The effects of corporate antitakeover provisions on long-term investment: empirical evidence

This paper's empirical results indicate that the average effect of antitakeover provisions on subsequent long‒term investment is negative. The interpretation of these results depends on whether one thinks that there was too much, too little, or just the right amount of long‒term investment prior to the antitakeover provision adoption. We use agency theory to devise more refined empirical tests of the effects of antitakeover provision adoption by managers in firms with different incentive and monitoring structures. Governance variables (e.g. percentage of outsiders on corporate boards, and separate CEO/chairperson positions) have an insignificant impact on subsequent long‒term investment behavior. However, consistent with agency theory predictions, managers in firms with better economic incentives (higher insider ownership) tend to cut subsequent long‒term investment less than managers in firms with less incentive alignment. Furthermore, managers in firms with greater external monitoring (due to higher institutional ownership) also tend to cut subsequent long‒term investment less than managers in firms with less external monitoring. Thus, the decrease in subsequent long‒term investment is significantly less for firms where the managers have greater incentives to act in shareholders' interests. Finally, there are interesting effects of the control variables. First, high book equity/market equity firms cut total long‒term investment more. Second, firms that were takeover targets or rumored to be takeover targets cut long‒term investment more. These results suggest that inefficient firms cut long‒term investment more when an antitakeover provision is adopted. © 1997 John Wiley & Sons, Ltd.     

The effect on stockholder wealth of product recalls and government action: The case of Toyota's accelerator pedal recall

We analyze the effect of Toyota's faulty accelerator pedal on stockholder wealth. Using the event study methodology, we show that a major recall in January of 2010 is associated with a 19% fall in the company's cumulative abnormal returns. Continued concerns that Toyota was unable to identify and adequately fix the problem prompted the National Highway Traffic Safety Administration to conduct its own investigation in March, 2010. The results of this government investigation exonerated the company and Toyota's cumulative abnormal returns rose by almost 9%. The Toyota case provides an opportunity to study a product recall with both company error and a government action that addressed concerns about the safety of the product.     

The impact of reshoring decisions on shareholder wealth

Interest in reshoring, defined as the return of manufacturing and service operations from previously offshored locations to the U.S., has gained momentum recently. Yet, there is no academic evidence on the shareholder value implications of reshoring decisions. This paper analyzes the shareholder wealth effects of 37 reshoring decisions announced by U.S. firms during 2006–2015. Our results indicate that reshoring announcements result in positive abnormal stock returns. Mean (median) abnormal stock returns on reshoring announcements are 0.45% (0.29%), corresponding with a mean (median) market value change of $322.57 million ($31.60 million). Our findings imply that the benefits associated with the reshoring tend to outweigh the costs. This finding is relevant for firms faced with the decision of whether to move business activities from offshore to domestic locations. It is also of interest to policy makers who may seek to further stimulate the reshoring phenomenon.     

The effect of non-convertible preferred stock retirement on shareholder wealth

In this paper the authors examine the common stock price behavior of firms that call their non-convertible preferred stock. The findings for the entire sample of preferred stock calls are consistent with the Modigliani and Miller (MM) leverage hypothesis that preferred stock financing adds no value to the firm. However, for those firms whose preferred stock was completely eliminated from the capital structure, a significant, positive announcement effect is observed. This finding is consistent with an information signaling effect related to the earnings prospects and tax status of the calling firms and also is suggestive of a burdensome covenant effect. No evidence is found to support the free cash flow theory of common stock price reactions to preferred stock calls.     

The measurement and structure of household wealth

This paper deals with methodological issues that arise in measuring household wealth. Two prominent American household surveys—the PSID and SCF—rely on different methodological approaches to the measurement of household wealth. In particular, SCF oversamples high-income households and has a far more extensive set of questions. In the top one percent of the wealth distribution, better measures of wealth are related to over-sampling of very wealthy households and the number of questions that are asked. However, one can characterize total household wealth holdings for the overwhelming majority of households with a relatively moderate number of questions. When successive waves of wealth modules are used to compute savings, the verdict on quality is more cautious, in part due to the inherently larger role measurement error plays in any first difference formulation.     

The wealth effects of unethical business behavior

This study examines the shareholder wealth effects of specific unethical conduct involving bribery, illegal payments, employee discrimination, environmental pollution, and insider trading based on announcements in theWall Street Journal. It is hypothesized that the high costs of such reported acts would result in a negative shareholder wealth effect because of increases in monitoring costs and risks to stakeholders of the firm. The results show that the significantly negative abnormal returns were not short-term, but were persistent and cumulative for approximately one month following the announcement of unethical business conduct. Therefore, contrary to some earlier studies, unethical business behavior, as defined in this study, is not compatible with the goal of shareholder wealth maximization.     

