Institutional Ownership and the Extent to which Stock Prices Reflect Future Earnings*

Articles in the financial press suggest that institutional investors are overly focused on current profitability, which suggests that as institutional ownership increases, stock prices reflect less current period information that is predictive of future period earnings. On the other hand, institutional investors are often characterized in academic research as sophisticated investors and sophisticated investors should be better able to use current‐period information to predict future earnings compared with other owners. According to this characterization, as institutional ownership increases, stock prices should reflect more current‐period information that is predictive of future period earnings. Consistent with this latter view, we find that the extent to which stock prices lead earnings is positively related to the percentage of institutional ownership. This result holds after controlling for various factors that affect the relation between price and earnings. It also holds when we control for endogenous portfolio choices of institutions (e.g., institutional investors may be attracted to firms in richer information environments where stock prices tend to lead earnings). Further, a regression of stock returns on order backlog, conditional on the percentage of institutional ownership, indicates that institutional owners place more weight on order backlog compared with other owners. This result is consistent with institutional owners using non‐earnings information to predict future earnings. It also explains, in part, why prices lead earnings to a greater extent when there is a higher concentration of institutional owners.     

Consumer Acceptance of Camel Milk in Emerging Economy

Abstract

Camel is considered as an indispensable part of desert eco-framework across the globe. Apart from helping in transport, it is also used for its milk. Camel's milk is used worldwide because of its salty taste. However, it has many beneficial effects such as cure for autism and helps to control diabetes, allergy, and also prevents liver cirrhosis. Objective of this study is to analyze the ways to make people purchase and consume camel milk. In the last few years, awareness about nutritional and medicinal benefits of camel milk has rapidly increased. Consequently, the demand of the product has also increased. Objective of this article is to analyze the consumers’ willingness to buy camel milk before and after knowing its health benefits. It also explores the linkage between lifestyle diseases and consumer’s willingness to buy. We analyzed data in two stages. Initially, we did qualitative analysis with twitter text mining to understand customer’s sentiments about camel milk. Later, primary data was collected through structured questionnaire from a sample of 120 respondents by convenience sampling for quantitative analysis. There is a significant increase in the proportion of people willing to buy camel milk and once they were aware of the benefits, people are willing to buy more after knowing the benefits. People exposed to lifestyle diseases are more willing to buy camel milk. Hence, support of market-based awareness campaigns to stimulate demand for quality camel milk among consumers can be realized through information dissemination and awareness campaign.     

Service,value networks and learning

Both supply chain management (SCM) and marketing in general have been moving from models and purposes narrowly focused on goods to more general models and purposes associated with partnerships, value networks, service provision, and value creation. Some of this movement has been captured in what has become known as service–dominant (S–D) logic. This article applies S–D logic to thinking about SCM in terms of service provision, in which goods are seen as service distribution or provisioning mechanisms, explores and elaborates on the concept of a value network, and develops a model of the firm as an essential service provisioning agent in a complex and adaptive value network. Research and managerial opportunities are also explored.     

Cross‐border Insolvency Problems: Is the UNCITRAL Model Law the Answer?

This paper examines the impact that the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross‐border Insolvency has had on States in the light of the central problems often associated with transnational insolvencies. Despite the accolades that it has received, the Model Law has been adopted in only 19 countries in the last 15 years and that too in many different ways. If the number of adoptees and the rather conditional acceptance of the Model Law's provisions represent a lack of international enthusiasm for adopting the Model Law, what are the reasons for this? The paper concludes by asking whether the UNCITRAL Model Law presently has a future in dealing with cross‐border insolvencies. Copyright © 2012 INSOL International and John Wiley & Sons, Ltd.     

Competing in digital ecosystems

Digital technologies are revolutionizing traditional interdependencies among businesses. As a result, managers have begun to recognize their business environments as digital ecosystems. For firms accustomed to framing their business environments as industries, this represents a significant shift in perspective—one that requires an understanding of fresh strategic initiatives necessary to compete in the digital era. In this article, we highlight what is new and different about digital ecosystems for firm strategy. We offer frameworks that explain how digital ecosystems provide firms with new sources of value and new avenues for growth. Two sets of underlying concepts govern these frameworks: (1) production and consumption ecosystems and (2) digital envelopes and product-in-use information. We introduce and elaborate upon these foundational concepts and highlight new strategic options for firms to compete in digital ecosystems.     

