DO INSTITUTIONS PREFER HIGH‐VALUE ACQUIRERS? AN ANALYSIS OF TRADING IN STOCK‐FINANCED ACQUISITIONS

If owners of target shares in a stock‐for‐stock merger perceive the acquirer as overvalued, they should sell their holdings more aggressively to profit before such overvaluation dissipates. We study institutional owners of targets and find that slightly more than half liquidate their shares in stock mergers, consistent with high institutional‐share turnover rates found in the prior literature. However, share retention is higher when valuation measures suggest greater acquirer overvaluation, regardless of whether institutional owners generally prefer growth or value stock. Institutions that prefer large‐cap, growth stock are most enthusiastic about bids from large, high‐valuation acquirers, and substantially increase their stakes in such deals.     

Coming and going: Experiments on endogenous group sizes for excludable public goods

When a public good is congestible, individuals wanting to provide the public good face challenges in forming groups of optimal size, selecting the members of the group, and encouraging members to contribute for the public good. We conduct a series of experiments in which subjects form groups using three different entry and exit rules. The experimental results are analyzed in terms of group size, the level of public good provision, social efficiency, congestion and group stability. We find that entry restriction improves the average earnings for some individuals compared to free entry/exit or restricted exit. For a given group size, individuals under the restricted entry rule contribute more for the provision of the collective good. Also, for a given average contribution level of group members, subjects under the restricted entry rule suffer less from the congestion problem and are better able to form groups of sizes closer to the optimal.     

Five trademark law strategies for managing brands

This installment of BUSINESS LAW & ETHICS CORNER offers business professionals a selection of five trademark law strategies for more effectively protecting and managing brand names. The legal strategies profiled herein introduce readers to a variety of trademark issues that are often overlooked in the management and protection of brand names, even by sophisticated and savvy business people.     

An experimental test of brand insulation against competitor attacks: Effects of consumer heterogeneity and residual desire

Price discounts generally move consumers from lower‐quality brands to higher‐quality brands more than from higher‐quality brands to lower‐quality brands. This asymmetry can reverse, however, to favor the lower‐quality brand when improvements are made to product quality. Whether such variations exist when the goal is to retain rather than steal customers remains untested and constitutes the focus of this study. Experimental results indicate that customer retention strategies tend to favor higher‐quality brands. Higherquality brands are able to retain customers by matching the form of the lower‐quality brand's attack (price reduction or quality improvement). For lower‐quality brands, matching is effective only in the case of a price attack by a higher‐quality brand. Furthermore, higher‐quality brands are able to effectively retain customers with price reductions that are smaller than the discount offered by a lower‐quality competitor, whereas lower‐quality brands must match the magnitude of a discount by a higher‐quality brand to retain customers. The findings suggest that differences in customer retention across quality levels arise from (1) heterogeneity among consumers of different quality levels in the relative weightings of price and quality, and (2) switching decisions based on reasons that are biased toward continuing to purchase, or moving to, higher quality products. © 2008 Wiley Periodicals, Inc.     

The scheduling and organization of periodic associative computation: Essential networks

This paper defines and characterizes essential decentralized networks for calculating the associative aggregate of one or more cohorts of data. A network is essential if it is not possible to eliminate an instruction or manager and still calulate the aggregate of each cohort. We show that for essential networks, the graphs that depict the operations and data dependencies are trees or forests. These results assist in the characterization of efficient networks. Received: 15 October 1994 / Accepted: 6 March 1997     

Schumpeter's ghost: Is hypercompetition making the best of times shorter?

At the center of Schumpeter's theory of competitive behavior is the assertion that competitive advantage will become increasingly more difficult to sustain in a wide range of industries. More recently, this assertion has resurfaced in the notion of hypercompetition. This research examines two large longitudinal samples of firms to discover which industries, if any, exhibit performance that is consonant with Schumpeterian theory and the assertions of hypercompetition. We find support for the argument that over time competitive advantage has become significantly harder to sustain and, further, that the phenomenon is limited neither to high‐technology industries nor to manufacturing industries but is seen across a broad range of industries. We also find evidence that sustained competitive advantage is increasingly a matter not of a single advantage maintained over time but more a matter of concatenating over time a sequence of advantages. Copyright © 2005 John Wiley & Sons, Ltd.     

Demand under product differentiation: an empirical analysis of the US wine market*

Oversupply has led to a number of perplexities for the Australian wine industry in recent times. When disaggregated from the industry level, however, the problem can be better described as a range of attribute‐specific disequilibria. To date, the solutions to this problem have predominantly revolved around supply‐side policies of reducing output through crop thinning or vine pulling. By contrast, this paper focuses on the demand side and argues that the disequilibria may be reduced by gaining a better understanding of the demand for Australian wine. A discrete choice model of product differentiation is used to estimate the demand for wine in Australia's second largest export market, the United States. Implications of the analysis are explored.     

Spurious Regressions in Financial Economics?

Even though stock returns are not highly autocorrelated, there is a spurious regression bias in predictive regressions for stock returns related to the classic studies of Yule (1926) and Granger and Newbold (1974) . Data mining for predictor variables interacts with spurious regression bias. The two effects reinforce each other, because more highly persistent series are more likely to be found significant in the search for predictor variables. Our simulations suggest that many of the regressions in the literature, based on individual predictor variables, may be spurious.