Do analysts add value when they most can? Evidence from corporate spin‐offs

This article investigates how securities analysts help investors understand the value of diversification. By studying the research that analysts produce about companies that have announced corporate spin‐offs, we gain unique insights into how analysts portray diversified firms to the investment community. We find that while analysts' research about these companies is associated with improved forecast accuracy, the value of their research about the spun‐off subsidiaries is more limited. For both diversified firms and their spun‐off subsidiaries, analysts' research is more valuable when information asymmetry between the management of these entities and investors is higher. These findings contribute to the corporate strategy literature by shedding light on the roots of the diversification discount and by showing how analysts' research enables investors to overcome asymmetric information. Copyright © 2013 John Wiley & Sons, Ltd.     

Higher education and firms: on the interaction between research and regional policies

In the European Union, a series of competencies are shared between a central agency called the European Commission, and the governments of the Member States. This paper focuses on two of those policies: research and regional development. Here, we model and discuss how the level of commitment of a central authority toward poor regions affects the design of the best decision-making process. We explore cases of full centralization and full decentralization, and situations where the two levels of government are allowed to take decisions, either simultaneously or sequentially. In the latter case, we make a distinction between a situation where the central agency decides first as in most federations, and one in which it decides second, then being an agent of national governments. This setting is especially relevant for the European Union. We show, in particular, that when the degree of commitment of the center is high, assignment of redistributive competencies to both levels of power is a proxy for centralization. Additionally, the poorer region may find its best interest in an institutional design where the regions decide first.     

Consumer life styles and market segmentation

Consumer behaviorists faced with the task of segmenting markets increasingly turn to the study of consumer life styles. The life style concept and its role in predicting consumer decisions are analyzed here. One methodology known as AIO or life style research has proven especially useful in identifying heavy users of specific product categories. Three representative AIO portraits—for beer, eye make-up, and bank credit cards—are outlined. An evaluation of life styles as a systems concept suggests bright prospects for presenting research findings to clients, formulating creative strategies, positioning products and services and selecting media. C. W. Post Center, L.I.U. Doubleday Advertising Co.     

Board 3.0: What the Private‐Equity Governance Model Can Offer Public Companies∗

The authors view board structures as an adaptive institution that responds to the key challenges faced by public companies: helping management solve the problems of production and organization of large‐scale enterprise; limiting managerial agency costs; serving as a delegated monitor of the firm's compliance obligations; and responding to the governance environment of changing shareholder ownership patterns. U.S. company board structures are shown to have evolved over time, often through discontinuous lurches, as particular functions have waxed and waned in importance. This article is part of a larger project that traces two iterations of the public company board, what the authors call Board 1.0 (the “advisory board”) and Board 2.0 (the “monitoring board”). The authors argue in particular that Board 2.0, as embedded in both current practice and regulation, now fails the functional fit test for many companies. First, it does not scale to match the dramatic increase in the size and complexity of many modern public corporations. Second, at a time of reconcentrated ownership achieved through institutional investors and increased activism, it does not have the expertise and commitment needed to resolve the tension between managerial or market myopia, or “short‐termism,” and managerial “hyperopia.” This article holds out an optional alternative, Board 3.0, which would bring to the public company board some strategies used by private equity firms for their portfolio company boards. Such “Portco” boards consist of directors who are “thickly informed,” “heavily resourced,” and “intensely interested.” Bringing such “empowered directors” to public company boards could facilitate evolution of the public company board model in response to dramatic changes in the corporate business environment. The authors also suggest possible routes for implementing Board 3.0, including the enlisting of PE firms as “relational investors” that would have both capacity and incentives to engineer changes in board structure.