Complex Systems and the Merger Process

This paper considers how some of the generic principles that have emerged in the course of recent study and thinking around complex systems might be applied in a helpful way to the particular context of understanding the nature of the merger process. Theoretically, the paper stresses the connections between the processual and time-dependent nature of learning and knowledge acquisition and the systemic nature of socio-economic development and transformation. When carried into the substantive domain of mergers and their contribution to restructuring in the pharmaceuticals industry, we suggest that the complex systems approach provides a fruitful complement to alternative conceptual frameworks, albeit one which is still at an early stage of development in terms of this particular application.     

Insider Trading and Pay‐Performance Sensitivity: An Empirical Analysis

Abstract:   We examine whether the sensitivity of pay to performance is associated with the amount of insider trading that managers undertake. Because insider trading profits represent an alternative form of compensation, we expect that firms will consider the compensation component provided by insider trading when designing remuneration contracts. Employing a proxy for insider trading that captures the degree to which managers trade on private information, we find evidence that an increased (a decreased) level of insider trading is associated with a decreased (an increased) pay‐performance sensitivity.     

AIRLINE DEREGULATION AND THE PROBABILITY OF AIR CARRIER INSOLVENCY

This study investigates the effects of deregulation from the perspective of airline lenders. Airline-specific, pre- and post-deregulation insolvency probabilities are used to assess the effects on creditors. The results suggest that the financial condition of several airlines has significantly deteriorated as a by-product of deregulation, although most have been unaffected.     

Multivariate GARCH hedge ratios and hedging effectiveness in Australian futures markets

We use the All Ordinaries Index and the corresponding Share Price Index futures contract written against the All Ordinaries Index to estimate optimal hedge ratios, adopting several specifications: an ordinary least squares‐based model, a vector autoregression, a vector error‐correction model and a diagonal‐vec multivariate generalized autoregressive conditional heteroscedasticity model. Hedging effectiveness is measured using a risk‐return comparison and a utility maximization method. We find that time‐varying generalized autoregressive conditional heteroscedasticity hedge ratios perform better than constant hedge ratios in terms of minimizing risks, but when return effects are also considered, the utility‐based measure prefers the ordinary least squares method in the in‐sample hedge, whilst both approaches favour the conditional time‐varying multivariate generalized autoregressive conditional heteroscedasticity hedge ratio estimates in out‐of‐sample analyses.     

Merger statistics and merger policy

It is widely believed that the 1950 amendment of Section 7 of the Clayton Antitrust Act has diverted merger activity away from horizontal and into conglomerate forms. Examination of the Federal Trade Commission Large Merger Series replicates existing substantiation of this belief, but only up until 1968. Further examination of the data shows a perceptible weakening of the horizontal-merger deterrent in the following eight years. One possible explanation is that all the attention devoted to the “conglomerate problem” after 1968 implied that horizontal mergers were neither as bad nor as illegal as existing case law had made them.