Economic shock and share repurchases

Using the most recent financial crisis as a natural experiment, we examine firm valuation, capital structure adjustment, and takeover deterrence as motives for share repurchases. We find that both overvalued firms and low levered firms are more likely to announce share repurchase programs and buy back more shares following the repurchase announcements. Potential target firms are more likely to announce larger share repurchase programs, but there is no significantly positive relation between the takeover probability and the completion rate. We also find that the decision to announce share repurchase and the decision to actually buy back shares following the repurchase announcement are separate to some extent.     

The effectiveness of price-stabilizing share buybacks: Evidence from listed firms in Vietnam

The majority of share buybacks in Vietnam involve the sole stated purpose of price stabilization. Using a sample of repurchases announced in 2008–2016 and control firms based on propensity score matching, we find the Vietnamese repurchases to be effective in stabilizing prices and enhancing liquidity. Utilizing the special disclosure features in Vietnam that allow clearly-defined sub-windows of pre-trading, trading, and post-trading, we further examine the different mechanisms of market reactions and actual firm buyback transactions in the buyback process. We document significantly higher abnormal returns over the pre-trading window driven by market reactions, and improved liquidity and reduced volatility over the firm’s actual transaction window for the buyback firms. We also report a significant moderating effect of target shares announced and actual shares repurchased depending on the sub-window under examination. We do not find any evidence of effectiveness in the post-trading window or over a longer-term beyond the buyback period.     

Venture capitalist participation and the post-issue operating performance of IPO firms

Previous studies have identified the value-added potential of venture capitalist monitoring in the initial public offering (IPO) market. We test this proposition by comparing the post-issue operating performance of venture capitalist-backed IPOs with a matched sample of non-venture capitalist-backed IPOs. We find that venture capitalist-backed IPO firms exhibit relatively superior post-issue operating performance compared to non-venture capital-backed IPO firms. Further, the market appears to recognize the value of monitoring by venture capitalists as reflected in the higher valuations at the time of the IPO. Finally, we find that proxies for the quality of venture capitalist monitoring are positively related to post-issue operating performance.     

A model for IPO pricing and contract choice decision

This paper attempts to reconcile the average underpricing phenomenon with the expected wealth maximizing behaviors of market participants. Under the usual informational asymmetry, the optimal offer price for best efforts IPOs is derived as a function of the uncertainty about market’s valuation, the expected return on proposed projects and the size of offerings relative to the firm’s market value. According to these firm-specific characteristics, best efforts IPOs can be underpriced, fairly priced, or overpriced. Employing the investment banker as an outside information producer, the basic pricing model is extended to provide empirical implication for underwriting contract choice decision as well as for the pricing. Consistent with the existing empirical evidences, the model predicts that the issuers with greater uncertainty about market’s valuation choose best efforts contract over firm commitment contract and that the dispersion of initial returns would be greater for best efforts IPOs than for firm commitment IPOs.     

Mixed oligopoly, foreign firms, and location choice

We investigate a mixed market in which a state-owned, welfare-maximizing public firm competes against n domestic private firms and m foreign private firms which are all profit-maximizing. A circular city model with quantity-setting competition is employed. We find that the equilibrium location pattern depends on m. All private firms agglomerate in the unique equilibrium if m is zero or one. Two foreign firms induce differentiation between domestic and foreign private firms. More than two foreign firms yield differentiation among the foreign firms. Regardless of n and m, agglomeration of all domestic private firms appears in equilibrium. We provide several conditions in which eliminating the public firm from the market enhances social welfare. We extend the basic model and investigate three issues concerning multiple public firms, inefficiency of the public firm, and entries by private firms. We obtain some additional implications of welfare and equilibrium locations.     

Changes and continued stability in Japanese HRM systems: choice in the share economy

There is a growing acknowledgement by scholars both within and outside Japan that traditional patterns of human resource management are now under structural pressures to change. The author, from a labour economics perspective, examines the dimensional shifts that are now occurring in the Japanese labour market, both empirically and in the context of Weitzman's model of the share economy. She concludes that, in HRM terms, the current situation exhibits a combination of responses to change that are characterized by both innovative and traditional practices.     

Interaction between central planners and firms: The uncertainty of target adjustment

Conclusions The interaction between planners and firms in a centrally planned economy has already been treated by a number of authors. They have generally focused upon the firm's performance in the face of various reward structures and have, with the exception of Gindin (1970) and Snowberger (1977), not dealt explicitly with the feed-back effect this performance has on the planners' adjustment of the reward structure for the future. This paper has extended the previous analysis of the feedback mechanism into the case where a firm knows that the planners have the power to make such adjustments but does not know precisely what form they will take. We have developed models which reflect several different ways in which a firm might respond to this uncertainty. Furthermore, we have introduced an adjustment scheme which considers the performance of all firms in the industry when setting a target for any one of them, in addition to treating the ordinary assumption that a firm's future target depends only upon its own present underor overfulfillment.8060 Niwot Road, # 19, Longmont, Colorado 80501, USA.     

