Spin-offs and Sales of Assets: An Examination of Security Returns and Divestment Motivations

Event study research to date has generally used the cumulative average residuals technique and focused on stockholder announcement impacts while testing one or two hypotheses concerning divestment. There are two important reasons for departing from this tradition. First, recent evidence suggests that an examination of cross-sectional cumulative average residuals may result in detecting abnormal performance when none is present. Second, most of the hypotheses concerning divestment are consistent with positive returns to stockholders.

This research isolates the impact of divestment on security holders by examining firms that have a single major divestment and no other seemingly important news events. The impacts at the announcement period and the divestment period are examined for subsamples of firms according to managerial motivations for divestment. Results indicate that when the sample is categorised this way, divestiture impacts vary between categories.     

Horizontal mergers and divestment dynamics in a sunset industry

Industries with declining demand tend to be riddled with chronic excess capital due to the presence of a business‐stealing effect and fixed costs. This article highlights the potential of mergers to internalize this business‐stealing effect and thereby promote divestment. Using the case of mergers in the Japanese cement industry, it examines whether such merger‐induced divestment improves total welfare based on a dynamic model of divestment. The findings suggest that merged firms indeed tended to reduce capital more actively and that, as a result of these mergers, total welfare improved despite a reduction in the consumer surplus.     

Does familiarity with business segments affect CEOs' divestment decisions?

We examine the impact of familiarity with business segments on CEOs' divestment decisions. We find CEOs are less likely to divest assets from familiar than from non-familiar segments. We attribute this effect to CEOs' comparative information advantage with respect to familiar segments. Consistent with this information advantage, we document that the familiarity effect is particularly strong in R&D intensive industries. We further find the familiarity effect to be most pronounced for longer-tenured CEOs who have built up sufficient political power over the course of several years in office to enable implementation of their preferred divestment choices. We also document the value effects of divestments and show that familiarity affects returns on divestment announcements.     

Executive Remuneration and Corporate Divestment: Motivating Managers to Make Unpalatable Decisions

Abstract:  This study examines the impact of voluntary divestment on executive remuneration, using an unbalanced panel of 107 UK quoted companies over the period 1988 to 1993. It employs a dynamic compensation equation, with a vector of controls and alternative specifications of the divestment effect. The results show no general direct evidence of a remuneration process that rewards managers for downsizing their firms. Indeed the substantial pay-size elasticity implies the reverse. However, divestment does have a positive and significant effect in raising executive remuneration under a regime of strong corporate governance, defined in terms of the presence of a substantial blockholder.     

南通市外商投资企业撤资及涉税问题调查

我国近年来出现了部分外商投资企业撤资的现象。本文通过对江苏省南通市2007年以来外商投资企业撤资情况、原因及涉税问题的调查分析,提出加强对撤资企业的税收服务与管理的一些建议。     

Management control packages: a literature review and guidelines for public sector research

ABSTRACT

The effectiveness of a management control (MC) element, such as performance measurement, may depend on other MC elements, such as organizational values and training activities. This is why MC elements should be studied ‘as a package’, instead of as isolated elements. Although examining MC elements as a package has the potential to make significant contributions to ongoing debates, this approach is largely absent in the academic public sector management literature. This paper reviews the MC package literature, examines its implications for public sector research and practice, and aids future research by discussing research design choices and research directions.     

Dynamic market entry and the value of flexibility in transitional international joint ventures

The purpose of this study is to formalize the optimal 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 an MNE's investment decision gives further insights into the expansion, dissolvement, and optimal timing of international joint ventures (IJVs). 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 three-step expansion strategy explicitly into account. The evolutionary process of the value of the foreign direct investment can be interpreted as a compound complex chooser option. The results suggest that uncertainty, size of equity share and future investment/divestment opportunities play an important role when it comes to transit from export to the first phase of the foreign direct investment commitment. The paper underscores the importance of modeling the dynamics of market entry and helps to refine the application of real options in the alliance context by providing a closed-form solution in continuous time to value the overall strategic flexibility.     

Takeover Timing, Implementation Uncertainty, and Embedded Divestment Options

We design a compound real options model, which determines the timing of takeovers and characterizes the distribution of the associated surplus. We delineate a relation between the bargaining power of the acquiring firm and the takeover incentives. The takeover threshold is decreasing as a function of the expected primary takeover gain and the embedded divestment gain. Decreased implementation uncertainty stimulates takeover activity. This uncertainty concerns the delay until either primary takeover synergies or subsequent divestment gains are realized. We demonstrate how the relation between volatility and takeover timing depends on the functional form of the profit flow with implementation uncertainty.Financial support from the Foundation for the Promotion of the Actuarial Profession and the Finnish Insurance Society to Luis H. R. Alvarez is gratefully acknowledged. Both authors acknowledge the financial support from the Yrj? Jahnsson Foundation and the Research Unit of Economic Structures and Growth (RUESG) at the University of Helsinki. The authors are grateful to Josef Zechner and two anonymous referees for their constructive comments and suggested improvements on an earlier version of this study.     

