Merger negotiations and the toehold puzzle

The substantial control premium typically observed in corporate takeovers makes a compelling case for acquiring target shares (a toehold) in the market prior to launching a bid. Moreover, auction theory suggests that toehold bidding may yield a competitive advantage over rival bidders. Nevertheless, with a sample exceeding 10,000 initial control bids for US public targets, we show that toehold bidding has declined steadily since the early 1980s and is now surprisingly rare. At the same time, the average toehold is large when it occurs (20%), and toeholds are the norm in hostile bids. To explain these puzzling observations, we develop and test a two-stage takeover model where attempted merger negotiations are followed by open auction. With optimal bidding, a toehold imposes a cost on target management, causing some targets to (rationally) reject merger negotiations. Optimal toeholds are therefore either zero (to avoid rejection costs) or greater than a threshold (so that toehold benefits offset rejection costs). The toehold threshold estimate averages 9% across initial bidders, reflecting in part the bidder's opportunity loss of a merger termination agreement. In the presence of market liquidity costs, a threshold of this size may well induce a broad range of bidders to select zero toehold. As predicted, the probability of toehold bidding decreases, and the toehold size increases, with the threshold estimate. The model also predicts a relatively high frequency of toehold bidding in hostile bids, as observed. Overall, our test results are consistent with rational bidder behavior with respect to the toehold decision.     

The game plan for aligning the organization

Better-aligned operational and strategic plans and a better balance of supply and demand bring tangible benefits to firms. However, functional departments in firms often operate without vertical and horizontal alignment. The outcomes are delays and amplification of the information flow, suboptimal corporate plans, uncoordinated reactions within the business, insufficient operational flexibility, and discrepancies in supply and demand. Sales and operations planning (S&OP) can circumvent these negative consequences and align the organization. Our multi-method research develops a holistic S&OP maturity model that firms can use for the assessment of their internal S&OP processes and shows the pathway to an integrated S&OP approach for the achievement of a better-aligned organization. We present a case study of a medium-sized, Swiss-based pharmaceutical company that has recently implemented S&OP to highlight why companies implement S&OP, the prerequisites and roadblocks encountered during implementation, and the benefits envisioned and achieved. Finally, we reveal the great relevance of the topic by means of a questionnaire survey which shows that organizations’ current S&OP performance is underdeveloped and that many improvements are indispensable to enjoy all benefits associated with the alignment process.     

Teachers' beliefs about using a professional development plan

Professional development plans (PDPs) have recently been introduced in Dutch schools to support teachers' professional development. However, teachers' beliefs regarding the use of PDPs have not been systematically researched, whereas research on the use of PDPs indicates that the implementation is not always successful and depends on how use is perceived by users. Some teachers may doubt the usefulness and purpose of a PDP, and this might influence their reactions to its introduction. Using Fishbein and Ajzen's theory of planned behaviour, the current study explored teachers' characteristics (such as age and years of experience in education) and their beliefs about intention to use a PDP. Clusters of teachers with similar characteristics and beliefs were identified to permit the design of interventions specific to each cluster. Semi‐structured interviews were conducted to reveal these beliefs and characteristics for a sample of 41 teachers working in schools where using a PDP was mandatory. The results showed that most teachers had a positive attitude towards using a PDP. However, because using a PDP was mandatory, they felt pressured to produce one. Moreover, it was not a priority. This was because of their high workload. The present study contributes to the literature by adding knowledge of teachers' beliefs about the use of PDPs. This knowledge may help the PDP to become a more effective device in promoting teachers' professional development.     

Stock option compensation: impact of expense recognition on performance indicators of non-domestic companies listed in the U.S.

The IFRS 2, Share-based Payment, requires that companies recognize the fair value of employee stock options as an expense. To ascertain the impact recognition will have on companies domiciled in countries subject to accounting standards issued by the IASB’s liaison standard setting partners, this research examines the pro forma stock option disclosures provided in Form 20-F by Australian, British, Canadian, French, German, Japanese, and Irish companies.The findings indicate the average impact of expense recognition on diluted EPS will be approximately 40% and will be material at a 5% level for the majority of the companies. The impact varies significantly by country. On average the annual expense recognized will be approximately 15% of beginning stockholders equity. For the majority of the companies, the charge will represent less than 1% of beginning equity. Again the impact varies significantly by country.The findings indicate that absent requirements that stock compensation expense be recognized, a material upward bias will be reflected in performance indicators of many non-U.S. companies and cross-border comparability will be impaired. Since our analysis is based solely on data for the year 2000 for companies domiciled in seven countries, future research will be needed to ascertain the impact of expense recognition on a broader range of companies reporting under IFRS 2.     

