Initial public offerings by mutual thrifts: The regulatory impact

This study analyzes the abnormal returns from a sample of 311 mutual thrift IPOs to investigate the presence of deliberate underpricing and to measure the impact of the changing regulatory environment. The large initial returns are maintained over the following year, indicating deliberate underpricing. Cross-sectional regressions show that the adjusted returns are positively related to the percentage of insiders participating in the IPO and to the size of the conversion. The adjusted returns significantly decrease after regulations are tightened, and there is a rapid rise in adjusted returns when uncertainty is introduced relating to the actual impact of these regulations. (JEL G280)     

Hedge fund attributes and volatility around equity offerings

The purpose of this paper is to explore the potential influence of hedge fund attributes on idiosyncratic volatility (IVOL) in excess stock returns for 705 firms undergoing seasoned equity offerings (SEOs). This investigation is important due to the pervasive concerns about the impact of hedge funds on volatility. We choose a time frame from 1999 to 2005 covering two periods that could impact IVOL differently: the internet-technology bubble period and the post-bubble period. Our time frame includes the breakpoint year of 2000 that marks a downward trend in IVOL from 2000 to 2008. We explore this IVOL drop for a sample of SEOs and find that the decline in IVOL for this sample can be primarily related to the rapid increase in the hedge fund industry size and to the increasing use of leverage by hedge funds. This trend is also related to the increasing use of a relative value (arbitrage) strategy and the decreasing use of an event-driven strategy. IVOL for our sample also appears to decrease with greater hedge fund performance except when hedge funds are riding the pre-SEO stock price run-up. The downward shift in IVOL for our SEO sample around their offering dates is better explained by hedge fund attributes than by non-hedge fund attributes. In conclusion, our findings suggest that the rapid increase in the hedge fund industry offer an explanation for the mysterious decline in IVOL that has been witnessed since 2000.     

Market undervaluation of risky convertible offerings: Evidence from the airline industry

We assess market valuation of airline convertible preferred stocks using a contingent claims valuation model that was extensively tested by Ramanlal et al. (Rev Quant Financ Account 10:303–319, 1998). Our sample consists of 4,096 daily price observations of 11 convertible preferred stocks issued by the U.S. airlines in 1980–1991. For each convertible we estimate daily model prices for 2 years after issuance and compare them with market prices by calculating pricing errors. While the entire sample’s mean pricing error is found to be negative 3.8%, the panel data analysis and the mean pricing errors of the sub-samples indicate that the undervaluation is much more severe in the first 6 months of trading. The results suggest that airlines leave about 10% on the table when they raise capital by issuing convertible securities.     

Technology transfer organizations: Services and business models

Knowledge and technology transfer organizations (KTTOs) are crucial nodes connecting suppliers and users of knowledge that support the endogenous potential of innovation in firms. Prior studies on the services provided to firms by KTTOs tend to have weak theoretical foundations, to rely on case study approaches, and to focus attention on one service or a few services provided by a single organization. This study extends and integrates elements from a conceptual knowledge value chain and business model frameworks. The value chain perspective allows integrating the services offered by KTTOs in the value chain of firms. As for the business model perspective, it allows developing hypotheses about how KTTOs create and deliver value for client firms. To test these hypotheses, we collected and analyzed a data set of 281 publicly supported KTTOs located in Canada. The empirical results show that different types of KTTOs tend to specialize in the provision of services at different stages of the value chain of firms, and to benefit from complementarity effects between service offerings. Our analysis also shows that different types of KTTOs devise different types of business models that are centered on services linked to different stages of the value chain. Overall, these results suggest that managers of KTTOs could improve their business models and increase value to client firms by increasing the degree of customization of solutions offered to clients which, in turn, would also increase revenues from clients, and hence reduce KTTOs′ vulnerability to reductions in government funding.     

Private debt, unused credit lines, and seasoned equity offerings

We study a sample of SEOs to examine the impact of private debt and unused credit lines on SEO underpricing and long-run stock and operating performance. We do not find significant effects of private debt financing on SEO underpricing and long-run stock underperformance. However, firms with more bank debt and unused lines of credit exhibit significantly better pre-issue operating performance. Changes in operating performance from the pre-issue year to the post-issue period are negatively related to the size of unused credit lines. Capital spending decreases with the size of unused credit lines in the year prior to SEOs, but increases following SEOs. Our overall evidence suggests that the post-issue operating performance we observed may be a result of overinvestment, which is enhanced by unused credit lines.     

