Incentive effects of stock purchase plans

Financial economists are interested in whether alternative compensation plans are adopted primarily for tax, incentive or signaling reasons. As most compensation plans have tax implications, examining for other effects is difficult. In this paper we examine the stock market reaction to employee stock purchase plans which are ‘non-tax advantageous’ and adopted for incentive/signaling reasons. The results suggest that (1) equity-based compensation schemes have a positive effect on shareholder wealth for reasons other than tax reduction, (2) a motive for adopting these plans is to align managerial and shareholder interests, and (3) equity ownership motivates key executives more than subordinate employees.     

The Impact of Fundamentals on IPO Valuation

We examine how initial public offering (IPO) valuation has changed over time by focusing on three time periods: 1986-1990, January 1997 to March 2000 (designated as the boom period), and April 2000 to December 2001 (designated as the crash period). Using a sample of 1,655 IPOs, we find that firms with more negative earnings have higher valuations than do firms with less negative earnings and firms with more positive earnings have higher valuations than firms with less positive earnings. Our results suggest that negative earnings are a proxy for growth opportunities for Internet firms and that such growth options are a significant component of IPO firm value.     

Corporate governance and firm performance

How is corporate governance measured? What is the relationship between corporate governance and performance? This paper sheds light on these questions while taking into account the endogeneity of the relationships among corporate governance, corporate performance, corporate capital structure, and corporate ownership structure. We make three additional contributions to the literature:First, we find that better governance as measured by the Gompers, Ishii, and Metrick [Gompers, P.A., Ishii, J.L., and Metrick, A., 2003, Corporate governance and equity prices, Quarterly Journal of Economics 118(1), 107–155.] and Bebchuk, Cohen and Ferrell [Bebchuk, L., Cohen, A., and Ferrell, A., 2004, What matters in corporate governance?, Working paper, Harvard Law School] indices, stock ownership of board members, and CEO-Chair separation is significantly positively correlated with better contemporaneous and subsequent operating performance.Second, contrary to claims in GIM and BCF, none of the governance measures are correlated with future stock market performance. In several instances inferences regarding the (stock market) performance and governance relationship do depend on whether or not one takes into account the endogenous nature of the relationship between governance and (stock market) performance.Third, given poor firm performance, the probability of disciplinary management turnover is positively correlated with stock ownership of board members, and board independence. However, better governed firms as measured by the GIM and BCF indices are less likely to experience disciplinary management turnover in spite of their poor performance.     

Do Trademark Infringement Lawsuits Affect Brand Value: A Stock Market Perspective

Many firms find that they can benefit from copying orotherwise misusing the trademarks of their competitors. Firmsthat have maintained a positive brand image are likely to fightany dilution or eventual loss of their trademark by using lawsuitsagainst offending firms. These lawsuits help to staunch any lossesto the brand and leave the potential for the benefits from thetrademark to flow back to the firm. These benefits will be temperedby legal costs, potential infringement by other firms in futureand the need to file lawsuits in response. In contrast, firmsthat have infringed on a trademark are likely to lose if theowner of the trademark challenges them in court. This study relatesthe stock returns of firms to the filing of lawsuits to defendtrademarks. We study the impact of both the filing of the lawsuitand the eventual verdict of the court on the stock market valueof defendant and plaintiff firms. The protection of a trademarkby a plaintiff using a lawsuit resulted in a negative returnto the shareholders of the defendant firm that infringed on thetrademark. The returns to the plaintiff firms were mixed andof marginal magnitude due to offsetting factors although largefirms experienced positive returns.     

International and Cultural Variations in Employee Assistance Programmes: Implications for Managerial Health and Effectiveness*

abstract While employee assistance programmes (EAPs) are becoming commonplace in large Western organizations, little is known regarding their prevalence in non‐Western cultures. In this paper, we provide a framework for understanding the prevalence of EAPs in four distinct cells of societal culture‐based variations. A cultural matrix for analysing the relative emphases of styles of coping, social support systems, rites and rituals, and the prevalence of EAPs is developed. The implications for managerial health and effectiveness in the global context are discussed.     

