MANAGERIAL INCENTIVES AND CORPORATE DIVERSIFICATION STRATEGIES

Because the break-up of conglomerates typically produces substantial increases in shareholder wealth, many commentators have argued that the conglomerate form of organization is inefficient. This article reports the findings of a number of recent academic studies, including the authors' own, that examine the causes and consequences of corporate diversification. Although theoretical arguments suggest that corporate diversification can have benefits as well as costs, several studies have documented that diversified firms trade at a significant discount from their single-segment peers. Estimates of this discount range from 10–15% of firm value, and are larger for “unrelated” diversification than for “related” diversification. If corporate diversification has generally been a value-reducing managerial strategy, why do firms remain diversified? One possibility, which the authors label the “agency cost” hypothesis, is that top executives without substantial equity stakes may have incentives to maintain a diversification strategy even if doing so reduces shareholder wealth. But, as top managers' ownership stakes increase, they bear a greater fraction of the costs associated with value-reducing policies and are therefore less likely to take actions that reduce shareholder wealth. Also, to the extent that outside blockholders monitor managerial behavior, the agency cost hypothesis predicts that diversification will be less prevalent in firms with large outside blockholders. Consistent with this argument, the authors find that companies in which managers own a significant fraction of the firm's shares, and in which blockholders own a large fraction of shares, are significantly less likely to be diversified. If agency problems lead managers to maintain value-reducing diversification strategies, what is it that leads some of these same firms to refocus? The agency cost hypothesis predicts that managers will reduce diversification only if pressured to do so by internal or external mechanisms that reduce agency problems. Consistent with this argument, the authors find that decreases in diversification appear to be precipitated by market disciplinary forces such as block purchases, acquisition attempts, and management turnover.     

Knowledge production and publishing in Africa

This article explores the practice of ‘knowledge production’ and ‘publishing’ in Africa. Knowledge production and publishing in Africa has been and still is dominated by Western experts, most of whose interests do not serve Africa. Powerful social groups in post-colonial Africa construct knowledge about Africa from the sites of universities. Ordinary people also produce knowledge, most of which is elaborated through unwritten forms, and actually contest dominant modes of knowing. Publishing in Africa ought to be controlled by Africans if African states are to realise the dream of an African renaissance. African governments ought to invest in knowledge production and publishing. African intellectuals with university education should work with ordinary African intellectuals to create new sites of knowledge. Knowledge production and publishing is not an ideologically neutral phenomenon. Therefore, African governments should create, and not thwart, conditions conducive to knowledge production and publishing that is self-interrogating.     

Critical thinking and communication skills: Integration and implementation issues

This article describes issues associated with implementing an integrated approach to critical thinking and communication skills within accounting courses. The article builds on the work of Hirsch and Collins (1988) and discusses the following issues: (a) the collaboration of accounting and English faculty, (b) types of assignments, (c) assignment design, (d) the feedback process, (e) revisions in courses to accommodate a communication skills program, and (f) resources and motivation. The examples offered are from management/cost accounting courses, but our experience suggests that such an integrated approach to teaching critical thinking and both oral and written communication skills works well within most accounting and other business courses. However, individual programs will need to be tailored in order to address the issues defined here in ways that best fit their mission, goals, and resources.     

Issues in decentralizing the provision of education

This paper analyzes some of the problems that arise in decentralizing education to the private sector. We concentrate on the difficulties that result from the heterogeneity of students and competition among schools in a location setting. We analyze two main issues, the resources expended by schools and the mix of students in schools, and report on results for two others, the location of schools and their number. For each of these, we investigate the extent to which decentralizing the provision of schooling results in an efficient allocation of resources, and consider the use of vouchers to improve the situation. Our analysis draws on elements of three distinct methodologies: the theory of clubs, location theory, and the theory of monopolistic competition. We find that private schooling will typically be inefficient, but that inefficiency may sometimes be corrected by appropriately designed vouchers.We would like to thank Olivier Debande, Jean-François Wen, two anonymous referees, and seminar participants at the 1st meeting of the Canadian Public Economics Study Group and the 51 st congress of the International Institute of Public Finance for helpful comments. Stefan Buergi and Luc Savard provided useful research assistance. We are also grateful to the SSHRCC and the FCAR for financial support.     

Carol Corrado,Jonathan Haskel,Javier Miranda,and Daniel Sichel (eds.): Measuring and accounting for innovation in the twenty-first century (NBER studies in income and wealth,volume 78)

Business Economics -     

A Forum for Issues in Advertising Education

Abstract

Advertising education is an established facet of higher education. It has developed, however, along two tracks—journalism and marketing. The result has been two different approaches to the study of advertising, neither of which may be the best approach. If the best education in advertising is to be offered, then the academic community must address itself to a resolution of these differences in the approaches to the teaching of advertising. Thus, a forum to consider the problems of advertising education is suggested.     

Race and land ownership in Rhodesia: trajectories of conflicting nationalisms in Shimmer Chinodya's Dew in the morning (2001)

This paper analyses Shimmer Chinodya's novel Dew in the morning in order to demonstrate that fiction has the capacity to reveal patterns of meaning that comment on race relations and to show how these are related to the issue of land ownership in Rhodesia. The novel questions the assumption that bitterness and anger over economic dispossession necessarily leads to rebellion. Dew in the morning recounts different kinds of resistances that emphasise the ‘peasant option’ (Ranger, 1985 Ranger, T. 1985. Peasant consciousness and guerrilla war in Zimbabwe, Harare: Zimbabwe Publishing House.  [Google Scholar]) in which Africans developed groups to stave off the possibility of being absorbed as full-time wage earners. The novel adds complexity to the notions of the armed political struggle and the peasant option by showing that these routes produced differentiated African subjectivities based on race, class and gender nationalisms. The movements or trajectories of these forms of peasant consciousnesses produced conflict-ridden nationalisms characterised by moments of resistance, incorporation and obeisance to colonial rule.