Hierarchies and information-processing organizations

This paper analyzes organizational structures that minimize information processing costs for a specific organizational task. Organizations consist of agents of limited ability connected in a network. These agents collect and process information, and make decisions. Organizations implement strategies – mappings from environmental circumstances to decisions. The strategies are exogenously given from a class of “pie” problems to be defined in this paper. The notion of efficiency is lexicographic: the primary criterion is minimizing the number of agents, and the secondary criterion is minimizing the number of connections between the agents. In this modeling framework, efficient organizations are not hierarchical for a large number of problems. Hierarchies often fail to exploit fully the information processing capabilities of the agents because in a hierarchy, subordinates have a single superior. Received: 1 December 1995 / Accepted: 11 October 1998     

Optimal information transmission in organizations: search and congestion

We propose a stylized model of a problem-solving organization whose internal communication structure is given by a fixed network. Problems arrive randomly anywhere in this network and must find their way to their respective specialized solvers by relying on local information alone. The organization handles multiple problems simultaneously. For this reason, the process may be subject to congestion. We provide a characterization of the threshold of collapse of the network and of the stock of floating problems (or average delay) that prevails below that threshold. We build upon this characterization to address a design problem: the determination of what kind of network architecture optimizes performance for any given problem arrival rate. We conclude that, for low arrival rates, the optimal network is very polarized (i.e. star-like or centralized), whereas it is largely homogenous (or decentralized) for high arrival rates. These observations are in line with a common transformation experienced by information-intensive organizations as their work flow has risen in recent years.     

Applying lot-by-lot double sampling plan to reform Taiwan National Health Insurance auditing system

This paper seeks to design an elaborate and effective “sampling audit and payment process” for a single-payer system of national health insurance. Furthermore, contrive incentive mechanisms in the “sampling audit and payment process” to make the healthcare providers willing to apply for their medical claim payments straightforwardly. A framework of “medical claim payment auditing by double sampling plan (MCPAD)” procedure based on the lot-by-lot double sampling plan was proposed to curb the growth of medical expenses. The proposed procedure entertains several advantages, including: (1) it meets international standards of sampling plan; (2) it simplifies the auditing process; (3) it reduces sample size and auditing costs; and (4) it encourages healthcare providers using an honest medical claim payment through the incentive mechanisms. This study successfully reduces the sampling cost and effectively audits the claimed medical fees as well as encourages healthcare providers to straightforwardly apply for their medical claim payments. Practically, the proposed MCPAD procedure is also applied to healthcare provider. It is anticipated that the proposed procedure in other nations in the future.     

Managing change in South Africa: developing people and organizations

The interaction of Western and non-Western management practices is a growing issue in transitional and emerging economies through the world, not least within the multicultural context of South Africa. This is characterized in this article as an antithesis between instrumental and humanistic views of people in organizations, which is fundamental to the way change is being managed. In order to better understand how the management of people and change may be related to this antithesis, the results of an exploratory study, involving focus-group methods with thirty managers, and of a survey of some 200 employees in participating organizations are presented. Indicative results suggest that, despite best efforts from organizations which may represent best management and development practice, issues concerning the value attached to people in these organizations are still not being properly addressed. It may be only through understanding and reconciling this antithesis that change concerning the development of people, in South Africa as well as in other emerging economies, may be successfully achieved.     

The optimal timing of initial public offerings in the course of privatization: Theory and an illustrative application

Privatization has been studied primarily from the standpoint of the post-privatization performance of state-owned firms (SOEs) or of various ways of valuing and privatizing them, but little attention has been paid to the timing of privatization. In this paper we use real options analysis to consider a situation where the government has the option to delay a planned privatization in the expectation that exogenous events may make the firm more valuable to outside investors in the future. In addition to considering the theoretical aspects of the problem, we apply our model to Taiwan's privatization program to add to the understanding of the role of option value in an actual privatization program. Our results suggest that the (mis)timing of privatization represents significant losses for the government and for investors.     

Psychological and implied contracts in organizations

Two forms of unwritten contracts derive from relations between organizations and their members. Psychological contracts are individual beliefs in a reciprocal obligation between the individual and the organization. Implied contracts are mutual obligations characterizing interactions existing at the level of the relationship (e.g., dyadic, interunit). Employee/employer relations and changing conditions of employment give rise to issues not addressed in conventional transaction-oriented models of motivation and individual responses. The development, maintenance, and violation of psychological and implied contracts are described along with their organizational implications.Promise is most given when least is said. (George Chapman,Hero and Leander, 1598)     

Residual affective commitment to organizations: Concept,causes and consequences

Research on affective organizational commitment has largely been conceptually restricted by the temporal boundaries of organizational membership, while only few authors have addressed how individuals may commit to an organization before becoming members. Given that individual careers increasingly span across a greater number of organizations, this restriction limits our ability to capture how employees experience their workplaces throughout their careers. Addressing this gap, this article contributes to the literature on affective commitment by arguing that individuals may remain affectively committed to an organization after having left it. We extend the temporal structure of affective commitment beyond separation by introducing the concept of residual affective commitment, and present a model of how such commitment is formed. We elucidate the interplay between residual and current affective commitment, complementing research on organizational newcomers. Finally, we open up new avenues for research by discussing theoretical consequences of the introduction of residual commitment.