Budgeting as a means for control and loose coupling

Budgeting has been traditionally viewed as one means for achieving control over activities performed at middle and lower levels in the organization through an essentially downward flow of information. This paper proposes that the use of budgeting, particularly in the nursing services area where centralized control by a hospital administration may not be attainable, is more complex than this traditional definition would suggest. In such a setting, budgets may well be used as a negotiating tool with which middle level managers advocate the needs of the subunit to upper-level organizational members. Such a use of budgets would emphasize an upward flow of information which is, in turn, consistent with the image the organization wishes to portray to its environment.     

外商直接投资对中国国际收支影响的研究

外商直接投资（FDI）可以从多方面对一国的国际收支产生影响,包括对资本和金融账户的直接影响和对经常账户的间接影响。本文结合中国具体情况,利用1982-2009年的相关历史数据,通过建立贡献率指标,分析外商直接投资对国际收支产生的综合影响。结果显示,近年来,由于外商直接投资持续、大量的流入,不仅直接对国际收支产生正面影响,而且带动了出口快速增长,积累了巨额贸易顺差,成为导致国际收支失衡的重要因素之一。同时,撤资、利润汇出等负面效应所带来的国际收支风险也应被密切关注,尤其是在经济环境恶化时期。     

The dynamism of pre-decision controls in the appraisal of strategic investments

In this study we examine the dynamism of pre-decision controls in the appraisal of strategic investments, an area largely overlooked by the literature, even though it is of the utmost importance to understand the mechanisms companies use to ensure their optimal capital investments. More specifically, we investigate how changes in companies’ economic, strategic, and organisational conditions relate to an increased emphasis on pre-decision controls such as policies, procedures, and routines. The empirical data is based on 108 interviews from among the 150 largest Finnish manufacturing companies. The paper contributes to the scarce capital budgeting literature by extending the discussion of the adaptations of pre-decision controls to external and internal environmental changes. We add to the literature by showing that changes in management may play a decisive role in control adaptations. Furthermore, we provide strong support to maintain that increased financial pressure can be related to the tightened use of controls.     

VALUATION OF EVENT‐CONTINGENT OPTIONS

I study a new class of investment options, event‐contingent options. These are options to invest and divest in projects that are dependent on other projects of the same firm or that are conditioned by projects of other firms in its value chain. I construct payoff functions and derive closed‐form solutions for the value of options to invest contingent on investment (OICI), options to invest contingent on divestment (OICD), options to divest contingent on divestment (ODCD), and options to divest contingent on investment (ODCI). I also derive analytical comparative statics for these option valuation equations and examine their implications on the firm's wealth. I offer examples of event‐contingent options in a global context.     

Extending corporate accountability: A survey and framework for analysis

This paper has three objectives: to review the state of the art with regard to the literature on corporate internal audit activities; to report on a research study of recent developments in the scope and organization of the internal audit function in major companies in U.S.A.; and to propose an analytical framework which may be used in future research to describe the scope, procedures and responsibilities of the corporate internal audit function. Although there appears to be some confusion in the extant literature regarding the definition and scope of certain internal audit efforts, this research provides new evidence that major U.S. companies are engaging in unprecedented experiments into the use of auditing as a tool for enforcing management and social accountability. This is a movement away from the traditional financial audit which is frequently assumed to fully circumscribe the internal audit function. The implications for implementing heightened standards of corporate accountability should be of interest to audit committees of boards of directors, corporate management, investors, consumers, and future researchers.     

Accruals: An overview

The paper provides a broad discussion of the topic "accruals". Though much of what is said is familiar from the literature on accruals, the paper tries to develop concepts and show how theses forge tight links across a variety of themes. The starting point of the analysis concerns the construct of an accrual.The case is made that it should rest solely on consecutive balance sheets and the splitting of assets/liabilities into(i) cash and approximate cash,assets/liabilities and(ii) all other kinds of assets/liabilities. Given this divide of assets/liabilities one can measure the components in the foundation equation: cash earnings + net accrual = comprehensive earnings. The paper then proceeds to discuss how the net accrual relates to growth in a firm's operating activities and the extent to which it can be informative or misleading.This topic in turn integrates with the issue of a firm's quality of earnings and the role of accounting conservatism. Among the remaining topics, the paper discusses how one conceptualizes diagnostics to assess whether or not a period's accrual is likely to be biased upwards or downwards. It gives rise to a consideration of how one constructs accruals that may be more informative than GAAP accruals and the role of value-relevance studies to assess the information content of accrual constructs. The paper ends with a list of suggestions how future research may be modified in light of the discussions in this paper.     