Relational Investing And Firm Performance

A substantial academic and popular literature argues that the performance of American corporations might improve if American corporations had long‐term outside investors (relational investors) who would hold large stakes, actively monitor management performance, and engage with management in setting corporate policy. Institutional investors can perhaps play this role. We provide the first large‐scale test of the hypothesis that relational investing can affect corporate performance. We consider ownership and performance data for more than 1,500 large U.S. companies over a thirteen‐year period (1983–1995). Our results provide a mixed answer to the question of whether relational investing affects corporate performance. Our data suggest that there was a period in the late 1980s—a period with a uniquely high level of hostile takeover activity—when the presence of a relational investor was associated with higher stock market returns. This cohort of relational investors may have been able to induce corporate restructuring, whose principal effect was to reduce growth rates while improving profitability. But this pattern was not found in the early 1980s or repeated in the early 1990s.     

The effect of pre-emptive right amendments on shareholder wealth

Pre-emptive rights allow existing shareholders to purchase a new offering of shares before the general public. This paper investigates the effect on shareholder wealth of removing pre-emptive rights from corporate charters. Two hypotheses are constrasted: (1) Shareholder wealth maximization suggests that management uses this extra degree of freedom to pick the least cost method for raising new equity; hence, the amendment increases shareholder wealth. (2) Management welfare maximization holds that management will use the passage of the amendment to maximize their own welfare, sometimes to the detriment of shareholders; hence, the amendment decreases shareholder wealth. The evidence indicates that the amendment decreases shareholder wealth.     

Satisfaction of Tourists with Public Transport: An Empirical Investigation in Dubai

Availability and suitability of public transport enhances the perceived attractiveness of a destination for tourists. Since few studies have investigated how public transport influenced the tourist experience, this study developed and empirically examined a parsimonious conceptual model of satisfaction for tourists using public transport services, with quality and value postulated to influence value, which in turn influenced satisfaction. Using data collected from a judgmental sample of 169 tourists using the Dubai metro, confirmatory factor analysis was used to develop unidimensional and valid measures, after which the study hypotheses were tested using structural equation modeling. Reputation (gamma = 0.99, p < 0.01) was found to influence satisfaction via value, while quality was unexpectedly not found to be a driver for value. Various theoretical and managerial implications are discussed.     

Using Eye Tracking to Assess the Impact of Advertising Appeals on Donor Behavior

This research examines print advertisements of nonprofit organizations (NPOs) using eye-tracking technology and a nonverbal, emotional scale to assess donor behavior. Attention to three areas of interest, including the text, face, and brand/logo, was visually tracked. Next, three eye-tracking metrics (Time to First Fixation, Fixation Count, and Total Visit Duration) and corresponding donor behavior were measured. The eye-tracking metrics were effective indicators of an advertisement’s propensity to stimulate donor behavior. The findings in this research show that NPO advertisements should encourage viewers to look at the face in the advertisement layout. The more times the subject went back and looked at the face, and the more total time spent looking at the face, the greater the likelihood they would recommend to others to donate. These characteristics are shown in this research to be those of negative emotional appeals.     

We are who we are: Incorporation of individual culture in customer satisfaction models

Despite the increasing recognition that cultural values have a major impact on consumer behavior, few studies have investigated the effect of individual culture on customer satisfaction in the global banking sector. This study designs a model of customer satisfaction that incorporates Uncertainty Avoidance (UA), and tests it among a sample of 227 Arab customers in the UAE banking sector through structural equation modeling using LISREL. Arab customers are reported to have a high UA, and it would thus be pertinent to determine how this cultural trait affects their consumer satisfaction. It was determined that perceived value and UA are direct antecedents of corporate reputation that in turn has a strong effect on satisfaction. Unexpectedly, service quality was not found to affect satisfaction. Various theoretical and managerial implications arising from the study findings are discussed, as well as potential avenues for further research in this important area.