Antitakeover provisions in corporate spin-offs

We analyze the relation between antitakeover provisions (ATPs) and the performance of spin-off firms. We find that firms protected by more ATPs before spin-offs have higher abnormal announcement returns and greater improvements in post-spin-off operating performance than firms with fewer ATPs. Further, firms that reduce the number of ATPs after spin-offs have greater improvements in operating performance than firms that do not reduce the number of ATPs. Finally, CEOs of pre-spin-off firms tend to retain more ATPs in parent firms and assign fewer ATPs to the spun-off units if they remain as the CEOs of the parents but not the spun-off units. Overall, our results indicate a positive relation between ATPs and the value gains to spin-offs.     

The Financial Crisis: Causes and Lessons*

The author argues that the root cause of the recent crisis was a housing bubble whose origins can be traced to loose monetary policy and a government housing policy that continually pushed for lower lending standards to increase home ownership. The negative consequences of such policies were amplified when transmitted throughout the financial system by financial institutions through the process of securitization. In attempting to assess culpability for the crisis and identify possible reforms, the author focuses on three categories:

• 1 Defects in Financial Products: Without criticizing derivatives and the process of securitization, the author identifies the sheer complexity of the securities as a major source of the problem—for which the solution is a simpler security design combined with greater disclosure about the underlying assets being securitized.
• 2 Defects in Risk Management: Thanks in large part to agency and other incentive problems, there was universal underestimation of risks by mortgage originators and financial institutions throughout the securitization chain. Changing incentive pay structures is part of the solution, and so are better accounting rules for SPEs. But more effective regulatory oversight and ending “too big to fail” may well be the only way to curb excessive private risk-taking.
• 3 Defects in Government Policy and Regulation: While acknowledging the need for more effective oversight, the author argues that there was ample existing authority for U.S. regulators to have addressed these issues. Lack of power and authority to regulate was not at the heart of the problem—the real problem was lack of foresight and judgment about the unexpected. After expressing doubt that regulators can prevent major financial failures, the author recommends greater attention to devising better methods of resolving such failures when they occur. One of the main goals is to ensure that losses are borne not by taxpayers but by private investors in a way that maintains incentives for market discipline while limiting spillover costs to the entire system.

     

Risk Management,Corporate Governance,and the Search for Long-Term Investors

This discussion explores a number of ways that more effective risk management, corporate governance, and communication with investors can help companies increase their effciency and long-run value. According to one of the panelists, recent surveys of corporate directors suggest that companies should devote more time and attention to three issues—strategy, risk management, and succession planning—and that strategy and risk are the “flipsides of the same coin.” As the panelist argues, “You can't talk about strategy without talking about what risks you're going to take—and what risks you decide to take has to depend on the core competencies that drive the corporate strategy.” In addition to making risk management a critical part of corporate strategy, another notable recommendation is to communicate a company's strategy and business plan as clearly as possible to investors, with the aim of attracting more sophisticated, long-term shareholders. Contrary to popular belief, such a group may well include some hedge funds and other activist shareholders. According to a newly released report on shareholder activism (produced and cited by another panelist), corporate boards should work harder to identify and engage the “largest 10 shareholders in the organization,” with the ultimate goal of cultivating a shareholder base that buys into the company's strategy.     

Competition,Prices and Quality in the Market for Physician Consultations

Prices for consultations with General Practitioners (GP's) in Australia are unregulated, and patients pay the difference between the price set by the GP and a fixed reimbursement from the national tax‐funded Medicare insurance scheme. We construct a Vickrey‐Salop model of GP price and quality competition and test its predictions using individual GP‐level data on prices, the proportion of patients who are charged no out‐of‐pocket fee, average consultation length, and characteristics of the GP's, their practices and their local areas. We measure the competition to which the GP is exposed by the distance to other GP practices and allow for the endogeneity of GP location decisions with measures of area characteristics and area fixed‐effects. Within areas, GP's with more distant competitors charge higher prices and a smaller proportion of their patients make no out‐of‐pocket payment. GP's with more distant competitors also have shorter consultations, though the effect is small and statistically insignificant.     

Retaining the visitor,enhancing the experience: identifying attributes of choice in repeat museum visitation

• How people make choices in relation to cultural and leisure consumption has been explored from the viewpoint of motivation, lifestyle segmentation, and lifecycle. Little is known about the specific characteristics associated with choices to visit, re‐visit, or not to visit a museum. Understanding characteristics of choice, developing incentives, bundled packages, and levels of pricing is an essential element in marketing strategies for museums operating in a competitive leisure marketplace. However, determining what really matters to cultural consumers is complex and methodologies to assist in unraveling such complexities are not easily identified. This study aimed to address ways in which people respond to specific incentives as influences in choosing museum visitation. The study was conducted in two major museums in Australia to determine how useful choice modeling is in identifying features that matter to cultural consumers. The results suggest that choice modeling has much to offer in relation to understanding the benefits people are seeking from a museum experience as well as offering strategic insight into potential collaborative ventures and re‐combinations of existing museum products and services.

Copyright © 2008 John Wiley & Sons, Ltd.     

Buyer perceptions of supply disruption risk: A behavioral view and empirical assessment

As supply chains become more complex, firms face increasing risks of supply disruptions. The process through which buyers make decisions in the face of these risks, however, has not been explored. Despite research highlighting the importance of behavioral approaches to risk, there is limited research that applies these views of risk in the supply chain literature. This paper addresses this gap by drawing on behavioral risk theory to investigate the causal relationships amongst situation, representations of risk, and decision-making within the purchasing domain. We operationalize and explore the relationship between three representations of supply disruption risk: magnitude of supply disruption, probability of supply disruption, and overall supply disruption risk. Additionally, we draw on exchange theories to identify product and market factors that impact buyers’ perceptions of the probability and magnitude of supply disruption. Finally, we look at how representations of risk affect the decision to seek alternative sources of supply. We test our model using data collected from 223 purchasing managers and buyers of direct materials. Our results show that both the probability and the magnitude of supply disruption are important to buyers’ overall perceptions of supply disruption risk. We also find that product and market situational factors impact perceptions of risk, but they are best understood through their impact on perceptions of probability and magnitude. Finally, we find that decisions are based on assessments of overall risk. These findings provide insight into the decision-making process and show that all three representations of risk are necessary for fully understanding risky decision-making with respect to supply disruptions.     

The effects of technological turbulence and breadth on supply chain technology acceptance and adoption

The current empirical study examines the intention to use and subsequent implementation of a supply chain technology. Specifically, the authors extend the technology acceptance model (TAM) to incorporate the state of the technology environment (technological turbulence) and the extent to which other supply chain technologies have already been adopted by the firm (technological breadth). A series of seemingly unrelated regressions (SUR) were used to analyze survey data from 195 respondents. The results show that in technologically turbulent environments, the relationships between the firm's perceived usefulness and ease of use and the firm's intention to use a supply chain technology are stronger. The study also finds that the relationship between the firm's intention to use a supply chain technology and the implementation of the technology is weaker in firms with greater technological breadth.