Output flexibility—A competitive advantage for small firms

We explore three theoretical perspectives that look at output flexibility as a competitive advantage for small firms as was initially described by Stigler (1939). First, small firms are more willing to fluctuate their output. As a result: second, small firms can trade cost inefficiency with volume flexibility to increase their profits; third, output flexibility is a more viable source of competitive advantage in volatile and capital-intensive industries, and less viable in profitable industries. Indeed, the empirical analysis of over 3000 companies representing 83 industries during the 1979-87 time period supports our theoretical perspectives. Future research directions that combine firm flexibility and other strategic dimensions are discussed in the context of providing a general strategic framework for small firms competing against large ones.     

Surprise vs anticipated information announcements: Are prices affected differently? An investigation in the context of stock splits

We compare the long run reaction to anticipated and surprise information announcements using stock splits. Although there is underreaction in both cases, anticipated splits are treated differently to those that are unforeseen. After anticipated splits, cumulative abnormal returns peak at one-and-a-half times the level observed after unanticipated splits although the time taken for the announcement to be absorbed into prices is the same. We explain the difference in underreaction by the degree to which split announcements are believed and hence invested in. The favorable signal conveyed in forecast splits is more credible owing to their better pre-split performance, resulting in a far more pronounced underreaction effect.     

Do Share Buybacks Provide Price Support? Evidence From Mandatory Non-Trading Periods

Abstract:  Financial regulators, analysts and journalists have expressed concern that open market share repurchases may help support share prices. We test this conjecture by examining repurchasing firms' share price patterns on entering mandatory non-trading periods imposed by the London Stock Exchange. If buybacks provide price support, we would expect to observe price declines when trading bans force firms to suspend their buyback program. Consistent with claims that open market buybacks provide price support, we document average price declines when repurchasing firms enter mandatory non-trading periods. We also find that the magnitude of the price decline varies cross-sectionally with proxies for the price support impact of repurchases in the predicted manner. However, economic and statistical significance levels are moderate and largely confined to non-trading periods preceding interim results announcements, casting doubt on whether trading profits could be earned by exploiting this information.     

Doing well by doing good—case study: ‘Fair & Lovely’ whitening cream

According to the ‘doing well by doing good’ proposition, firms have a corporate social responsibility to achieve some larger social goals, and can do so without a financial sacrifice. This research note empirically examines this proposition by studying in depth the case of ‘Fair & Lovely,’ a skin whitening cream marketed by Unilever in many countries in Asia and Africa, and, in particular, India. Fair & Lovely is indeed doing well; it is a profitable and fast‐growing brand. It is, however, not doing good, and I demonstrate its negative implications for public welfare. I conclude with thoughts on how to reconcile this divergence between private profits and public welfare. Copyright © 2007 John Wiley & Sons, Ltd.     

The roles of the private and public sectors in poverty reduction

There are two major actors involved in tackling the challenge of poverty: private businesses and government. Unfortunately, both actors have tended to view each other through the lens of negative stereotypes, and each actor (or its proponents) dismisses the contributions of the other player and minimises its role. Unusual compared to most past literature, Khare and Varman in their article 'Kafkaesque institutions at the base of the pyramid' in this journal in 2016 reject both the private and the public sectors. By contrast, in this article, I argue for an ideologically eclectic approach, and suggest appropriate roles for both business and government in poverty reduction. The private sector needs to focus on creating employment opportunities for the poor and the government should focus on providing basic public services to the poor.