The Life Cycle of Initial Public Offering Firms

This study uses an integrated and comprehensive approach to study the evolution of IPO issuing firms to the three basic post-IPO states: survive as an independent firm, get acquired, or fail. We develop multinomial logit models that utilize information available at or prior to the IPO to predict the probability of subsequent transition to the three post-IPO states. We find that lower risk, larger firm size, higher investment banker prestige, higher pre-IPO operating performance, and higher industry R&D intensity increase the probability of survival relative to failure. We also find that higher firm size, higher industry R&D intensity, and industry concentration increase the probability of survival relative to being acquired. Finally, lower risk and higher investment banker prestige increase the probability of being acquired relative to failure. Overall, we identify several factors that influence the probability of subsequent transition to one of the three basic post-IPO states.     

Product-Line Length as a Competitive Tool

The increasing number of consumer goods and services offered in recent years suggests that product-line extensions have become a favored strategy of product managers. A larger assortment, it is often argued, keeps customers loyal and allows firms to charge higher prices. There is disagreement, however, about the extent to which a longer product line translates into higher profits. We develop an econometric model derived from a game-theoretic perspective that explicitly considers firms' use of product-line length as a competitive tool. On the demand side, we analytically establish the link between consumer choice and the length of the product line. Based on our derivations, we include a measure of line length in the utility function to investigate consumer preference for variety using a brand-level discrete-choice model. The supply side is characterized by price and line length competition between oligopolistic firms. For the empirical analysis we use market-level data for the yogurt category. We find that there are decreasing returns to product-line length. Based on a series of "what-if" experiments, we derive recommendations for effective product line decisions in a competitive environment.     

Domestic tourist spending and economic development: The case of the North West Province

Globally, tourism is the largest and fastest growing industry, outpacing all other industries. In South Africa, tourism is widely regarded as a growth catalyst, able to generate much-needed income and employment opportunities. The market potential of domestic tourism has, however, been downplayed in favour of international tourism. This research argues that tourism – especially domestic tourism – can contribute significantly to regional growth and development in South Africa. A survey was carried out among domestic tourists in the North West Province, one of the poorest provinces in South Africa. This survey was used to draw up a demographic and spending profile of the average domestic tourist in the province, and to determine the possible implications of this spending on different macroeconomic variables in the province.     

Project Assistance versus Budget Support: An Incentive-Theoretic Analysis of Aid Conditionality

Foreign aid is conveyed predominantly in the form of project assistance, rather than general budgetary support for the recipient government. Most theoretical explanations of this phenomenon center on the possibility of a divergence of preferences, or opinions, between donor and recipient. Projects or conditional transfers, rather than “cash”, may then be ways by which donors align the recipients’ incentives more closely with their own preferences. This paper proposes an alternative, complementary, explanation, based on information asymmetries between voters in donor nations, and their aid agency administrators. If voters are uncertain about the “type” of their administrator agent, who is better informed about the efficacy of alternative policies, then project assistance may be chosen, even when budget support provides a more efficient alternative. JEL no. F35, O19, D82     

Revamping MBA programs for global competitiveness

World-wide, the MBA has become one of the most popular academic qualifications. In recent years, doubts have been raised regarding worth of the MBA degree, at least in its present form. This article examines the broad trends shaping business education and recommends how MBA curricula might be redesigned to make students globally aware, and be effective in the midst of global competition. Our focus here is on meeting future essential business needs that today's schools fail to sufficiently address. Although MBA education is at a crossroads, change will not be easy, as MBA education represents a sizeable global ‘industry.’ We conclude by listing issues which may be examined to make the change feasible.     

Corporate Social Responsibility and Psychosocial Risk Management in Europe

Corporate social responsibility (CSR) is a comprehensive concept that aims at the promotion of responsible business practices closely linked to the strategy of enterprises. Although there is no single accepted definition of CSR, it remains an inspiring, challenging and strategic development that is becoming an increasingly important priority for companies of all sizes and types, particularly in Europe. Promotion of well-being at work is an essential component of CSR; however, the link between CSR, working conditions and work organisation is still found to be unfamiliar to stakeholders. As CSR is strategic and is regarded by many companies and corporate leaders as an important development, it offers opportunities for psychosocial risk management, an area that is currently among the top priorities in working environment and well-being at work debates. However, the link between CSR and psychosocial risk management has not been addressed clearly before. This paper aims to explore the potential role of CSR in promoting well-being at work through the development of a framework for the management of psychosocial risks. As part of the research, key stakeholders [including the World Health Organization (WHO), the International Labour Organization (ILO), the European Agency for Safety and Health at Work (EU-OSHA), the European Commission (EC), employers’ associations, trade unions and other policy experts] across Europe participated in a survey, interviews and focus groups to assess and clarify the link between CSR and psychosocial risk management. On the basis of the findings, a CSR-inspired approach to the management of psychosocial issues at work is proposed. Such an approach can be a useful tool in contexts where, up until now, expertise and tradition in dealing with psychosocial issues have been lacking.     

Equity issues and changes in expectations of earnings by financial analysts

Evidence is provided on an implication of models by Myers andMajluf (1984) and Miller and Rock (1985), which predict thatequity issues convey information about firms' future earnings.Consistent with the prediction, the results show that earningsforecast revisions by financial analysts subsequent to the announcementof equity issues are significantly related to announcement periodabnormal returns.     

NEA Presidential Address: Gender Inequality and Human Development in Sub- Saharan Africa

This Presidential Address considers the effects of gender inequality on human development in Sub-Saharan Africa. Parameter estimates from quantile and ordinal categorical latent variable specifications of the relationship between components of the Human Development Index and measures of gender inequality suggests that human development in Sub-Saharan Africa increases with respect to improvements in several measures of gender inequality. The results suggest that inegalitarian laws, norms, traditions and codes of conduct toward women constrain both human and economic development in Sub-Saharan Africa.