets and modeling hospital network formation. He is a member of the editorial board of Marketing Letters and a reviewer for a number of management science journals. D. Sudharshan (Ph.D., University of Pittsburgh) is a professor of business administration in the College of Commerce and Business Administration at the University of Illinois at Urbana-Champaign. His research interests lie in the areas of marketing strategy, new product and service development, and marketing technology management. He serves on the editorial boards of the Journal of Marketing and the Journal of the Academy of Marketing Science. His articles have appeared in various journals including Marketing Science, Management Science, the Journal of Marketing, the Journal of Marketing Research, the Strategic Management Journal, the European Journal of Operational Research, the Journal of Service Research, and the Journal of Market Focused Management. K. Ravi Kumar (Ph.D., Northwestern University) is a professor in the Department of Information and Operations Management, Marshall School of Business, at the University of Southern California. His current research interests include the embedding of information systems within global physical operation and the development of sustainable information technology industries in developing countries. He is the author or coauthor of articles appearing in Management Science, Marketing Science, the Journal of Economic Theory, Production and Operations Management, and the Journal of Operations Management. He serves on the advisory boards of Production and Operations Management and Technology and Operations Review.     

Analysis of interactions among the barriers of reverse logistics

The aim of this article is to analyze the interaction among the major barriers, which hinder or prevent the application of reverse logistics in automobile industries. A key task of top management is to diagnose those barriers of reverse logistics that could be crucial to the survival of the organization in the future. Existing models have focused on diagnosing these barriers independently. As a result, we lack a holistic view in understanding the barriers that hinder reverse logistics. This paper utilizes the Interpretive Structural Modeling (ISM) methodology to understand the mutual influences among the barriers so that those driving barriers, which can aggravate few more barriers and those independent barriers, which are most influenced by driving barriers are identified. By analyzing the barriers using this model, we may extract crucial barriers that hinder the reverse logistics activities. It can be observed that there are some barriers, which have both high driving power and dependency, thus needing more attention. An actual example of a small case automobile company provides some managerial insights into the methodology. Finally, the implications for practice and future research are discussed.     

Introduction: macroeconomic implications of capital flows in a global economy

The papers in this volume address issues raised by the wave of financial crises that hit emerging markets since the mid 1990s. Several of the papers examine the role that different credit market frictions may have played in triggering the crises, or in determining the effects of policies aimed at containing them. Other papers ask more general questions about the implications of international financial integration for business cycles, risk sharing, and sovereign lending.     

Reforming the Bookbuilding Process for IPOs

The controversy over IPOs has raised questions about whether retail investors are being unfairly denied access to shares in IPOs and whether the new Internet auction methods might provide a fairer and more efficient way to allocate shares. This article argues that much of the popular concern may be misdirected. By and large, bookbuilding is well designed to accomplish price discovery in a cost-effective way. And standard auctions, which have been all but abandoned in a number of countries, have generally proved disappointing for equity IPOs (although they have been successful for bond offerings). The authors propose a "hybrid" form of securities issuance that would retain the advantages of bookbuilding while incorporating a public offer "tranche" for retail investors and other measures designed to increase transparency.