Industry aspects of takeovers and divestitures: Evidence from the UK

This paper examines takeover and divestiture activity at the industry level for the population of UK firms over the period 1986–2000. Consistent with US research, takeovers in the UK cluster both across industries and over time. The evidence for divestitures indicates clustering across industries only. The paper further investigates whether broad and specific industry shocks (e.g., growth, free cash flow, concentration, deregulation, foreign competition, technology, stock market performance) explain takeover and divestiture clustering at the industry level. The results suggest that broad shocks increase (decrease) the likelihood of takeovers (divestitures), although not significantly for takeovers. Specific industry shocks that increase the likelihood of takeover activity include low growth, the threat of foreign competition and high stock market performance. For divestitures, high industry concentration and deregulation increase activity. Little evidence is found for deregulation as a significant factor in explaining takeover activity.     

Are Corporate Restructuring Events Driven by Common Factors? Implications for Takeover Prediction

Abstract:  The paper shows that variables commonly used in takeover prediction models also help to explain the likelihood of several other restructuring events, including divestitures, bankruptcies and significant employee layoffs. This finding helps to explain the larger misclassification errors in binomial takeover prediction models commonly used in prior research. The results show that modelling takeover prediction models in a binomial setting is likely to lead to misspecification in the parameter estimates and, further, result in erroneous conclusions about the determinants of takeover likelihood. The paper shows that controlling for other restructuring events by using a multinomial framework results in consistently lower misclassification errors in out-of-sample prediction tests, when compared to the benchmark of a typical binomial model.     

Developing a performance measurement framework to enhance the impact orientation of the Food Research Institute, Ghana

Research institutions in Ghana are facing various challenges. It is the contention that viable research and development institutions are needed for achieving sustainable change in areas of national importance. A key aspect of institutional viability is strong performance management. This implies clear and workable approaches to performance measurement. This paper looks at the initial experiences in a collaborative effort to develop a performance measurement framework for the Food Research Institute (FRI) and the application of the Balanced Score Card (BSC) at institutional level. The process of diagnosing and analysing institutional monitoring and evaluation capacity and systems is described using a mix of diagnostic tools. Stages in applying the BSC approach are documented and the added value of the scorecard perspectives in highlighting focal areas for performance measurement and management within FRI. These are placed in the context of ongoing changes in the external environment posing both threats and opportunities. Changes implied by the introduction of the concept are discussed in the context of current constraints and the way forward is mapped out in terms of enhancing FRIs' impact orientation through the application of improved performance measurement and management.     

Analysing the wealth effects of UK divestitures: An examination of domestic and international sales

Here we analyse divestiture announcement effects for UK multinational corporations accounting for the location of the unit sold. We find some bias in market reactions with larger abnormal returns for UK divestitures when compared to overseas sales. US sales generate larger returns than those in Continental Europe or the Asia-Pacific region. We analyse the determinants of abnormal returns using accounting and transaction data, supplemented with country specific data for overseas sales. Abnormal returns for UK sales are explained by financial characteristics of the selling firm but the size of the transaction relative to the firm is the most significant factor in overseas divestitures.     

Human development and cross-border acquisitions

We examine the role of human development in US companies' decisions to engage in cross-border acquisitions. Utilizing the human development index (HDI) published by the United Nations Development Program (UNDP), we find that US firms make acquisitions in countries with strong HDI levels. Alternative factors such as institutional quality, life expectancy, telephone usage and school enrolments also have a positive influence on the cross-border acquisition decision. Further, we find a positive relationship between cross-border mergers and acquisitions (M&As) and HDI rankings relative to the United States. Our findings contribute to the literature that seeks to explain why so little capital flows from developed to developing economies.     