The effect of population growth,the pattern of demand and of technology on the process of urbanization

A nonlinear, three-sector, two-region wage and price endogenous dynamic general equilibrium model is used to study the effects of population growth, the pattern of demand, and technological change on urbanization in the context of a low-income developing country starting at a low level of urbanization. The model represents a closed economy and is therefore more suited to a large country. It is validated on Indian data and traces its development path well from 1950 to the present. The sectors modeled are agriculture, industry, and services with the latter two being located exclusively in urban areas. The three sectors are linked with an input-output matrix which subsumes transportation costs incurred between urban and rural areas. The model is designed to investigate long-term changes, e.g., over a 30-year period, and factor mobility is therefore assumed to be “almost perfect.” The model demonstrates that rapid agricultural productivity growth, high rates of investment, and Engel demand effects combine to produce a continuing increase of urbanization as development occurs in an economy. The rate of urbanization is not necessarily dependent on high overall population growth: indeed, under certain conditions, a lowering of overall population growth might speed up the rate of urbanization. The pattern of demand and changes in the pattern can affect the rate of urbanization significantly: in particular, Engel-type demand changes serve to make the process of urbanization logistic. Technological bias effects are not very strong but effective appropriate technology policies might speed up urbanization.     

Product Technology Transfer in the Upstream Supply Chain

This article addresses the transfer of new product technologies from outside the firm for integration into a new product system as part of a product development effort. Product technology transfer is a key activity in the complex process of new product development and is the fundamental link in the technology supply chain. Product technology transfer too often is dealt with in an ad‐hoc fashion. Purposeful management of the product technology transfer process leads to more effective transfers in terms of timeliness, cost, functional performance, and competence building. Better management of product technology transfer gives firms access to a greater variety of new technology options, improves a firm's ability to offer significantly differentiated products, deepens the firm's competitive competencies, and positively influences sustained product development success. The central objective of this article is to gain insight into product technology transfer so that companies can manage this process more successfully and so that researchers can investigate this critical activity further. This article describes the technology supply chain as a unique form of a supply chain that poses a set of managerial challenges and requirements distinguishing it from the more traditional component supply chain. Because a single product technology transfer project is the fundamental piece in the technology supply chain, understanding this piece well is key to leveraging the extended technology supply chain and to improving overall product development performance. This article integrates literatures on new product development, supply chain management, and technology management and builds on organizational theory to present a conceptual model of determinants of product technology transfer success. The core proposition is that product technology transfer effectiveness is greatest when companies carefully match (or “fit”) the type of technology to be transferred (the “technology uncertainty”) with the type of relationship between the technology supplier and recipient (the “interorganizational interaction”). A quite detailed framework characterizing technology uncertainty along the dimensions of technology novelty, complexity, and tacitness is presented to help in assessing the challenges associated with transferring a particular product technology. This article also considers detailed elements characterizing the interorganizational interactions between the technology source and recipient firms. This helps firms consider the appropriate means to facilitate the interfirm process of technology transfer. Overall, this article provides practical insight into characterizing technologies and into improving the product technology transfer process. This article also provides a strong theoretical foundation to aid future research on product technology transfer in the technology supply chain.     

Does the Stock Market Fully Appreciate the Implications of Leading Indicators for Future Earnings? Evidence from Order Backlog

Although leading indicators are becoming increasingly important for equity valuation, disclosures of such indicators suffer from the absence of GAAP related guidance on content and presentation. We explicitly examine (i) whether one leading indicator—order backlog—predicts future earnings, and (ii) whether market participants correctly incorporate such predictive ability in determining share prices. We find that the stock market overweights the contribution of order backlog in predicting future earnings, and a hedge strategy that exploits such overweighting generates significant future abnormal returns. However, such mispricing is not due to analysts' inability to incorporate order backlog into their earnings forecasts.     

The Relevance of Non-financial Performance Measures for CEO Compensation: Evidence from the Airline Industry

This paper investigates the role of non-financial performance measures in executive compensation. Using a sample of airline firms we document that passenger load factor, an important non-financial measure for firms in this industry, is positively associated with CEO cash compensation. This association is significant after controlling for traditional accounting performance measures (return on assets) and financial performance measures (stock returns). This evidence is consistent with the hypothesis that non-financial measures provide incremental information about CEOs actions over financial measures and hence, receive a positive weight in compensation contracts. We also explore cross-sectional differences in the importance of non-financial performance measures. We find weak evidence that CEO power and the noise of financial performance measures impact the relationship between non-financial performance measures and cash compensation.JEL Classification: J33, L25, L93, M41, M52