Efficiency and Market Power Gains in Bank Megamergers: Evidence from Value Line Forecasts

This paper examines whether gains in bank megamergers occur due to efficiency improvements or the exercise of market power using financial statement line item forecasts from Value Line to infer the effect of the merger on prices and quantities. The average megamerger is associated with cost‐efficiency improvements. In the cross‐section, efficiency gains are limited to market expansion mergers while market overlap mergers and Too‐Big‐To‐Fail (TBTF) mergers exhibit monopoly gains. Efficiency gains dissipate when the resulting megabank size exceeds $150 billion in assets or 1.5% of gross domestic product indicating that banks thought to be TBTF are likely to be “Too‐Big‐To‐Be‐Efficient.”     

LINKING CHANGES IN REVEALED CAUSAL MAPS AND ENVIRONMENTAL CHANGE: AN EMPIRICAL STUDY

This article explores the cognitive maps of the dominant coalition of one firm over time. It begins with an overview of the cognitive mapping literature and discusses ‘revealed cognitive maps’ as one strategy for measuring managerial cognitive structures. Next, the revealed cognitive maps from one company over a 20-year period are analysed for their fit with the company's environmental context. The data suggest that the fit between cognitive structures and the environment was less than perfect, and that decision-makers both under-identified and over-identified certain environmental factors. These and other data are discussed within the context of a cognitive approach to managerial thinking.     

Correction to: The impact of a U.S.–U.K. free trade agreement on workers: a CGE model with worker displacement

Business Economics -     

CEO founder status and firm financial performance

Founders create their organizations, yet are often expected to eventually become liabilities to these same organizations. Past empirical research on the relationship between CEO founder status (i.e., is the CEO also the founder?) and firm performance has yielded inconsistent results. This study of 94 founder‐ and nonfounder‐managed firms finds that founder management has no main effect on stock returns over a 3‐year holding period, but that firm size and firm age moderate the CEO founder status–firm performance relationship. Copyright © 2000 John Wiley & Sons, Ltd.     

Battle on the Wrong Field? Entrant Type,Dominant Designs,and Technology Exit

Research summary : Startups often compete with diversifying entrants in the technology race to define dominant designs, which can be platform technology‐based or non‐platform technology‐based. However, little research has examined the relative risk of technological exits for startups vs. diversifying entrants in such “dominance battles.” We develop a contingency framework that links a firm's technology exit to its pre‐entry experience and the characteristics of the dominance battle. With a sample of 134 technologies involved in 31 dominance battles in the information technology industry from 1979 to 2007, we show that technologies of startups were more likely than those of diversifying entrants to exit from platform technology‐based dominance battles; however, this relationship did not exist in non‐platform technology‐based dominance battles, or after the emergence of dominant designs. Managerial summary : How can a startup that tries to create a dominant design strategize to survive the fierce technology race? This study demonstrates that choosing the right battlefield is of paramount importance. Two aspects of a battlefield are shown as relevant: the type of technology and the stage of industrial evolution. Our results show that technologies sponsored by startups tend to have higher exit rates than those sponsored by diversifying entrants in dominance battles characterized by platform technologies, but this penalty is not evident in dominance battles characterized by non‐platform technologies or after the emergence of dominant designs. Furthermore, our study suggests that lack of organizational legitimacy, complementary assets, and integrative capabilities may explain why startups have a higher risk of technology exit than diversifying entrants. Copyright © 2017 John Wiley & Sons, Ltd.     

Takeover Immunity, Takeovers, and the Market for Nonexecutive Directors

We develop and test two competing hypotheses that relate the market for nonexecutive directors to the level of external monitoring mechanism of the firms they serve. The Reward for Discretion Hypothesis posits that directors are valued more when they display discretion concerning their choice of antitakeover provision (ATP) levels rather than follow a rule. Alternatively, the CEO Risk Aversion Hypothesis implies that CEOs seek directors with inclination for uniform and high ATP levels. We examine how changes in ATP levels and approval of value creating/destroying acquisitions affect the careers of nonexecutive directors. Our results, based on data from about 3,000 listed US companies during 1994-2003, support the Reward for Discretion Hypothesis.     

Consumers' willingness to pay for corporate social responsibility: Theory and evidence

In an era when consumers believe that businesses should engage in corporate social responsibility (CSR), it is vital to understand how it affects consumers' willingness to pay (WTP) for the goods and services offered by such businesses. There is a need for an in-depth study into the relationship between CSR and WTP, and to identify the mediators and the moderators affecting this relationship. To investigate this, we conducted a systematic literature review based on a preliminary search result of 116 unique articles indexed on this topic in four bibliographic databases—Scopus, Google Scholar, Dimensions and Web of Science—published over the previous seven decades. The findings confirm the overall positive effect of CSR on WTP. This study also reveals the indirect effect between CSR and WTP, mediated by variables like Brand Trust, Brand Loyalty, Brand Love, Customer Satisfaction, Brand Attitude, Purchase Intention and Brand Equity. The relationship is impacted by moderators, including demographics, cause-based aspects, company characteristics, personal aspects and types of products. The theory explaining the evidence of each of these aspects provides a deeper understanding of the relationship between CSR and WTP, and the intervening variables. Based on these, a conceptual framework of this relationship involving all the variables is developed. The Theory, Context and Method (TCM) framework is employed to identify gaps and systematically make recommendations for future research. The findings of this study will aid marketers in developing pricing strategies based on a thorough understanding of consumer behaviour in terms of CSR perceptions. Scholars can use this study's conceptual framework to examine previously unexplored relationships. As the literature on CSR and its influence on consumers' purchase behaviour grows, this comprehensive systematic literature review on the effects of CSR on WTP fills an important gap.     

The path-to-profitability of Internet IPO firms

Extant empirical evidence indicates that the proportion of firms going public prior to achieving profitability has been increasing over time. This phenomenon is largely driven by an increase in the proportion of technology firms going public. Since there is considerable uncertainty regarding the long-term economic viability of these firms at the time of going public, identifying factors that influence their ability to attain key post-IPO milestones such as achieving profitability represents an important area of research. We employ a theoretical framework built around agency and signaling considerations to identify factors that influence the probability and timing of post-IPO profitability of Internet IPO firms. We estimate Cox Proportional Hazards models to test whether factors identified by our theoretical framework significantly impact the probability of post-IPO profitability as a function of time. We find that the probability of post-IPO profitability increases with pre-IPO investor demand and change in ownership at the IPO of the top officers and directors. On the other hand, the probability of post-IPO profitability decreases with the venture capital participation, proportion of outsiders on the board, and pre-market valuation uncertainty.     

BOND REFUNDING IN EFFICIENT MARKETS: A DYNAMIC ANALYSIS WITH TAX EFFECTS

This paper provides a dynamic analysis of the bond refunding problem in an efficient market setting with corporate taxes and transaction costs. A new methodology is developed to analyze the optimal exercise problem in the presence of imperfections. This analysis enables prediction of the effect of changes in corporate tax laws on the refunding decision. It also explains the empirical observation that bonds are often called when the bond price is below the call price.