The medium of exchange in acquisitions: Does the private information of both acquirer and target matter?

We present a direct test of the choice of the medium of exchange in acquisitions when both acquirers and targets possess private information about their own intrinsic values. We test three hypotheses: first, whether acquirers are more likely to choose a stock offer as their equity is more overvalued; second, whether acquirers facing a greater extent of information asymmetry in evaluating targets are more (or less) likely to use a stock versus a cash offer; and third, whether a cash offer deters competing bids. Our findings are as follows. First, acquirers choosing a stock offer are overvalued and those choosing a cash offer are correctly valued. Second, the greater the extent of acquirer overvaluation, the greater the likelihood of it using a stock offer; further, the greater the extent of information asymmetry faced by an acquirer in evaluating its target, the greater its likelihood of using a cash offer. Third, the extent of an acquirer's under- or overvaluation significantly affects the abnormal returns to its equity upon the acquisition announcement. Finally, the use of cash by an acquirer deters competing bids. We conclude that private information held by both acquirers and targets together determine the medium of exchange.     

Policy makers’ paradigms and evidence from consumer interpretations of dietary supplement labels

The regulation of marketplace information regarding health and nutrition is in flux. Nowhere, perhaps, is this more evident than in the dietary supplement industry. Herein, we present an experiment that examines the two major types of claims used for dietary supplements, testing the underlying assumptions made by policy makers. Our study suggests that a direct‐effects consumer decision‐making model does not apply in this context; instead, consumers process label claims through various biasing filters.     

Are trade restrictions to protect the Balance of payments becoming obsolete?

With the removal of exchange controls and other restrictions to capital mobility, the need for, and the use of, import restrictions for balance-of-payment reasons, as provided for under GATT Articles XII and XVIII:B, has diminished. Since a recent WTO ruling also seems to have put a stop to developing countries' using the ambiguity of treaty language to justify measures designed to protect their domestic industries, there is reason to expect that trade restrictions justified with a foreign exchange crisis will finally fall into disuse. The views reflected here are solely those of the author and should not be attributed to the WTO.     

Disclosing elements of disclosure: a test of legitimacy theory and company ethics

This paper focuses on some of the ethical issues related to voluntary disclosure of qualitative information by Canadian public companies. Drawing on various organizational theories, we examine some of the ways that companies can symbolically manage legitimacy through disclosure. Press releases of a sample of companies that received cease‐trading orders were analysed for their use of language. We found that high‐risk companies attempted to manage legitimacy by selectively releasing information and by using ambiguous language. Moreover, some companies behaved unethically by using language that suggested a positive future despite the imminent release of a cease‐trading order. These findings have implications for organizational and accounting theorists and stakeholders in the corporate, fiduciary, and investment communities. Copyright © 2008 ASAC. Published by John Wiley & Sons, Ltd.     

The Value Premium and Time-Varying Volatility

Abstract:  Numerous studies have documented the failure of the static and conditional capital asset pricing models to explain the difference in returns between value and growth stocks. This paper examines the post-1963 value premium by employing a model that captures the time-varying total risk of the value-minus-growth portfolios. Our results show that the time-series of value premia is strongly and positively correlated with its volatility. This conclusion is robust to the criterion used to sort stocks into value and growth portfolios and to the country under review (the US and the UK). Our paper is consistent with evidence on the possible role of idiosyncratic risk in explaining equity returns, and also with a separate strand of literature concerning the relative lack of reversibility of value firms' investment decisions.     

Young consumers’ food preferences within selected sectors of the Hospitality Spectrum

In society, young consumers are influenced by an array of factors within their home, school and social environments. The adolescent period is one in which the individual becomes a more independent consumer, exerting increased degrees of independence and a subsequent freedom of preference. Such independence may be particularly apparent within the social environment, despite young consumers generally being categorized under the ‘family market’, within the Hospitality Spectrum. The aim of the study was to analyse young consumers’ food preferences within the home, school and social environments, with particular reference to the role of the Hospitality Spectrum. Young consumers for the study, are defined as being between 11 and 16 years, segmented into two age groups: 11–13 years and 14–16 years. The selected sectors of the Hospitality Spectrum which were studied, were the fast food service and school canteen sectors. In order to fulfil the research aim and objectives, a range of research instruments and analysis techniques were used. The results of the study to date would illustrate that tentative steps have been taken within the school and fast food sectors, to bridge the ‘gaps’ between business supply and consumer preferences. Gender differences were found in food selections within school canteens and fast food establishments, with females more likely to select ‘British’ styled fast foods at school and males more likely to select ethnic foods at fast‐food establishments. No significant differences were found between the two age segments. It is vital that the increasingly important role of the young consumer segment is recognized, in particular considering them as individuals rather than as a part of the ‘total’ family consumer package. However, in market segmentation young consumers are an important consumer group and it must not be overlooked that they will be the future adult consumers. The Hospitality Spectrum must therefore treat this group with respect for the consumer service industry to achieve its full potential. The results of this Northern Ireland study indicates that although the young consumer segment is viewed as important within the selected sectors of the Hospitality Spectrum, the extent of their full potential has yet to be recognized.     

An exploratory analysis of the effect of the “buy it now” option on sellers' revenues in silent auctions

• This paper tests three competing hypotheses regarding the effect of a “buy it now” option in silent auctions: that the option has a positive, negative, or neutral effect on the seller's revenues. These hypotheses were tested on 4 years of data from a university art museum's silent auctions. The results indicate that the “buy it now” option has a significant negative effect on the seller's revenues. Possible explanation, implications, and limitations are discussed.

Copyright © 2009 John Wiley & Sons, Ltd.