Single-equation,multiple-regression methodology: Is it an appropriate methodology for the estimation of the structure-performance relationship in banking?

Tests of the structure-performance paradigm of the industrial organization literature have been carried out almost exclusively using a single-equation, multiple-regression methodology. The purpose of this paper is to suggest that where the firms being considered are multiple product in nature and may pursue objectives in addition to maximizing the value of the firm, such a methodology may be inappropriate. The results presented in this paper suggest that the absence of a consistently strong, positive, and statistically significant relationship between market concentration and bank profitability may be traced in part to such an inappropriate methodology.     

Does tax avoidance increase or decrease when tax enforcement is stronger? Evidence using CSR heterogeneity perspective

Prior literature has reported mixed results on whether corporate social responsibility (CSR) activities are associated with more or less tax avoidance. These past results may be attributed to a failure to control for endogeneity between tax avoidance and CSR. We utilize an exogenous increase in tax enforcement to investigate how a heightened level of scrutiny by authorities affects tax avoidance by firms adopting CSR policies (CSR firms) compared to non-CSR firms. If stronger enforcement leads to greater tax compliance, we expect to observe a decline in tax avoidance measures in all firms. As expected, tax avoidance has decreased in non-CSR firms in response to this exogenous change, but surprisingly, in CSR firms it has increased. The results are supported by theories such as the licensing effect and organized hypocrisy. We contribute to the literature by using an exogenous shock to tax enforcement to shed light on whether CSR firms act in a socially responsible manner in their tax reporting. Moreover, we provide new empirical evidence relevant to the theory of organized hypocrisy, whereby there are notable inconsistencies between the actions that corporations take to bolster their public image and self-serving practices.     

企业创新效率研究——来自股权质押的影响

本文结合我国实施创新驱动发展战略及股权质押频繁的现实背景,利用2006—2015年A股上市公司的数据,探讨控股股东的股权质押行为是否以及如何对企业的创新效率产生影响。研究表明,控股股东的股权质押行为会显著降低企业的创新效率。进一步地研究发现:(1)当第二类代理问题越严重,或质押风险越大时,控股股东股权质押行为抑制企业创新效率的作用越明显,表明控股股东股权质押伴随的掏空效应及短视效应,是导致二者负向关系的重要原因;(2)掏空效应和短视效应在影响控股股东股权质押与企业创新效率的关系上存在显著的替代效应;(3)研发投入强度下降时,控股股东股权质押对企业创新效率产生的负面效应更强。本文的研究不仅丰富了企业创新效率影响因素及控股股东股权质押经济后果的相关文献,对于规范控股股东股权质押行为,提高企业创新能力,实现创新驱动发展战略,也具有重要的启示意义。     

The price discovery of day trading activities in futures market

Access to information is necessary for market transparency. However, contrary to trading volume and open interest, information related to day trading activities is rarely available. By incorporating unexplored day trading volume in the literature, this paper demonstrates that both the expected open interest and expected day trading volume are consistently and positively correlated with returns, but that one-lagged day trading volume is negatively correlated with futures returns. Meanwhile, both expected and unexpected day trading volume are negatively correlated with volatility, suggesting that arbitrage activities related to unexpected day trading volume may accelerate the movement of futures prices to a new equilibrium. Moreover, open interest provides liquidity but increases volatility. Finally, we strongly suggest that day trading transaction information be released by futures exchanges to achieve greater transparency.     

THE THREAT OF ETHICAL ACCOUNTANTS: AN APPLICATION OF FOUCAULT'S CONCEPT OF ETHICS TO ACCOUNTING EDUCATION AND SOME THOUGHTS ON ETHICALLY EDUCATING FOR THE OTHER

There are an increasing number of papers within the accounting literature which are concerned with the relationship between accounting education and the ethics of accountants (see, e.g. Gray, 1994). This paper attempts to contribute to this literature. It draws on the work of Michel Foucault to argue that ethical accountants may pose just as great a threat to society as unethical ones. The paper initially explains Foucault's work on power/knowledge and delineates his novel perspective on how power may operate through an individuals sense of moral identity. It is argued that the way accountancy is taught may predispose accountants to discipline themselves in such a way that they behave in a manner which serves the interests of capitalism and subjugates opposition to it. However, the paper also draws on Foucault's notion of resistance to explain how accounting education might be able to produce students who could represent a threat to this hegemony.