The relationship between private investors and small firms: an agency theory approach

Many small firms in Sweden are characterized by a lack of equity capital. For several years measures to increase the equity capital have been discussed. In this discussion the private investors' market has received virtually no attention. This study presents some preliminary results of the private investors in Sweden.

The research in small firms financing is characterized by a lack of theoretical framework. One basic assumption in the study is that agency theory can provide an essential framework to explain the interaction between the private investor and entrepreneur. Twenty-five hypotheses generated from agency theory are formulated and tested on 62 small unlisted firms in Sweden. Multiple regression analysis is used for the causal analyses.

The empirical results in the study show inter alia that the geographic distance and the private investor's knowledge about the portfolio firm's transformation process seem to be the most influential factors for determining the private investor's involvement in the portfolio firms. It is also interesting to notice that none of the variables, frequency of contacts and the private investor's operational work in the portfolio firm affect the performance of the firm. Contrary to conventional wisdom, private investors do not add value to their portfolio firms through their interaction with the entrepreneurs.

The theoretical conclusion is that agency theory does not provide any satisfactory framework to explain the private investor - entrepreneur relationship. Some of the basic assumptions in agency theory seem to be invalid. A model for the relationship between private investors and entrepreneurs is developed in which four interaction strategies are identified. The model gives implications on two levels: the portfolio level and the individual case level.     

The relationship between discretionary slack and growth in small firms

International Entrepreneurship and Management Journal - Discretionary slack, along with entrepreneurial orientation (EO), are vital to the growth and long-term survival of small firms. This...     

Growth and fluctuations: The role of public dividends and public spending

In this paper, we consider a discrete-time version of the endogenous growth model developed by Barro [Barro, R.J., 1990. Government spending in a simple model of endogenous growth. Journal of Political Economy 98, 103–125], but augmented in order to envisage a public participation in the production of private goods. Public dividends are invested in order to provide a public good; in turn, the public good plays a role of indispensable production externality and, eventually, of growth engine.For what concerns the production of private goods, we find that an optimal policy is always based on a positive participation of the government as shareholder; also, when growth is slow, a public intervention or large substitution effects stabilize the economy.A right mix of short-run services and long-run infrastructures is suggested in slow economies to rule out expectation-driven fluctuations. Infrastructures are mainly recommended in presence of moderate income effects, while services are recommended in presence of strong income effects.     

On the financial characteristics of firms that initiated new dividends during a period of economic recession and financial market turmoil

The initiation of new dividends and increases in dividend payout ratios occur infrequently because once initiated it would be expected by most investors that the new dividends will be maintained. Dividend announcements are said to have informational content concerning the value of the firm, and financial signaling theory would lead investors to conclude that the initiation of new dividends is an indication that the firm expects increased cash flows in the future. Thus, unless the initiation is identified beforehand as a special dividend resulting from unanticipated cash inflows, it is difficult to reverse the action without having an adverse effect on the value of the firm. In periods of economic recession and financial turmoil most firms conserve cash and the initiation of new dividends or increases in the dividend payout ratio in such periods are extraordinary and noteworthy. The purpose of this study is to provide a financial analysis of those firms described by Value Line as having initiated or increased the dividend payout ratio in the most recent period of economic recession and financial market turmoil. Specifically, the analysis will test for significant differences in the financial profiles of those firms that initiated new dividends in such a period, and companies selected at random but from the same industries. A unique financial profile is established for the dividend initiating firms, and it is suggested that the profile may be used to identify firms that will initiate new dividends in future periods of economic downturn. As in previous studies of this nature Multiple Discriminant Analysis is used.     

The links between active cooperation and eco-innovation orientation of firms: A multi-analysis study

The environmental orientation of companies is key for firms to gain a competitive advantage against peers. However, the high level of novelty and uncertainty involved with eco-innovations requires additional knowledge and capabilities that go beyond the firm and that can be achieved through cooperation. Thus, it is crucial to analyse how cooperation affects the elements that drive eco-innovation. This study tests the impact of cooperation on the environmental orientation of companies while innovating using structural equation modelling with partial least squares and multigroup analysis and a fuzzy-set qualitative comparative analysis for a sample of Spanish companies. Results suggest that companies that do not cooperate are less eco-innovation-oriented and show lower dependence on external information sources, although their impact on the orientation to product and process innovation is higher. This work leads to some theoretical conclusions and implications for researchers and practitioners.     