The influence of lock-up provisions on IPO initial returns: Evidence from an emerging market

A lock-up agreement ensures that major shareholders retain significant economic interest in the companies following the IPOs. Rationally, these insiders will not adhere to the lock-up agreement unless the benefits of doing so can more than offset the costs. Therefore, in an environment characterized by high information asymmetry, a lock-up agreement can serve as an effective mechanism to signal the risk or quality of firms. This article examines whether the lock-up ratio and lock-up period affect the initial returns, using a sample of 384 IPOs listed on Bursa Malaysia between 2000 and 2012. The results of the cross-sectional multiple regression show that the lock-up period is significantly positive in explaining IPO initial returns, but the lock-up ratio is not. The findings provide new insights for testing the signaling content of lock-up provisions, particularly in a setting characterized by high information asymmetry.     

Sovereign wealth funds,productivity and people: The impact of Norwegian Government Pension Fund‐Global investments in the United Kingdom

Sovereign wealth funds have an increasing presence in the global financial ecosystem, principally through their investments in equities, which, in turn, may influence HRM. This study examines the influence of the world's largest sovereign wealth fund, the Norwegian Government Pension Fund‐Global (NGPF‐G), on employment in its U.K. investee firms. We find that firms with NGPF‐G investment are significantly less likely to reduce their demand for labour, more specifically in the immediate aftermath of the 2008 financial crisis. When a drop in the demand for labour does occur, it is less extreme when compared to similar organisations without a NGPF‐G shareholding, and this is evident even in the case of relatively small NGPF‐G investments. These findings are in line with the fund's objective of promoting corporate sustainability and Norwegian values. We draw out the key implications of our findings for HR practice.     

The (Un-) importance of Chapter 7 wealth exemption levels

This paper examines the effects of the Chapter 7 wealth exemption level on welfare, bankruptcy filings, debt, and on asset holdings. I build a heterogeneous agent life cycle model which features uninsurable income and expense shocks. Moreover, households can borrow and save simultaneously. When a borrower defaults on her debt by filing for Chapter 7 bankruptcy, she can keep her assets up to the wealth exemption level. Wealth exemption levels are important for two reasons. First, they explain the extensive and intensive margin of the credit card debt puzzle. Around thirty percent of borrowers, both in the model and in the data, who borrow at high interest rates simultaneously save at low interest rates. However, these borrowers borrow and save only relatively small amounts, a few thousand U.S. Dollars. Second, ignoring the exemption level biases results because it overstates the costs of defaulting. The welfare gains from Chapter 7 compared to the European system, where debt is not discharged, are twice as high when exemption levels are positive compared to when they are ignored. At the same time, wealth exemption levels are unimportant in the sense that they have an impact only at low exemption levels. The effects of increases in the exemption level fade out very quickly. There is no strong positive relationship between exemption levels, which vary across U.S. states, and default rates in the model. This is in contrast to the previous literature, but consistent with the data. The reason is that those borrowers who might default do not own much wealth. Therefore, only very few households are affected by increases in the exemption level.     

The effect of housing and stock market wealth on consumption in emerging and developed countries

This study examines the long- and short-run relationship between private consumption, housing wealth, stock market wealth and income. In order to asses this relationship empirically, we use pooled mean group estimators of dynamic heterogeneous panel data on a sample of 30 developed and emerging economies. The sample countries are segmented into three separate panels: a developed bank-based panel, a developed market-based panel, and an emerging bank-based panel. Empirical estimates support the existence of long- and short-run stock market wealth effects in both groups of developed countries, with the effect being particularly strong in the developed market-based countries. A moderate long-run housing wealth effect is confirmed only for the developed bank-based countries, while a very strong short-run housing wealth effect is present in the developed market-based countries. As far as the emerging countries are concerned, the evidence is somewhat inconclusive, but it does seem to suggest that both wealth effects are effective in the long run, with housing wealth being more dominant.     

The differential impact of product complexity,inventory level,and configuration capacity on unit and order fill rate performance

This paper examines the simultaneous impact of configuration capacity, inventory level, and complexity on service performance as measured by unit and order fill rates in a configure-to-order environment. Demand skew is treated as a control variable. A simulation model based on data from a leading electronics manufacturer is used to test the hypotheses and identify the impact. Results suggest that there are differential direct and interactive effects of examined variables on unit and order fill rates.     

