Sustainability as Adaptability

Most corporations now view sustainability as a key requirement for competitive advantage, but few claim to have achieved it. One of the key obstacles separating intention from execution is that the sustainability frameworks employed by companies tend to be insufficiently clear, precise, or comprehensive to guide decision making. One of the most pressing challenges for corporate leaders today is, of course, to sustain the economic viability of the core businesses. But given the implicit “beyond business” focus of most sustainability efforts, corporate executives would be better served by a more integrated, holistic framework—one that enables them to make tradeoffs among the economic, social, and ecological aspects of business. This article introduces such a framework—one that redefines sustainability as the ability of companies to adapt to change in three different spheres of operation—ecological, social, and economic—with a near‐term as well as a longer‐term planning horizon. Without such adaptation, business models become obsolete for reasons that can range from economic failure, to competitive inferiority, to social or ecological limits. This ability to adapt can be measured and valued by using the BCG Adaptive Advantage Index, a composite measure of corporate performance during market downturns. The BCG analysis also shows that although the most adaptive companies tend to report lower profits and have lower values during periods of relative stability, such companies perform consistently better over full cycles. Creating social and ecological value alone doesn't automatically confer economic rewards, but—with the right business model and capabilities—it can. The authors explore some of the business model archetypes that successfully achieve this “co‐optimization.”     

Ex-dividend day abnormal returns for special dividends

Past research shows that the difference between dividend amount and ex-dividend day price drop reflects the transaction costs and the differential in the tax rates on dividends and capital gains. Moreover, it is also documented that the higher the dividend yield, the lower is the ex-dividend day return. This paper focuses on large special dividends and tests the two competing hypothesis, tax hypothesis and short term trading hypothesis. Our focus on large special dividends is motivated by the following three considerations. First, special dividends have experienced a surge in recent years. Second, special dividends are important for dividend capture by institutions, corporations and arbitragers. Third, using a sample of large special dividends allows us to reduce the market microstructure effects and focus more directly on the two competing hypotheses. Based on a sample of large special dividends, we find that price drop on ex-dividend day is significantly less than the dividend amount. Furthermore, we show that ex-dividend day returns are positive and hence, are not fully arbitraged away. Our tests indicate that tax hypothesis explains some portion of ex-dividend day abnormal returns even for large special dividends, whereas the support for the short-term trading hypothesis is weak.     

Organizational Accidents: A Systemic Model of Production versus Protection

Production pressure is often cited as an underlying contributory factor of organizational accidents. The relationship, however, between production and safety protection is complex and has not been adequately addressed by current theories regarding organizational accident. In addressing this gap, this paper uses the methodology of system dynamics to develop a causal model to address the dynamic interaction between management of production and protection, which can accumulate in an organizational accident. A case study of a fatal rock fall accident in Tasmania, Australia was conducted based on the developed model and is used to uncover the intricate dynamics linking production pressure, risk tolerability, perception of safety margin, and protection efforts. In particular, the study demonstrates how a strong production focus can trigger a vicious cycle of deteriorating risk perception and how increased protection effort can, ironically, lead to deterioration of protection.     

Gender differences in the impact of banking services: evidence from Mexico

This paper examines the effects of providing financial services to low-income individuals on entrepreneurial activity, employment, and the income levels of men and women. We exploit cross-time and cross-municipality variation in the opening of Banco Azteca in Mexico to measure these effects with a difference-in-difference strategy. This bank opened over 800 branches simultaneously in 2002, focusing on low-income clients. Our results show that this led to an increase in the number of informal business owners among men and to an increase in wage-earning opportunities for women. Average income levels also increased, with this increase being twofold higher for women than for men.     

Trade,wages, and the specific factors model: empirical evidence from manufacturing industries in Ghana

This study analyzes the impact of trade on wages in the context of the specific factors model by focusing on the link between trade and the average real wage. A recent paper by Jones and Ruffin (Rev Int Econ, 16:234–249, 2008) shows how one can use the specific factors model to predict how labor should fare from an improvement in the terms of trade. For this purpose, I use annual firm-level data on the manufacturing sector in Ghana during the period 1991–1997. I find that a ceteris paribus increase in the price of exportables in the wood industry would help labor but labor would be hurt by price increases in the food-baker, furniture, textile-garment, and metal-machinery industries.

The innovation decision: An economic analysis

Studies of the determinants and effects of innovation commonly make an assumption about the way in which firms make the decision to innovate, but rarely test this assumption. Using a panel of Irish manufacturing firms we test the performance of two alternative models of the innovation decision, and find that a two-stage model (the firm decides whether to innovate, then whether to perform product only, process only or both) outperforms a one-stage, simultaneous model. We also find that external knowledge sourcing affects the innovation decision and the type of innovation undertaken in a way not previously recognised in the literature.     

Corporate governance, investor protection, and performance in emerging markets

We use recent data on firm-level corporate governance (CG) rankings across 14 emerging markets and find that there is wide variation in firm-level governance in our sample and that the average firm-level governance is lower in countries with weaker legal systems. We explore the determinants of firm-level governance and find that governance is correlated with the extent of the asymmetric information and contracting imperfections that firms face. We also find that better corporate governance is highly correlated with better operating performance and market valuation. Finally, we provide evidence that firm-level corporate governance provisions matter more in countries with weak legal environments.     

Corporate structure,ownership and the likelihood of innovation

An examination is conducted into the effect which external ownership and other aspects of corporate ownership structure have on the likelihood of innovation for a sample of manufacturing plants located in Scotland. Econometric estimation indicates that plant size, the presence of in-plant R&D, and non-UK ownership have a positive effect on the likelihood of innovation. Multiplant operation, market power and variations in industrial structure have no discernible effect on innovation. The finding that foreign ownership is positively associated with innovation contrasts with previous research conducted on manufacturing plants in Northern Ireland.     

Not all threats are taken equally: Evidence from proxy fights

Previous research shows that activist threats lead to corporate policy concessions. We find that the threat of proxy fights is responded to differently based on its credibility. Decomposing proxy fight threats, we find that only credible threats are associated with more leveraged, more innovative, and less acquisitive corporate policies. Management, however, does not respond to noncredible threats. Further, for materialized fights, the market reaction at announcement is also conditional on the credibility of the threats. Overall, not all activist threats are responded to equally by management or the market, and only credible threats achieve disciplinary effects and favorable valuation.