An epistemological framework for nanoscience and nanotechnology literacy

The need for a new literacy that will allow for meaningful participation in the rapidly evolving field of nanotechnology is very critical to national development. This need is important for nanotechnology to achieve its full potential. This paper describes and analyzes some contemporary philosophical interpretations of the concept of technological literacy. The paper then focuses on some of the metaphysical assumptions underpinning the techno-scientific literacy framework; and theories governing public understanding of science and technology, as the basis to propose a new technological literacy framework suitable in the era of nanotechnology. A case is made that the new technological literacy framework proposed is a suitable and essential pedagogic endeavour which should be seen as yielding a perspective through which meaning may be infused into the importance of nanotechnology development–a perspective as essential to the informed lay person as it is to the truly literate technologist. The paper concludes by analyzing the implications of the proposed epistemological framework on nanotechnology workforce development and makes recommendations based on this new framework to achieve a ‘nanoliterate’ society.     

Systems Mapping of Consumer Acceptance of Agrifood Nanotechnology

Application of nanotechnology in the agrifood system and the rising number of nanofood products on the market are creating concerns among consumers and other stakeholders. These concerns and other potential barriers to the commercialization of agrifood nanotechnology products may limit the ability to capture its full potential. Understanding the emerging trends and the links between underlying values, expressed attitudes, and actual behaviors involving consumer acceptance of agrifood nanotechnology is important for governance, risk regulation, and the achievement of the full potential of agrifood nanotechnology. The purpose of the study was to use systems mapping to examine and analyze critical links between consumer acceptance of agrifood nanotechnology and factors such as trust, stakeholders, institutions, knowledge, and human environmental health risks. The study used a meta-analysis of the risk perception literature and solicited the opinions of experts to develop the systems map. Factors affecting consumer acceptance of agrifood nanotechnology are dynamic, complex, interactive, and interdependent, and consumer decisions to accept agrifood nanotechnology were found to be the results of complex feedback structure. This study suggests several consumer policy and programmatic levels in the system toward enhancing consumer acceptance of agrifood nanotechnology products where warranted.     

Internal Restructuring and Firm Survival

We examine the impact of two common methods of internal restructuring, layoffs and divestitures on the survival of a sample of UK firms. Using a Poisson regression model, we find that divestitures improve survival likelihood by reducing the probability and speed of market exit via takeover or bankruptcy, whereas layoffs increase the probability and speed of market exit via bankruptcy. Surprisingly, classifying firms into financially distressed and healthy groups, we find that distressed firms are less likely to restructure. Furthermore, while divestitures improve survival likelihood in both groups, layoff firms are less likely to survive, irrespective of whether they are distressed or healthy. Our findings are consistent with event studies that examine the market reaction to layoffs and divestiture decisions, and so provide some support for the view that the market correctly values the consequences of these restructuring actions on firm survival. The results are robust to several econometric and modeling issues, including controlling for potential self‐selection bias.     

Corporate life cycle and M&A activity

We investigate the impact of corporate life cycle on takeover activity from the perspective of acquiring firms. Using the earned/contributed capital mix as the proxy for firm life cycle, we find a highly significant and positive relation between firm life cycle and the likelihood of becoming a bidder. This finding is, however, driven by the mature rather than the old acquirers in the sample. Further we find that, whilst firm life cycle has a positive effect on the probability that a deal will be negotiated, it is negatively related to tender offers. In addition, the likelihood of making both cash and mixed deals are positively related to the corporate life cycle. Finally, we find that life cycle has a negative impact on the abnormal returns generated on the announcement of a deal although it is unable to distinguish between the returns received by firms at different stages in their life cycle.     

Divestitures,wealth effects and corporate governance

We analyse the market reaction to divestiture decisions and determine the impact of corporate governance practices. We find the market reaction is significant and can be determined using internal governance mechanisms. We evaluate the determinants of the decision to sell using a control sample of firms displaying characteristics often associated with divestitures indicating that these firms may face the same incentives to divest but elect not to restructure in this manner. Our results suggest that a combination of strong internal and external governance may force managers to act in a manner that is incompatible with their personal desires.