Longevity and the life-cycle of management buy-outs

The longevity debate about buy-outs has hitherto been restricted. By focusing on large highly leveraged transactions, existing research has taken only a partial view of how long buy-outs last and the factors influencing longevity. This paper develops and tests hypotheses concerning the influences on buy-out longevity across the whole spectrum of management buy-out applications. Both quantitative and case study evidence from the U. K. is presented. A heterogeneity view of buy-outs is supported. Tests using quantitative data show that earlier exit is associated with larger buy-outs, and buy-outs arising on privatization from the public sector and from non-U. K. parents. Case study evidence principally supports hypotheses that earlier exit is associated with financing institutions being in a relatively stronger position than management and with more rapidly changing market conditions for the firm.     

An explanation of why shareholders' losses are so large after drug recalls

Recent studies show firms suffering drug recalls experience security losses many times larger than any reasonable measure of their direct cost. We discover that the implied standard deviation of stock returns from the Black-Scholes option pricing model significantly increases after a drug recall. The implied standard deviation provides a good proxy for the stock's ex ante beta. The higher systematic risk after a product recall must raise the discount rate used by investors. After a recall, stock prices are reduced in line with the lower expected future earnings and are further reduced because of a higher discount rate.     

Options and efficiency: Some experimental evidence

This paper examines the information aggregation role of options when agents possess diverse information about possible asset returns. We construct two identical experimental markets: one with and one without options. We find that options speed the information aggregation process. Asset markets that have parallel option markets aggregate traders' diverse information faster than markets where options trading is not available. Implied ranges were calculated from asset and option prices and compared to the actual ranges. These comparisons suggest that options may provide a means for agents to coordinate beliefs about asset values.     

The Economic Significance of User-Generated Feedback

This paper examines the impact of user-generated feedback on price at a price comparison site or shopbot. It employs a modified hedonic price function to explore the use made by current potential consumers of the experience of past actual consumers in evaluating quality attributes that were not observable when the product was initially launched on to the market. Using a database of daily observations on 211 digital cameras traded on NexTag.com, we find that the product’s star rating, reflecting all the available individual assessments of the product, has a significant negative impact on the discount on the manufacturer’s recommended selling price at which the product is offered.     

Toll-free numbers: Demand,property rights,and public policy

The demand for Toll Free Numbers (TFNs) languished from 2000 to 2008; however recent growth in demand caused the FCC to open a new toll-free code (855) with the possibility of new code openings in the next three years. The analysis here indicates the demand for TFNs is highly inelastic (the coefficient for own price elasticity for TFNs is approximately −0.04). This has implications for concerns regarding future exhaust of toll-free codes and the price structure for recovery of SMS/800's costs. This article considers the effects of the limited property rights for TFN, and welfare implications of gray markets for vanity TFNs. The FCC's allocation mechanism for new 855 codes is considered and whether other allocation mechanisms, such as auctions, could be welfare superior.     

A tactical retreat? Conceptualising the dynamics of European grocery retail divestment from East Asia

The internationalisation of the firm is a highly dynamic process, in which periods of investment and expansion intermingle with periods of divestment and retrenchment. Academic research to date has focused on identifying the reasons for and the processes of divestment. Empirical studies either evidence generic pressures or provide case studies of specific incidents. There few longitudinal studies of international divestment, consequently the dynamic interactions between host market, home market and firm level factors, and how the institutional context changes over time is underplayed. This paper seeks to rectify this gap in our understanding.We explore the rationale and evolving dynamics of European grocery retail divestment in East Asia over a thirty year period. Taking an inductive approach and drawing on analysis of contemporary narratives drawn from company documentation, trade journals, newsfeeds and market reports, three phases can be identified characterised by specific factors and combinations of factors which intersect to provide the key pressures and stimuli for divestment. We conclude that at different time periods, different internal and external contextual influences manifest themselves through different priorities within the firm’s strategy – marked by a switch from local (host) market, to regional, to global firm-centric considerations. Longitudinal analyses allow a greater recognition of this dynamic interplay of factors, and the changes in these relationships, and provides a more nuanced understanding of the international divestment process.     

Moral management in competitive markets

The intrinsic motivation of a firm’s management for engaging in prosocial behavior is an important determinant of a firm’s social conduct. I provide the first model in which firms run by morally motivated managers engage in corporate social responsibility (CSR) in a competitive setting. Moral management crowds out a competitor’s strategic CSR, increasing profitability and leading shareholders to strategically delegate moral managers, although necessary for socially optimal CSR is that shareholders be morally motivated as well. Shareholders appoint managers that engage in a socially excessive amount of CSR, counter to existing literature, whenever product‐market competition is sufficiently intense.