Corporate strategy,executive selection,and firm performance

This article investigates three related questions: (1) Is corporate diversification strategy associated with the level of firm-specific experience (tenure) of selected CEOs? (2) Are tenure levels of selected CEOs related to subsequent organizational performance? and (3) Does diversification strategy influence the impact that CEO firm-specific experience has on subsequent organizational performance? Results indicate that while diversification levels do not relate to extent of tenure, the selection of CEOs with lower levels of firm-specific experience results in significantly improved performance among nondiversified firms. No such relationship is observed in more diversified firms.¹ © 1998 John Wiley & Sons, Inc.     

Debt Structure Adjustments and Long-Run Stock Price Performance

We examine the long-run implications of debt structure adjustments using a sample of U.S. bond IPOs from 1971 to 1994. Bond IPOs result in simultaneous and pronounced changes in both debt maturity and debt ownership structures. We document that firms engaging in debt IPOs substantially underperform their size-and-book-to-market-matched benchmarks by 33.39 and 55.99% over the 3- and 5-year post-offer periods. Our results are strikingly similar to those reported for equity offers but contrast the evidence for seasoned debt offers. We find evidence that debt IPOs are timed to coincide with the market having the highest expectations concerning firms' prospects. A negative relation is documented between debt maturity and future growth opportunities. In part, the underperformance can be attributed to significantly reduced growth opportunities following the offering. Post-offer underperformance is more pronounced for (a) longer maturity issues and (b) firms that do not experience an increase in bank monitoring. Journal of Economic Literature Classification Numbers: G12, G24, G30, D82.     

Optimal accumulation in a small open economy with technological uncertainty

Summary. This paper analyzes the optimal allocation problem of a small trading country facing an uncertain technology. It is involved in production of many commodities. Differentiability cannot be guaranteed, hence, the Ramsey-Euler condition of optimality needs to be modified. From the optimality criterion, we derive a pair of conditions, which does not require differentiability. If “enough” uncertainty is allowed, the sequence of the distribution functions of investment expenditure converges uniformly to a unique invariant measure. In addition to the weak convergence of the stochastic process of investment expenditure we also have the sequences of the stochastic process of investment expenditure converging weakly. Received: September 8, 1994; revised version: September 25, 1997     

A general equilibrium approach to wage bargaining and employment

This paper attempts to capture the effects of cyclical fluctuations in business activity on factor prices and employment levels in a two-sector model with wage bargaining.     

CEO Experiences: Effects on the Choice of FDI Entry Mode*

abstract Drawing on the strategic management and international business literatures, this study examines the relationships between the experiences of newly selected CEOs and their choice of foreign direct investment (FDI) entry modes. Based on a sample
of 380 foreign market entry events involving acquisitions, greenfield investments, and joint ventures, our findings indicate that CEOs with less firm experience preferred acquisitions and greenfield investments to joint ventures and, older CEOs were more likely to opt for joint ventures over greenfield investments. In addition, CEOs with throughput functional experience favoured acquisitions over joint ventures and greenfield investments. Finally, CEO international experience was associated with a greater propensity to choose greenfield investments and acquisitions over joint ventures and also greenfield investments over acquisitions. The implications of the findings from the perspective of theory and managerial practice are discussed, along with possible directions for future research.     

DO BANK RELATIONSHIPS MATTER IN PUBLIC DEBT OFFERINGS?

