The consequences of managerial indiscretions: Sex,lies, and firm value

Personal managerial indiscretions are separate from a firm's business activities but provide information about the manager's integrity. Consequently, they could affect counterparties’ trust in the firm and the firm's value and operations. We find that companies of accused executives experience significant wealth deterioration, reduced operating margins, and lost business partners. Indiscretions are also associated with an increased probability of unrelated shareholder-initiated lawsuits, Department of Justice and Securities and Exchange Commission investigations, and managed earnings. Further, chief executive officers and boards face labor market consequences, including forced turnover, pay cuts, and lower shareholder votes at re-election. Indiscretions occur more often at poorly governed firms where disciplinary turnover is less likely.     

Stock liquidity and managerial short-termism

We examine whether stock liquidity exacerbates or mitigates managerial short-termism. Utilizing earnings management as a proxy for managerial short-termism, we establish three major findings. First, firms with liquid stocks engage in less accrual-based and real earnings management. Second, the effect of stock liquidity on earnings management is amplified for firms with high levels of managerial pay-for-performance sensitivity. Third, the positive association between the intensity of earnings management and firm cost of capital is evident only for firms with low stock liquidity. Our findings are consistent with the threat of blockholder exit as the main governance channel through which stock liquidity discourages opportunistic earnings management and mitigates managerial short-termism.     

Does managerial ability matter for cross-border M&As: Evidence from Chinese listed firms

With the deepening of economic globalization, cross-border mergers and acquisitions (CBMAs) are increasingly becoming an important choice of transnational investment, and more Chinese firms are becoming involved in them. However, the success rate of CBMAs for firms in China seems to be lower than that for firms in other countries. Using data on the CBMA deals initiated by Chinese A-share listed enterprises from 2003 to 2018, we examine the association between managerial ability and the likelihood of completing CBMAs. The empirical results show that the average impact of managerial ability on the likelihood of completing CBMAs is positive. Furthermore, by taking heterogeneity of the ownership structure into account, we find that the positive effect of managerial ability is significant only for non-state-owned enterprises. Moreover, the results from the mediation model show that relaxing financing constraints is a possible channel by which managerial ability affects the likelihood of completing CBMAs. Our results are robust to various model specifications.     

A train of thought in product experientiality: Working memory,distraction, and inconsistencies in cue order effects

The sequence of informational cues and the level of distraction have an impact on the judgment of a product’s quality and preference. Two quasi-experimental studies (N_total = 340) investigate the influence of the force behind the processing of these cues – working memory (WM). Previous research found that, in the presence of a distractor, high WM individuals are more able to recall the initial cue, and thus derive their product judgment from the initial strong cue. Study 1 contradicts these findings and raises important methodological questions regarding the conceptualization of strong and weak cues. Specifically, commonly accepted strong cues (e.g., product reputation) might not influence consumers as expected. Additionally, in a sequence of product evaluation with high vs. low degree of experientiality, study 2 reveals that consumers tend to show a primacy effect that is stronger for higher levels of WM capacity. Moreover, in a sequence of assessing low vs. high degree of experientiality products, consumers reveal stronger recency effects, thus showing that WM reinforces this recency effect. Our findings have important implications for marketers by suggesting that consumers with high WMC are more able to process complex stimuli and retrieve previously presented information on a product quality. These consumers also have a higher tendency to retrieve more information from product scenarios with a high degree of experientiality.     

Expanding airport capacity of cities under uncertainty: Strategies to mitigate congestion

Airport capacity constraints are increasingly challenging the growth of air traffic. At the same time, decision-making about airport capacity investments is extremely complex, involving trade-offs. This paper’s objective is to optimise a privately owned airport system’s capacity investment decision in a city under demand uncertainty. Next to the investment size, our real options model incorporates the timing of the investment, as well as the cost of congestion. The results reveal that the larger a city’s initial airport capacity, the smaller its investment will relatively be and the lower the occupancy rate threshold at which investment will take place. We also show that, in case of a higher demand growth combined with more demand uncertainty, the city will benefit from a significantly larger investment, but made later at a higher occupancy rate. In this case, cities with a small initial capacity will sometimes even more than double current capacity. Higher airport charges and an increase in non-aeronautical revenues both lead to a later investment in more capacity, due to the increased project attractiveness. An increase in congestion costs results in a larger investment made earlier, in order to eliminate delays. Airport operational cost and capacity holding cost increases both lead to smaller investments.     

