Selling winners, holding losers: Effect on fund flows and survival of disposition-prone mutual funds

Recent studies suggest that presence of a disposition effect in a large subset of investors can create stock mispricings, which has serious implications for market efficiency. We examine whether US equity mutual funds are disposition-prone, how that effect influences performance, investor flows and fund survival, and whether the disposition orientation of mutual funds affects stock prices in a sustained manner.We find that about 30% of all funds exhibit some degree of disposition behavior and that such funds underperform funds that are not disposition-prone by 4-6% per year. Moreover, after controlling for performance, tax overhang and other factors that potentially affect flows, disposition-prone funds attract significantly smaller flows than other funds. The results suggest that mutual fund investors are smart enough to minimize investment in disposition-prone funds. Consequently, disposition-prone funds have significantly higher rates of failure than other funds, thereby reducing the impact of such trading behavior on security prices.     

Agility and flexibility in international business research: A comprehensive review and future research directions

This study explores 134 articles on agility and flexibility research published in the top-nine international business (IB) journals. Accordingly, we critically analyze, map and structure flexibility and agility research in IB, and synthesize the findings into an integrative framework. The paper identifies a wide range of definitions of the concept and a lot of work on its conceptualization. However, studies at the individual and institutional levels of analyses are scarce, and the concept is under-theorized, as there is a dearth of real theoretical underpinnings in this research stream. Thus, in addressing this gap, more qualitative and interdisciplinary research is needed.     

Localization--the revolution in consumer markets

Standardization has been a powerful strategy in consumer markets, but it's reached the point of diminishing returns. And diversity is not the only chink in standardization's armor: Attempts to build stores in the remaining attractive locations often meet fierce resistance from community activists. From California to Florida to New Jersey, neighborhoods are passing ordinances that dictate the sizes and even architectural styles of new shops. Building more of the same--long the cornerstone of retailer growth--seems to be tapped out as a strategy. Of course, a company can't customize every element of its business in every location. Strategists have begun to use clustering techniques to simplify and smooth out decision making and to focus their efforts on the relatively small number of variables that usually drive the bulk of consumer purchases. The customization-by-clusters approach, which began as a strategy for grocery stores in 1995, has since proven effective in drugstores, department stores, mass merchants, big-box retailers, restaurants, apparel companies, and a variety of consumer goods manufacturers. Clustering sorts things into groups, so that the associations are strong between members of the same cluster and weak between members of different clusters. In fact, by centralizing data-intensive and scale-sensitive functions (such as store design, merchandise assortment, buying, and supply chain management), localization liberates store personnel to do what they do best: Test innovative solutions to local challenges and forge strong bonds with communities. Ultimately, all companies serving consumers will face the challenge of local customization. We are advancing to a world where the strategies of the most successful businesses will be as diverse as the communities they serve.     

Colliding Employer‐Employee Perspectives of Employee Turnover: Evidence from a Born‐Global Industry

Set in the context of internationalization of the global division of labor, this article provides a deeper exploration of qualitative themes of conflicting accounts of employees’ reasons to quit and managerial strategies to prevent employee turnover in six business process outsourcing firms operating in India. Such differences in cognition and action between the two constituencies suggest that the decision to quit is not a linear and rational process as highlighted in most extant models of employee turnover. Our findings suggest that employees are attached more to a place or people they work with rather than the organization per se. Intergenerational differences between Generation Y knowledge workers and Generation X managers and the ineffectiveness of espoused human resource practices suggest the presence of “push” human resource management (HRM) systems. Our findings have implications for employee turnover models, intergenerational theory and high‐commitment HRM, and practitioners. © 2015 Wiley Periodicals, Inc.     

The fear of globalizing capital markets

It is generally accepted that free flow of goods benefits both economies without serious risks. The situation with the free flow of capital is different. Many policy makers and economists are skeptical not only about the benefits of free flow of capital, but also see uncontrolled capital flows as risky and destabilizing. Other economists, however, firmly believe that free capital flows will lead to a more efficient allocation of resources and greater economic growth. Nevertheless, the debate has little empirical evidence to rely on. We hope to fill that gap in this paper. We study the benefits and risks associated with capital flows by examining the experience of emerging economies around the time that foreign investment in stock markets was allowed. We investigate the impact of capital flows on stock returns, stock market efficiency, inflation, and exchange rates. We also examine the effect on different kinds of volatility that might arise as a consequence of capital flows: volatility of stock returns, volatility of inflation rates, and volatility of exchange rates. We find no evidence of an increase in inflation or an appreciation of exchange rates. Stock returns reflect a lower cost of capital after liberalization. There is no increase in stock market volatility and the volatility of inflation and exchange rates actually decreases. Stock markets become more efficient as determined by testing the random walk hypothesis.     

The evolution of educational inequalities through secondary school: Evidence from a South African panel study

Schooling outcomes in South Africa are characterised by significant inequalities on the basis of race and socio-economic status. This paper reports on findings from a unique panel dataset that follows individuals who participated in the Trends in International Mathematics and Science Study in 2002 as Grade 8 students through to their secondary school-leaving examination (known as ‘matric’) in Grade 12. The paper investigates the extent to which secondary schools differ in converting Grade 8 achievement into matric outcomes. Achievement in Grade 8 is strongly predictive of survival to matric, passing matric and performance in matric. Many students had extremely weak mathematical proficiency in Grade 8 and yet decided to take matric mathematics, only to fail the subject. Increasing the number of matric mathematics passes is a strong policy imperative. Our analysis suggests that the way to achieve this is to improve mathematics learning at earlier stages of the school programme rather than through indiscriminate mathematics participation in matric.     

Voluntary Disclosure of Management Earnings Forecasts in IPO Prospectuses

Asymmetric information and mechanisms for its resolution in the initial public offering (IPO) process are subjects of extensive research and debate. In this paper, we investigate the impact of one such mechanism, namely voluntary disclosure of management earnings forecasts by issuers of IPOs, as a means of reducing asymmetric information as well as ex ante uncertainty. Our focus is on the relative importance of this voluntary disclosure mechanism on both IPO underpricing and post‐issue return performance. Our results indicate that management earnings forecasts provide important and incremental information compared to other means of reducing asymmetric information, and these disclosures appear to improve the environment of IPO issuance. For example, our underpricing results show that firms that choose to provide forecasts leave 'less money on the table' with a lower degree of underpricing. In terms of post‐issue performance, firms whose forecasts turn out to be optimistic are penalized significantly relative to other forecasters and non‐forecasters.     

The information content of stock splits

We develop a new methodology that controls for both the timing of annual earnings news (Asquith et al., 1989) and the performance prior to split announcements (Barber and Lyon, 1996) to evaluate the information content of stock splits. In contrast to existing evidence, we find that stock splits in aggregate are followed by positive abnormal future earnings growth, suggesting that stock splits contain information about future, rather than past, operating performance. When we use changes in breadth of institutional ownership as a new metric of information content to corroborate our findings, we find that splits with the greatest increase in breadth experience positive post-split abnormal returns and positive abnormal earnings growth. Together, our results suggest that some splits contain positive information about future performance, and that sophisticated market participants such as institutional investors are able to select these splits.