The influence of socioemotional wealth in the entrepreneurial orientation of family businesses

This study analyses the effect of socioemotional wealth on the entrepreneurial orientation of family businesses. Entrepreneurship, measured through entrepreneurial orientation, is a key factor for the survival of family businesses. Second-generation structural equation method (PLS-SEM) was used to analyse the results, specifically, the SmartPLS 3.2.7 software applied to data on106 Spanish family businesses. The main contribution of this study is to show that family businesses provide an adequate framework for analysing entrepreneurship from an entrepreneurial orientation. Second, the FIBER measurement model for socioemotional wealth allows capturing the special behaviour of family businesses. Finally, with this study we ascertain that socioemotional wealth positively influences entrepreneurial orientation, thus explaining 32.6% of its variance.

     

The effect of capital wealth on optimal diversification: Evidence from the Survey of Consumer Finances

It is well known that the wealthier the household, the larger tends to be the proportion of its total capital portfolio allocated to publicly traded stock, and the larger tends to be the number of individual stock issues included in its portfolio. Using the “homogeneous securities” case of a mean-variance model originally proposed by Michael Brennan, explicit functional forms are obtained for both the optimal proportion of the portfolio allocated to stocks and the optimal number of individual stock issues in the portfolio. An empirical evaluation of these theoretical results, using a dataset derived from the 2004 Survey of Consumer Finances, lends substantial support to the model.     

The impact of obesity on employment

Using data from two rounds of the Health Survey for England I investigate the impact of obesity on employment. I use three approaches: a univariate probit model; propensity score matching; and IV regression using a recursive bivariate probit model. Conditional on a comprehensive set of covariates, the findings show that obesity has a statistically significant and negative effect on employment in both males and females. In males the endogeneity of obesity does not significantly affect the estimates, and the magnitude of effect is similar across the three methods. In females, failure to account for endogeneity leads to underestimation of the negative impact of obesity on employment.     

A study on the wealth effects of irish takeovers and mergers

This paper presents the findings of an empirical study on the share-price effects of takeovers and mergers on the Dublin Stock Exchange. The population under study consists of all acquisitions during the period 1965–83, and it is limited to those instances in which both partners were quoted and traded on the exchange. The Market Model has been adapted to take account of market inefficiencies. Any findings are evaluated in the light of other reported research.     

The impact of vocational education on productivity

This study looks at the impact that vocational education has had on output via the production function in the United States over the period 1947–1970. The results suggest that each one percent increase in the number of students enrolled in vocational education programs eventually leads to a 0.31% increase in output.     

The Internet's impact on trademark applications

This article assesses empirically the impact of Internet access on the number of trademark applications submitted by countries' residents. The analysis suggests that promotion of access to the Internet influences positively the submission of trademark applications by residents. Greater access to the Internet exerts a stronger positive effect on trademark submissions in developed countries than in developing ones. This positive effect is enhanced when countries further liberalise their trade regimes.     

The impact of mood on personality measures

This article reports an experiment conducted to estimate whether and how subjects' mood states would influence their scores on three personality measurement scales. The three scales were Larsen's (1984) Affect Intensity Measure, Scheier & Carver's (1985) Life Orientation Test, and Leary et al.'s (1986) Objectivism Scale (the third scale was included only for control purposes). Four experimental groups were exposed to a very negative, mildly negative, neutral or positive mood-inducing film. Significant differences in scores between groups were found for the first two scales. This indicates that the scales are unstable measurement instruments in the presence of mood variations, and the appropriateness of employing these measurement scales in mood studies can thus be questioned.     

The impact of narcoterrorism on HRM systems

This paper presents a study on the emergence of human resource management (HRM) systems in a narcoterrorism context based on a mixed-method approach. We conducted 40 interviews at 24 firms in Mexico to explore emerging HRM systems in narcoterrorism environments. The interviews were complemented with a quantitative content analysis of 204 news stories to explore the direct and indirect impacts of narcoterrorism on firms. Our analysis of firms’ responses with respect to HRM systems, which is supported by our quantitative analysis on the impacts of narcoterrorism, indicates that trust appears to shape HRM systems. We identified an adaptation strategy to design HRM systems based on a combination of strict employee’s screening and control an emphasis on humanistic practices such as soft-skills training and development, and a flexible work schedule, which appears to facilitate the development of trust in narcoterrorism environments. Identifying the similarities of objects and issues in the narcoterrorism context can help develop an understanding of this local phenomenon, with implications for the HRM and terrorism literatures on a global scale. Our findings highlight the importance of reinforcing values such as trust, openness, involvement and participation to develop a strong HRM system to adapt to narcoterrorism environments.