Accounting for distress in bank mergers

Most bank merger studies do not control for hidden bailouts, which may lead to biased results. In this study we employ a unique data set of approximately 1000 mergers to analyze the determinants of bank mergers. We use undisclosed information on banks’ regulatory intervention history to distinguish between distressed and non-distressed mergers. Among merging banks, we find that improving financial profiles lower the likelihood of distressed mergers more than the likelihood of non-distressed mergers. The likelihood to acquire a bank is also reduced but less than the probability to be acquired. Both distressed and non-distressed mergers have worse CAMEL profiles than non-merging banks. Hence, non-distressed mergers may be motivated by the desire to forestall serious future financial distress and prevent regulatory intervention.     

Covariance complexity and rates of return on assets

This paper considers the estimation of the expected rate of return on a set of risky assets. The approach to estimation focuses on the covariance matrix for the returns. The structure in the covariance matrix determines shared information which is useful in estimating the mean return for each asset. An empirical Bayes estimator is developed using the covariance structure of the returns distribution. The estimator is an improvement on the maximum likelihood and Bayes–Stein estimators in terms of mean squared error. The effect of reduced estimation error on accumulated wealth is analyzed for the portfolio choice model with constant relative risk aversion utility.     

Your new product development (NPD) is only as good as your process: an exploratory analysis of new NPD process design and implementation

Given industry competitiveness, how do firms' new product development (NPD) process designs differ when responding to an innovation mandate? How do NPD design elements differ across firms when implementing NPD processes? These design elements are strategic business unit (SBU) senior management involvement, business case content, customer interactions, and cross‐functional integration. What are the consequences of different combinations of NPD process design elements for innovation productivity? We explore these questions via a collective case study of newly implemented NPD process designs at three different SBUs of a major US‐based international conglomerate, 1 year after receiving the mandate to grow through innovation. Our analysis suggests that industry competitiveness and firm characteristics influence the NPD process design as SBUs employ distinct combinations of NPD design elements. The differential emphasis on design elements leads to variation in process design and divergence in innovation productivity.     

Sales channel integration after mergers and acquisitions: A methodological approach for avoiding common pitfalls

This article addresses the integration of sales channels after mergers and acquisitions (M&A) by appraising the strengths, weaknesses, and biases associated with the four most common frameworks for evaluating sales channels (sales management, historical performance, strategic fit, and customer choice) for their appropriateness in a post-M&A context. The authors develop a methodological approach that uses a balanced-scorecard framework to guide managers through the sales channel integration process, and then apply this approach to the merger of two industrial firms' sales organizations across 21 territories. In so doing, they reveal various pitfalls and propose and test some analytical corrections. Longitudinal performance data support comparisons across the different evaluative frameworks; in particular, the sales management and customer choice frameworks provide the most insight into channel partners' post-integration performance. The results support the premise that channel integration can be improved by accounting for factors unique to the M&A context and using an approach that triangulates multiple perspectives.     

Relationships in the purchasing of business to business professional services: The role of personal relationships

There has been a shift from transactional to relational exchange and relationship marketing both in the business to business and professional services contexts. This paper seeks to explore the manner in which personal relationships affect the process and outcomes of purchasing of professional business services. Specifically, it focuses on the role of the professional service providers as boundary spanners in the formation of personal relationships. These personal relationships constitute the underlying basis of long-term relationships between the purchasing and provider organizations in such complex service settings. The findings of this study demonstrate that the manner in which the boundary spanners cultivate relationships support the concept of relationship specific tasks. It extends this conception by use of the data to outline the chronological process over time Understanding the roles, function, and ultimately importance, of these relationships facilitates the identification and development of appropriate strategies to manage these relationships.     

Investment decisions in the wireless industry applying real options

The wireless industry is one of the most capital intensive high-technology industries. This paper applies real options techniques to estimate investments under uncertainty in two new ventures: (a) deferral of the expansion from 2.5G to 3G networks; and (b) expansion of a 2.5G network using Wi-Fi as an alternative technology. The cases are examined and analyzed both qualitatively and quantitatively, using realistic assumptions and parameters. Investment cost, number of subscribers, pricing of services, and risk are at the core of investment decision processing. In both cases, sensitivity analysis of the value of the (real) option considering the above key parameters was conducted, to extrapolate useful findings that should be taken into consideration by the decision makers in wireless companies.