Finance theorists have argued that banks have a comparative advantage over public debtholders and other suppliers of debt both in gathering information about and in monitoring corporate borrowers. Although underwriters of public debt issues and private placements have access to inside information when executing specific transactions, commercial bankers have ongoing relationships with their corporate borrowers that have often been built up over years. Perhaps more important, banks are also often in a better position and have stronger incentives than a dispersed collection of bondholders to keep tabs on what the borrowers do after receiving the capital.
This theoretical argument received striking empirical support from a study by Chris James published in 1987 in the Journal of Financial Economics. Entitled "Some Evidence on the Uniqueness of Bank Loans," the study documented that announcements of new bank lending aggreements by public firms are received positively, on average (and in a large majority of cases) by the stock market. This finding offered a pointed contrast to the neutral to sharply negative stock-price responses that accompany announcements of almost all other kinds of securities offerings, including private placements of debt and public offerings of straight debt.
In this article, the authors discuss their own recently published study that provides another piece of evidence of the value added by banking relationships. Specifically, the authors report that the first public debt offerings of companies with bank relationships carry spreads that are 85 basis points less than the spreads of initial debt issues by comparable firms without bank relationships. As the authors interpret their findings, a banking relationship not only helps to "certify" the value of corporate borrowers to their stockholders, but also provides other lenders with valuable "cross-monitoring" benefits that are reflected in lower borrowing costs.     

External validation of the use of vignettes in cross-country health studies

Cross-country comparisons of subjective assessments are rendered difficult if not impossible because of sub-population specific response style. To correct for this, the use of vignettes has become increasingly popular, notably within cross-country health studies. However, the validity of vignettes as a means to re-scale across sample sub-populations critically rests on the assumption of “response consistency” (RC): that vignettes and self-assessments are evaluated on the same scale. In this paper, we seek to test this assumption by applying objective measures of health along with subjective measures and vignettes. Our results indicate that the assumption of RC is not innocuous and that our extended model relaxing this assumption improves the fit and significantly changes the cross-country rankings of health vis-á-vis the standard Chopit model.     

Gendered Nature and Urban Culture: The Dialectics of Gated Developments in Izmir,Turkey

This article adds to recent debates on the emergence of new forms of private gated developments in Turkey that specifically target the upper middle classes. In particular, it focuses on the rise of residential gated developments along the Izmir‐Ce?me expressway to highlight how the dialectics between gender, nature and culture are reinforced in these places. The article, based on a case study of three gated developments in this region, suggests that their production is made possible through a series of dualisms between nature and culture, mobility and fixity, urban public life and gendered domesticity, urban modernity and rural parochialism, polluted city and healthy town. Based on interviews with architects, developers and residents, as well as local‐authority officials in Urla town who sanction these developments, this article argues that contradictions between different sets of dualisms form a central aspect of the processes through which these developments were designed, produced, marketed and inhabited. Taken collectively, these contradictions point broadly to the limits of gated communities in creating stable, adaptable and sustainable patterns of development in Turkey and the global South.     

Opaque financial reports and R2: Revisited

In this study, we revisit the link between R² (synchronicity) and earnings management (opacity) because of the importance of the ongoing debate on the relation between idiosyncratic risk and earnings management in the finance and accounting literatures. Hutton et al. (J. Financial Economics, 2009) provide evidence of a positive link between opacity and R². They interpret their finding to imply that firms with high R² (high synchronicity) have less firm-specific information impounded in their stock price. Our results for this relationship fail to unequivocally support the results reported in Hutton et al. (2009). We show that their results are not only time variant but also not robust to the alternative empirical technique recommended for panel data by Petersen (2009) and alternative estimation of discretionary accruals adjusted for firm performance prescribed by Kothari et al. (2005). We also find no support for a convex relation between idiosyncratic risk and opacity. The findings documented in this study substantially revise some of Hutton et al.'s findings in this important and growing area of research.     

Does reducing spatial differentiation increase product differentiation? Effects of zoning on retail entry and format variety

This paper investigates the impact of spatial zoning restrictions on retail market outcomes. We estimate a structural model of entry, location and format choice across a large number of markets in the presence of zoning restrictions. The paper contributes to the literature in three ways: First, the paper demonstrates that the omission of zoning restrictions in the extant literature on entry and location choice leads to biased estimates of the factors affecting market potential and competitive intensity. Second, the cross-market variations in zoning regulations helps us test and provide evidence for the theory that constraints on spatial differentiation will lead to greater product differentiation. Finally, we provide qualitative insight on how zoning impacts retail entry and format variety; in particular we evaluate the impact of prototypical zoning arrangements such as “centralized,” “neighborhood,” and “outskirt” zoning on entry and format variety.