Partial acquisitions in emerging markets: A test of the strategic market entry and corporate control hypotheses

In this paper, we examine the motivations of acquirers undertaking partial acquisitions in emerging markets by testing two competing hypotheses: the market for corporate control hypothesis and the market entry hypothesis. We find that targets of cross-border acquisitions outperform targets of domestic acquisitions in the pre-acquisition period. While cross-border acquisitions have no significant impact on target firms' operating performance, targets of domestic acquisitions experience significant improvements in operating performance and substantial changes in ownership structure after the acquisition. The evidence suggests that domestic partial acquisitions in emerging markets serve as a market for corporate control, while cross-border partial acquisitions are motivated by the strategic market entry rationale.     

The CEO's role in business model reinvention

Fending off new competitors is a perennial struggle for established companies. Govindarajan and Trimble, of Dartmouth's Tuck School of Business, explain why: Many corporations become too comfortable with their existing business models and neglect the necessary work of radically reinventing them. The authors map out an alternative in their "three boxes" framework. They argue that while a CEO manages the present (box 1), he or she must also selectively forget the past (box 2) in order to create the future (box 3). Infosys chairman N.R. Narayana Murthy mastered the three boxes to reinvigorate his company and greatly increased its changes of enduring for generations.     

Moral hazard,hold‐up,and the optimal allocation of control rights

I examine the optimal allocation of control rights in a model with manager moral hazard, where the manager and investor may hold up each other ex post. The control allocation determines both the likelihood of hold‐up and the agents’ renegotiation payoffs. In equilibrium, only two control allocations are optimal: either exclusive investor control or a contingent control allocation that allows the manager to remain in control if, and only if, interim performance is good. Thus, my model explains why it may be optimal to link control to the firm’s performance such that managers retain control only following good performance.     

Equal-weighting and value-weighting: which one is better?

Review of Quantitative Finance and Accounting - Prior research shows that noisy prices can introduce biases in returns causing equal-weighted portfolios to outperform value-weighted portfolios. In...     

Stairway to heaven or highway to hell: Liquidity,sweat equity,and the uncertain path to ownership

We study a setting in which a principal contracts with an agent to operate a firm over an infinite time horizon when the agent is liquidity constrained and privately observes the sequence of cost realizations. We formulate the principal’s problem as a dynamic program in which the state variable is the agent’s continuation utility, which is naturally interpreted as his equity in the firm. The optimal incentive scheme resembles what is commonly regarded as a sweat equity contract, with all rents back loaded. Payments begin when the agent effectively becomes the owner, and from this point on, all production is efficient. These features are shown to be similar to features common in real‐world work‐to‐own franchising agreements and venture capital contracts.     

CORPORATE BOARD SIZE, COMPOSITION AND CORPORATE FAILURES IN RETAILING INDUSTRY[1]

In recent years some activists have advanced proposals to reform corporate boards, notably their structure and process, to assure desirable corporate governance. the empirical question, however, is whether such formal board changes would guarantee good governance. This paper examines this issue by studying the differences in the board size and board composition of 21 pairs of failed and non-failed firms. the results suggest that the non-failed retailing firms, as compared to failed ones, tend to have bigger boards within the size range suggested by the activists. the differences in the percent of outsider directors and multiple offices held by C.E.O.s between the failed and non-failed firms were not significant. Implications of the results for the evaluation of board reforms are discussed.     

Feedback‐seeking behavior within multinational corporations

Notwithstanding their concern with intra‐MNC control mechanisms, scholars have overlooked the complementary phenomenon of self‐regulatory behavior by subsidiaries. In this paper, we take the first steps towards addressing this gap by advancing and testing hypotheses dealing with the determinants of a major element of self‐regulatory behavior at the subsidiary level, i.e., the performance‐oriented feedback‐seeking behavior of subsidiary presidents. Utilizing data from 374 subsidiaries of 75 MNCs, we test hypotheses regarding the impact of subsidiary task and organizational context on the feedback‐seeking behavior of subsidiary presidents. The results of this study can be summarized as follows: (i) subsidiary presidents do engage in proactive performance‐oriented feedback‐seeking behavior; (ii) they vary in the extent to which they engage in such behavior; and (iii) these variations in feedback‐seeking behavior are at least partially systematic. Copyright © 1999 John Wiley & Sons, Ltd.     

Information exchange in cartels

Antitrust authorities view the exchange of information among firms regarding costs, prices, or sales as anticompetitive. Such exchanges allow competitors to closely monitor each other, thereby facilitating collusion. But the exchange of aggregate information, perhaps via a third party, is legal. The logic is that collusion is difficult if the identity of a price-cutting firm cannot be ascertained. Here, we examine this logic using Stigler's model of secret price cuts. We first identify circumstances such that when no information exchange is possible, collusion is difficult. We then show that if firms' aggregate sales are made public, nearly perfect collusion is possible.     

India and the Impossible Trinity

In the 1990s, India responded to the well‐known trilemma of macroeconomic policy by adopting an intermediate exchange rate system combined with selective capital controls. This regime enabled the country to balance exchange rate stability, exchange rate targeting and monetary autonomy, and to weather successfully various shocks that included contagion from the East Asian crisis. India's experience serves to reinforce doubts about the desirability of bipolar exchange rate regimes for developing countries as an integral element of a new international financial architecture.     

THE DYNAMICS OF REGIONAL POPULATION AND EMPLOYMENT GROWTH

The authors investigate what Muth labels as the "chicken and egg" or what others label it as "jobs follow people" versus "people follow jobs" debate by studying the dynamic relationships of changes in population and employment in the snowbelt, the sunbelt, and the nine census regions of the United States. The vector autoregressive (VAR) modeling method is used for the annual time series data (1955–1988) on population and employment. The Granger causality tests show that, in the snowbelt region, population tends to precede employment, while in the sunbelt region, the opposite is true. The impulse response functions generated for the forecasting decade suggest that "jobs follow people" in the snowbelt and "people follow jobs" in the sunbelt. Similar findings in general hold for the census regions belonging to the snowbelt and sunbelt. These findings raise doubts about the proposition of others that the growth process is either demand or supply-driven in all phases of regional growth.