Geography and capital structure

We investigate the impact of geographic location on firms’ capital structure decisions. We find strong evidence that location of a firm influences its capital structure. In particular, we find that centrally located firms have lower leverage ratios than do remotely located ones. Moreover, consistent with the hypothesis that those remotely located firms face more severe adverse selection problems, the effect of geographic location on capital structure is more pronounced when information asymmetry is higher. We further examine alternative explanations of the negative relation between firm geographic proximity and capital structure and show that the financial constraint effect and industry clustering effect do not explain our results. Copyright © 2016 ASAC. Published by John Wiley & Sons, Ltd.     

Geographic Distance as a Moderator of Curvilinear Relationship Between Cultural Distance and Shared Ownership

This study tests geographic distance as a moderator of the curvilinear relationship between cultural distance and a firm's preference for shared ownership entry mode. The sample consisted of US foreign direct investments in 60 countries spread over 18 years. Results showed that an inverted U‐shaped relationship between cultural distance and preference for shared ownership is stronger for firms separated by high geographic distance. While full equity ownership is most likely when both cultural and geographic distances are either low or high, shared ownership is most likely when the cultural distance is high (low) but the geographic distance is low (high). Copyright © 2012 ASAC. Published by John Wiley & Sons, Ltd.     

The mediating role of employee strategic alignment in the relationship between rational strategic planning and firm performance: A European study

Previous empirical studies examining the direct relationship between rational strategic planning and firm performance have produced contradictory results. Therefore, in order to better understand the nature of this relationship, it is important to take into consideration the role of some mediating and moderating variables. We take into account this aspect by testing the mediating role of employee strategic alignment in the rational strategic planning–firm performance relationship. Based on a quantitative empirical study conducted among 372 European firms, we find that employee strategic alignment is a full mediator in this relationship. We then discuss the theoretical contributions and practical implications of our study. Copyright © 2013 ASAC. Published by John Wiley & Sons, Ltd.     

Reducing environmental uncertainty: How high performance work systems moderate the resource dependence‐firm performance relationship

Firm performance is a major concern for all organizations and involves a multitude of antecedents. Reducing environmental uncertainty and dependency through the use of strategic actions in the resource dependency theory (RDT) framework and enhancing work practices through high performance work systems (HPWS) lead to higher levels of firm performance. We reveal the interconnectivity between RDT and HPWS and develop propositions as to how components of HPWS positively moderate the relationship between firm performance and the environmental uncertainty‐reducing strategic actions proposed by RDT such as mergers and acquisitions, joint ventures, boards of directors, political action, and executive succession. Copyright © 2016 ASAC. Published by John Wiley & Sons, Ltd.     

Effect of corporate governance on default risk in financial versus nonfinancial firms: Canadian evidence

This paper investigates the influence of corporate governance variables on default risk of Canadian firms after the 2008 financial crisis. We provide evidence that important governance mechanisms have differential impacts between Canadian financial and nonfinancial firms. Ownership structure, (e.g., institutional ownership and insider ownership), has a significant impact on the default risk of financial firms but not on nonfinancial firms. Nonfinancial firms with more independent boards are associated with lower default risk, while financial firms with larger boards and more independent boards have higher default risk. In addition, although cross‐listing in the US reduces the default risk for Canadian nonfinancial firms, it actually increases the risk for Canadian financial firms during the postcrisis period. Copyright © 2016 ASAC. Published by John Wiley & Sons, Ltd.     

Interest alignment for joint business development: How global software houses and consulting firms work together in the enterprise systems sector

Despite the relatively long history of strategic alliances in the enterprise systems sector, studies examining the relationships between software houses and consulting firms have been rare and fragmented, particularly those related to the mechanisms that promote interest alignment for delivering a joint value proposition to the market. Through the cross‐analysis of two case studies, we identify 10 mechanisms that are regularly used for interest alignment purposes as well as counterpoints that contribute to the literature regarding the search for a consistent explanation for the longevity of hybrid organizational forms. Additionally, the study provides some insights related to the impact of innovation massification on competitiveness, partners' interdependence, and the presence of complementary contracts along with insights into the coexistence and interaction of other mechanisms that may help to explain the persistent existence of hybrid organizational forms in markets. Copyright © 2015 ASAC. Published by John Wiley & Sons, Ltd.     

Political risk and the internationalization of firms: An empirical study of Canadian‐based export and FDI firms

Political risk analysis primarily receives attention for foreign direct investment (FDI) but only rarely for exporting. We examine how exporters and foreign direct investors evaluate the relative importance of political risk factors. We provide a rationale for exporters to evaluate political risk factors for FDI and for foreign direct investors to evaluate political risk factors for exporting. Survey data were collected from Canadian exporters and foreign direct investors and capture the distinctive nature of salient factors for exporting and FDI. We offer unique insights on the evolutionary character of political risk that are of practical value for both exporting and FDI. Copyright © 2007 ASAC. Published by John Wiley & Sons, Ltd.     

The link between product diversification and performance among Spanish manufacturing firms: Analyzing the role of firm size

This study sheds additional light on the product diversification‐performance relationship for firms in a country having recently attained an advanced economy status in our period of analysis. We assume there will be an inverted U‐shaped relationship and use a sample of small, medium, and large Spanish manufacturing firms between 1994 and 2008. Our findings provide solid support for this assumption, and are identical when the sample consists of small, medium, and large firms and of large firms alone. Our results also suggest that the larger the firm, the higher the optimal level of diversification. Panel data models are used to control for unobservable heterogeneity and potential endogeneity problems. Copyright © 2015 ASAC. Published by John Wiley & Sons, Ltd.     

Impact of industry sector on corporate diversification and firm performance: Evidence from Indian business groups

Prior business group (BG) studies implicitly assume that corporate diversification‐firm performance relationships are uniform across industry sectors. This generalization may lead to research implications that are not equally true for BG‐affiliated manufacturing and service firms. Drawing on strategy and marketing literature, this research addresses this scholarly gap. Our empirical analysis of a large sample of BG‐affiliated Indian firms over a five‐year period (2004‐2008) indicates that the influence of corporate diversification on firm performance is greater for affiliated service firms than affiliated manufacturing firms. Results also indicate that the influence of BG size and diversity on diversification‐firm performance relationship varies significantly depending on whether the focal firm belongs to the manufacturing or service sector. Firm's share ownership does not generate similar influence. Copyright © 2015 ASAC. Published by John Wiley & Sons, Ltd.     

Estimation of the default risk of publicly traded companies: evidence from Canadian data

Through Canadian publicly traded companies, this study assessed how combining firms' continuous valuations by the market (structural model) with the value given in their financial statements (accounting model) could enhance prediction of a company's probability of default. The hybrid model outperformed other models. Specifically, estimated structural probabilities of default (PDs) contributed significantly to predicting default probabilities when they were included alongside accounting and macroeconomic variables in our hybrid model. These results were obtained with two versions of the structural model: the Merton model (Merton, 1973, 1974) and the default barrier model (Brockman & Turtle, 2003). Both models were estimated with the maximum likelihood method. Copyright © 2008 ASAC. Published by John Wiley & Sons, Ltd.