WHO GAINS FROM CORPORATE ASSET SALES?

This study documents that sell-offs, on average, are firm value enhancing, as both stockholders and bondholders gain from such transactions. Further, it reveals that sell-offs can be wealth redistributing, value destroying, or value enhancing depending on the way the sale proceeds are distributed and the motive underlying the sell-off. The wealth effects on stockholders and bondholders are not always symmetrical. Our results suggest that benefits from the sale of assets that do not strategically fit the firm's core business accrue primarily to stockholders, while benefits from distress-related sell-offs accrue to bondholders. Sell-offs to thwart takeovers destroy firm value. We document that a significant proportion of sell-offs results in wealth transfers between securityholders. Restrictive dividend covenants play an important role in protecting bondholders from wealth expropriation. Our analysis suggests that the relative size of the asset sale, the uses of the sale proceeds, and the degree of protection afforded bondholders via a dividend restriction may be relevant in explaining the direction of wealth transfer.     

Do Market‐Supporting Institutional Characteristics Explain Firm Performance? Evidence from Emerging Markets

The importance of market‐supporting institutions and their impact on business investment and economic growth has gained the attention of researchers and practitioners alike. In this study, we extend this research by capturing the impact of the quality of regulative institutional characteristics on firm performance in an emerging market context. We use a sample of 26,493 emerging market firms from 91 countries over the years 2003 to 2010 and test for the relationship between government effectiveness, regulatory quality, rule of law and control of corruption, and firm performance. Results indicate that governmental effectiveness and regulatory quality impact performance outcomes positively, while rule of law impacts performance negatively. These findings provide important insights and encourage managers and public policymakers to be cognizant of the impact of these factors and adapt accordingly. © 2014 Wiley Periodicals, Inc.     

Managing internationalization and innovation tradeoffs in entrepreneurial firms: Evidence from transition economies

For entrepreneurial firms (EFs), internationalization and innovation present two major avenues for growth. Prior research, based primarily on EFs from advanced economies, demonstrates mixed insights for the relationship between these strategies. A deeper understanding of the tradeoffs involved in the internationalization-innovation relationship may help better comprehend the issue. In this study, we draw on the organizational learning and capabilities-based literatures to examine the relationship in the context of EFs in transition economies (EFTEs). Our findings suggest that in EFTEs, internationalization is negatively associated with the likelihood of innovation. We also find that three knowledge-based capabilities of EFTEs (absorptive capacity, appropriation capability, and managerial capability) positively moderate the aforementioned negative relationship. We do not find any evidence of reverse causality (EFTE innovation impacting internationalization). Our research provides novel insights to the IE literature by shedding light on the internationalization–innovation tradeoffs that EFTEs experience.     

Contractual Mix Between Cash and Kind Wages of Casual Workers in an Agrarian Economy

A two‐agent general‐equilibrium model is developed for explaining the mix of wage payment between cash and kind among landowners and workers. Its focus is on how, in the absence of insurance instruments but in the presence of heterogeneous tastes and attitudes toward risk among agents, the payment mix between cash and kind can serve as a welfare‐improving, risk‐hedging device. The model is used to determine how this optimal mix of wage payment would be affected by changes in risk‐aversion, consumption preferences, technology, price risk, and production risk. While the complexity and nonlinearity of the model make it impossible to obtain clear‐cut analytical results, simulation results are derived and shown to be rather robust. These results are also broadly supported by the findings of a small‐scale survey of agricultural wage contracts in India.     

Organizational fit and acquisition performance: Effects of post-acquisition integration

Based on 173 acquisitions in the U.S. manufacturing industry, this study examines the impact of organizational differences between acquiring and acquired firms on post-acquisition performance. The findings indicate that differences in top management styles have a negative impact on performance in acquisitions characterized by both high and low levels of post-acquisition integration. However, no such relationship was observed between differences in the reward and evaluation systems and post-acquisition performance in either the high or low integration subgroups. Implications of the findings, along with directions for future research, have been discussed in the concluding section of this paper.     

Factors influencing wealth creation from mergers and acquisitions: A meta-analysis

This study analyzes the empirical literature concerning the influence of various factors on shareholder wealth creation in mergers and acquisitions using a multivariate framework. Overall, results indicate that while the target firm's shareholders gain significantly from mergers and acquisitions, those of the bidding firm do not. Findings also indicate that the use of stock financing has a significant impact on the wealth of both the target and bidding firms' shareholders. The presence of multiple bidders and the type of acquisition influence the bidders' return, while regulatory changes and tender offers influence the targets' returns. The paper also provides a comparison of our findings with that of previous narrative reviews and discusses their implications from the viewpoint of managers and researchers.     

Adversary activities and per capita income growth

When some present or future markets are either imperfect or incomplete, the selfish motivations of individual agents may (but not necessarily) lead to rent-seeking activities that can make society worse off. Legal activities tend to raise the costs of doing business. Moreover, because they are biased in the direction of suits by firms and consumers against other firms, they may as a whole lower profit and hence both investment and growth rates relative to what they would be without such activities. This paper uses international cross-section data to provide a simple test of this hypothesis. Despite the crudeness of the test, the small size of the sample and possible ambiguities in interpretation, the results provide a tentative confirmation of the hypothesis.     

Cost-allocation decisions in member controlled country clubs: A case analysis

Boca Vista Golf and Country Club (BVGCC), which operates as a not-for-profit organization, is a member-owned country club in South Florida. Since no mark-up for profit is included in member-owned clubs, total budgeted revenues (including member dues) must equal total budgeted costs. Accordingly, if net costs are used to determine dues for each membership category, cost-allocation decisions have a direct impact on member dues (product price). BVGCC is also subject to competitive pressures from public and semi-private golf courses. The case provides an overview of these competing forces and requests the service of a consultant to devise equitable and effective cost-allocation schemes for BVGCC.     

Price leadership and firm size asymmetry: an experimental analysis

We use laboratory experiments to examine the effect of firm size asymmetry on the emergence of price leadership in a price-setting duopoly with capacity constraints. Independent of the level of size asymmetry, the unique subgame perfect equilibrium of our timing game predicts that the large firm is the price leader. Experimental data show that price leadership by the large firm is frequent, but simultaneous moves are also often observed. Profit outcomes in the previous period affect the subjects’ decisions to announce or wait in a way that hampers convergence to the equilibrium. Furthermore, while both small and large firms display a strong tendency to wait to announce their price when firm size asymmetry is low, they often set prices early when size asymmetry is high. Prices are higher when price setting is sequential rather than simultaneous and when firm size asymmetry is high. Hence, price leadership by either type of firm has an anti-competitive effect that is more pronounced when the size difference between firms is large.