Internationalization speed and subsidiary survival of EMNCs: The moderating roles of CEO international experience and state ownership

In the process of internationalization, effective management of dispersed location-specific knowledge is the key to successful internationalization strategies for companies. Rapid internationalization often prevents multinational corporations (MNCs) from absorbing and internalizing internationalized knowledge in a timely manner and achieving ideal performance. Compared with MNCs in developed countries, emerging market multinationals (EMNCs) are more inclined to implement a rapid internationalization strategy to enhance their own competitive advantage. However, their internationalization process is limited by their lack of managerial resources. Why and how would internationalization speed impact the survival of EMNCs Subsidiary? Using the survival analysis method and taking the Chinese A-share listed companies as empirical setting, our results show that the internationalization speed negatively affects the survival of EMNCs Subsidiary; Both CEO international experience and state ownership weaken the negative impact of internationalization speed on the survival of EMNCs Subsidiary. We argue that rapid internationalization underestimates the Penrose effect in the process of internationalization, that is, underestimates the managerial resources required to learn and accumulate absorptive capacity, and effectively manage dispersed knowledge. Based on the dual context of dispersed knowledge management and managerial constraints, this paper expands the understanding of the impact mechanism of internationalization speed on corporate performance, and also has certain guiding significance for the selection of internationalization speed of EMNCs.     

A Monte-Carlo approach to estimating the effects of selected airport capacity options in London

The issue of future airport capacity in London is currently the subject of much political debate in the UK. Although realistic estimates of the effects of capacity enhancement may be desirable, such estimates are difficult. Through the use of Monte Carlo simulation, this paper quantifies and compares the relative capacity enhancements that may be afforded by the construction of a new hub airport in the Thames Estuary, additional runways at Heathrow, Gatwick and Stansted and changes to operating practices at Heathrow. The simulations show that a new hub airport would be the most effective way to increase capacity, although the reported financial and environmental costs of such a development indicate a comparatively poor rate of return. Proposed new runways at Heathrow, Gatwick and Stansted and the removal of runway alternation at Heathrow provide more modest increases in capacity.     

The importance of farmer education in South Australia

There is a significant challenge involved with balancing food security at local and global levels whilst mitigating the environmental and social consequences of the historically productivist agri-food system. This work will address the importance of education in the South Australian agricultural sector as a tool to maximise beneficial outcomes. The results of a blended method research project, which involved farmers and governance stakeholders in South Australia, are presented as empirical evidence highlighting the positive roles that formal education, in particular university education, have in regard to increasing sustainability. It was found that higher levels of formal education contributed to farmers being more likely to prioritise the socio-environmental outcomes of their agricultural land use. There was also a dramatic reduction in farmer concerns with government support mechanisms as education levels went from secondary or less, through to vocational qualifications, and finally university degrees. Interviews with agricultural governance stakeholders emphasised the role of education in building the adaptive capacity of farmers, and the subsequent positive outcomes for the future development of the South Australian agricultural industry. These results suggest that further education provides farmers with the capacity to compete effectively in a liberalised economy.     

Effects of hiring former employees of multinationals in the absorptive capacity of local firms

The attraction of foreign direct investment seeks, among other things, to increase the productivity of local companies through knowledge spillovers. However, the empirical evidence in this regard is contradictory. One influential factor is the absorptive capacity of the local companies. This article analyzes the effect of the presence of former employees of multinational corporations as employees of local companies, on the absorptive capacity of said companies. The study was done in Costa Rica, a country known for its successful strategy in the subject matter. The data come from a survey applied to 1167 companies by the Observatorio Costarricense de las Pymes in 2011. It was found that the hiring of former employees of multinational corporations by local companies has a positive effect on the index of absorptive capacity of companies in all productive sectors. Specifically, this hiring of former employees increases the index of absorptive capacity by nine percentage points, with differences by sector and the size of the company.     

How to improve the university–industry collaboration in Taiwan's animation industry? Academic vs. industrial perspectives

This study demonstrates the use of importance–performance analysis (IPA) to prioritise the motivators that can facilitate university–industry collaboration in the animation industry in Taiwan. This study confirms that financial supports and education are still major reasons for academia to participate in the university–industry collaboration. Reducing costs and obtaining human training are the reasons for animation firms to join the university–industry collaboration. However, by comparing the results of IPA for academia and industry, this study recommends four common interest motivators from both academic and industrial perspectives and where efforts should be concentrated. Research facilities, external competencies, talents, and innovation capacity are very important for the animation industry of Taiwan.