A discipline without sympathy: the happiness of the majority and its demise

Abstract.  Experimental economists frequently invoke Adam Smith's notion of sympathy, and experimental treatments typically examine sympathy in situations where two groups are involved. We explore additional implications of sympathy suggested by the work of later classical economists. We link the notion of sympathy to their majoritarian welfare analysis. Since sympathy provides a source of moral obligation, classical economists held that agents in democratic politics will refrain from unjust acts. We also consider how sympathetic agents may effect reforms that involve more than two parties, in which the benefits from the action accrue to someone who is not part of the 'exchange.' JEL classification: B12, D63     

Reforms to Schooling in the UK: A Review of Some Major Reforms and their Evaluation

Abstract. We aim to give a brief overview of some important reforms to the school system in the UK and existing evidence on their consequences. These reforms include a change in the type of secondary school open to pupils – from a selective to comprehensive system; a change in the examination system; quasi-market reforms; area-based initiatives; reforms to the content and structure of teaching; payments to encourage the pursuit of education beyond compulsory schooling.     

Who is at Greatest Risk of Work-Related Discrimination—Women, Blacks, or Homosexuals?

This study was developed to examine whether bias against women, blacks, and homosexuals emerges in predictable patterns when raters are presented with hiring scenarios. We instructed the research sample to hire six of eight candidates for an accounting position. Eight candidates were necessary to offer the full range of gender, race, and sexual orientation combinations. Requiring the research sample to select six of the eight candidates meant that each respondent would have to discriminate by eliminating the two candidates they considered the least desirable. We found that a black, male homosexual is the most likely target of discrimination and the white, female heterosexual is the least likely to be discriminated against. If it develops that these findings hold across a wide range of work-related decisions and samples, such results would support the argument for maintaining affirmative action for blacks and extending civil-rights protection to gays and lesbians.     

Revisiting the gender gap in CEO compensation: Replication and extension of Hill,Upadhyay, and Beekun's (2015) work on CEO gender pay gap

Research Summary: The increasing number of women chief executives motivates considerable interest in examining possible gender differences in CEO compensation. Recently, Hill, Upadhyay and Beekun reported that female CEOs receive greater compensation than male CEOs, which runs counter to common wisdom that the gender pay gap in the labor market favors men over women. With the goal of contributing to cumulative knowledge development in this area, we seek to reexamine Hill et al.'s finding about gender differences in CEO compensation by extending the analyses further in time, using a larger sample of firms and more rigorous empirical analyses. Our findings, which are robust to different statistical procedures and econometric specifications, do not reveal reliable evidence for differences in compensation paid to male and female CEOs. Managerial Summary : For years, a lively debate has centered on the issue of gender pay gap. The ubiquity of the pay gap between men and women has recently been questioned by Hill et al. who identify the chief executive officer (CEO) role as a workplace position where women receive greater compensation than men. Our investigation examines whether women CEOs are indeed compensated substantively more than male CEOs. We seek to replicate earlier work by Hill and colleagues, using an expanded dataset over a longer period of time and with more rigorous analytical tools. We do not find reliable evidence for a difference in compensation paid to male and female CEOs, suggesting that claims about gender gap in CEO compensation favoring women over men may be premature.     

Exhibitor retention at an industry exhibition: The case of AgroChemEx in China

In industry exhibitions, the subsequent attendance of key companies within the industry reflects the brand influences of the exhibition. This article explored how to achieve exhibitor retention at an industrial exhibition, AgroChemEx. A qualitative research design using a case study approach was adopted, and 19 in-depth interviews were undertaken. The analyses identified that new exhibitors and repeat exhibitors had different emphases on attendance objectives. The most common motivators for exhibitors were networking, marketing and information exchange, whereas booth location was the main reason for exhibitor defection. Recommendations for practices which could facilitate exhibitors continued involvement are discussed.     

Corporate Groups in Australia: State of Play

While a number of studies and reports (for example, CASAC 2000 ; Clarke and Dean 2007 ; Ramsay and Stapledon 1998; 2001 ) have identified the importance of corporate groups on the commercial landscape, both in Australia and internationally, little is known about the nature, incidence, composition or rationale for commercial enterprises to adopt specific types of group structures. Understanding the differences in the accounting for each separate company within a group and the process of consolidated group enterprise data used in most empirical works is a prius for researchers undertaking large‐scale empirical work. It underpins the ability to generalise about findings based on samples of publicly listed companies, arguably randomly selected from the population of listed corporate groups. This paper reports findings of an extensive empirical study using 2007 data in order to illuminate the current situation in relation to the nature, incidence and composition of corporate groups in Australia. It adopts a similar structure to that used by Ramsay and Stapledon (1998; 2001) . The current data will allow tests of stability regarding the way corporate groups are structured.