Market value,market share,and mergers: Evidence from a panel of U.S. firms

Improving shareholder value has often been cited as a merger determinant. Because mergers create larger firms and less competition, they may increase shareholder value through higher market share and stock‐market value. We investigate merger impacts on firms' stock‐market value and market share. We construct panel data from 4 different data sources on public merging and non‐merging U.S. manufacturing firms for 1980–2003. Instrumental variables and factors such as R&D, patents, and citations control for endogeneity. We find that mergers are positively correlated with stock‐market value and market share.     

HRM configurations in Korean venture firms: resource availability,institutional force and strategic choice perspectives

To examine various human resource management (HRM) configurations and their explanatory variables, we generated several hypotheses and tested them with data collected from Korean venture firms. For these purposes, we first suggested two ideal types of HRM configuration: a control-based human resource system (CBHRS) and a high-performing human resource system (HPHRS). Depending on contextual variables, firms are expected to make a choice between the two or among their variants. To generate hypotheses, we employed three theoretical perspectives: resource availability, institutional force, and strategic choice. To test the hypotheses, we collected data from 464 venture firms in Korea. From the data, we derived five different HRM configurations: Cost-minimizing type; Paternalistic type; Inducement type; Investment type; and Transitional type. Both the Cost-minimizing type and the Paternalistic type are classified as part of the CBHRS, the Inducement type and the Investment type are considered to be part of the HPHRS, and the Transitional type is taken to be mixed. We found that all three theoretical perspectives partly explained the selection of HRM configurations. Some related issues are raised and discussed in the final section.     

The choice between greenfield investment and cross-border acquisition: A real option approach

The purpose of this study is to formalize the choice of market entry strategy for an individual multinational enterprise (MNE) from a dynamic perspective. It is argued that incorporating a suitable treatment of irreversibility, uncertainty and flexibility related to a MNEs investment decision gives further insights to the choice of cross-border acquisitions to greenfield investment as the preferred entry mode. In most cases, the initial entry strategy serves as a platform allowing the firm to make subsequent investments to exploit host-country advantages and capabilities. We allow for this by taking a two-step expansion strategy explicitly into account. The evolutionary process of the value of the foreign direct investment includes two stochastic elements as well as the timing that triggers the transition from export to foreign direct investment. The results suggest that uncertainty and future investment opportunities play an important role when it comes to transit from export to the first phase of the foreign direct investment commitment as well as have an impact on the choice of entry strategy.     

Fostering product innovation: Differences between new ventures and established firms

This study combines insights from the entrepreneurship, competency-based view and innovation policy literature to analyze the relationships among different types of public incentives designed to foster innovation and product innovation at both new ventures and incumbent firms. To test our hypotheses, we ran a system of regression models on a cross-national sample comprised of 5238 firms from 29 European countries and found a different pattern for new ventures and incumbents. Our results suggest that support for attendance or participation in trade fairs and networking with other companies are the most effective methods of promoting product innovation for new ventures. However, for incumbent firms, we found that the most effective policies consisted of tax reduction for R&D expenditures and subsidies for acquiring buildings or other infrastructure(s) for innovation activities. This distinction prompts interesting insights related to theory development in research on entrepreneurship and innovation policy.     

中国．Inc：2008全球最大“IPO”

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Links between entrepreneurial culture,innovation, and performance: The moderating role of family firms

The relationships between corporate entrepreneurship, innovation and performance have been previously addressed by the literature. However, they have yielded mixed and often inconclusive results. The purpose of this paper is hence to empirically test a model that links entrepreneurial culture, innovation outcomes and business performance. In this model, the family nature of firms is subsequently included as a moderator variable. The empirical investigation is based on a sample of 145 family firms from the automotive components manufacturing sector in Spain. This study uses Partial Least Squares (PLS) path-modeling to test our research model and hypotheses. Our results reveal the increasing importance of fostering an entrepreneurial culture within family firms in order to yield innovation processes and performance.     

The relationship between entrepreneurial orientation and speed to the market: The case of incubator firms in Norway

Incubators and incubator firms work to promote the development and commercialization of technology and products. This study shows that entrepreneurial orientation can help achieve this aim. Using survey data from incubator firms, we show that entrepreneurial orientation has a statistically significant positive effect on ability to bring technology and products quickly to the market. This finding is important for managers of incubator firms and managers of incubators alike as they have a common interest in speed to the market. An implication of our study is that managers of incubators should try to enhance the entrepreneurial orientation of the incubator firms.     

Dividend announcements under varying market conditions: The case of specially designated dividends

In this study the author examines differences in the behavior of stock returns surrounding the announcements of the specially designated dividends (SDDs) between bull markets and bear markets. Results show that SDDs declared during bull markets have a significantly higher positive effect on stock prices than those declared during bear markets. This evidence, new to literature, indicates that SDDs declared during bull markets are viewed by the market as more favorable than those declared during bear markets.