Shareholder Value Creation in European M&As

This paper looks at the value generated to shareholders by the announcement of mergers and acquisitions involving firms in the European Union over the period 1998–2000. Cumulative abnormal shareholder returns due to the announcement of a merger reflect a revision of the expected value resulting from future synergies or wealth redistribution among stakeholders. Target firm shareholders receive on average a statistically significant cumulative abnormal return of 9% in a one‐month window centred on the announcement date. Acquirers’ cumulative abnormal returns are null on average. When distinguishing in terms of the geographical and sectoral dimensions of the merger deals, our main finding is that mergers in industries that had previously been under government control or that are still heavily regulated generate lower value than M&A announcements in unregulated industries. This low value creation in regulated industries becomes significantly negative when the merger involves two firms from different countries and is primarily due to the lower positive return that shareholders of the target firm enjoy upon the announcement of the merger. This evidence is consistent with the existence of obstacles (such as cultural, legal, or transaction barriers) to the successful conclusion of this type of transaction, which lessen the probability of the merger actually being completed as announced and, therefore, reduce its expected value.     

The toxic syndrome proceedings in Spain

The author, who has been counsel for the injured in the Spanish olive oil proceedings, reports about the health, political and legal issues of this the greatest tragic event in recent Spanish history. The complexity of the marketing processes has made it difficult to trace the criminal responsibilities of the traders of denatured oil. The civil servants in charge of control and supervision have so far been exempted from the proceedings. The author analyses the legal problems and makes suggestions as to the handling of such cases, including compensation.

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Die spanischen Strafverfahren im Zusammenhang mit dem Olivenölskandal

Zusammenfassung Der Bericht untersucht die Entstehung und Abwicklung des spanischen Strafverfahrens im Olivenölskandal. Im Jahre 1981 sind durch kontaminiertes Speiseöl nahezu 1,000 Menschen — meistens aus ärmeren Schichten herkommend — an schweren Vergiftungen gestorben und weitere tausend schwer erkrankt. Die Behörden haben nur zögerlich auf die größte Gesundheitskatastrophe in der spanischen Geschichte, das sog. síndrome tóxico, reagiert und das Strafverfahren gegen die verantwortlichen Händler erst nach langer Verzögerung, gegen die nachlässigen Beamten der Aufsichtsbehörden noch gar nicht eingeleitet. Die kaum aufklärbaren Wege der Vermarktung des vergifteten Öles machten es schwierig, die für die Opfer verantwortlichen Personen aufzufinden und ihre Schuld nachzuweisen. Der Autor, der als Vertreter der geschädigten Nebenkläger bzw. ihrer Familien das umfangreiche, noch nicht durch ein Urteil abgeschlossene Strafverfahren vor der audencia nacionál in Madrid mehrere Jahre aktiv begleitet hat, untersucht die rechtlichen und tatsächlichen Probleme einer kollektivrechtlichen Bewältigung des síndrome tóxico und macht Verbesserungsvorschläge, auch zur Opferentschädigung. Ein Postskrip berichtet über das nach Fertigstellung am 20. März gefällte Urteil ins Strafverfahren gegen die aceiteros.

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Ignacio de Uriarte Bofarull is a lawyer in Madrid and legal counsel to OCU (Organisación de los consumidores y usuarios). He has represented part of the victims as private attorney in the legal proceedings against the aceiteros. His address: Goya 99, Madrid — 9, Spain.     

Delegation and polarization of platforms in political competition

Summary. We consider a model of political competition among two ideological parties who are uncertain about the distribution of voters. The distinguishing feature of the model is that parties can delegate electoral decisions to candidates by nomination. It is shown that if the credible platform commitments of the candidates is feasible, then at least one of the parties nominates in equilibrium to a candidate who has an ideology that is more radical than the delegating party's ideology. In a variety of circumstances, this, in turn, yields a polarization of equilibrium policy choices of the candidates. It is thus argued formally here that strategic nomination of the candidates may well be one of the major reasons behind the well documented observation that the platforms associated with the political parties in two-party democracies are often surprisingly polarized. Received: January 10, 2002; revised version: May 8, 2002 RID="*" ID="*" We thank Alberto Alesina, Levent Ko?kesen, Antonio Merlo, Ronny Razin, Vijay Krishna, Alessandro Lizzeri, and seminar participants at Alicante, Columbia, Copenhagen, and NYU for helpful comments. We also thank an anonymous referee for its useful suggestions. A good fraction of this research was conducted while Ok was a visitor in the Department of Economics at University of Alicante; he thanks for the kind hospitality of this institution. We gratefully acknowledge the financial support from the Spanish Ministry of Education through grant CICYT BEC2001-0535 (Faulí-Oller) and BEC2001-0980 (Ortu?o-Ortín). Correspondence to:I. Ortu?o-Ortin     

The outsourcing of R&D through acquisitions in the pharmaceutical industry

We examine the performance of 160 pharmaceutical acquisitions from 1994 to 2001 and find evidence that on average acquirers realize significant positive returns. These returns are positively correlated with prior acquirer access to information about the research and development activities at target firms and a superior negotiating position. A unique Desperation Index is employed to determine the current status of a firm's internal productivity. We find that firms experiencing declines in internal productivity or which are more desperate are more likely to engage in an outsourcing-type acquisition in an effort to replenish their research pipelines.     

Determinants of economic and social satisfaction in manufacturer-distributor relationships

The aim of this work is to examine the dimensions of satisfaction in manufacturer-distributor relationships as well as identifying the antecedents of both the economic and the non-economic dimensions of satisfaction. A literature review about satisfaction in marketing channels is followed by quantitative research into how this interchange process is perceived by food product distributors in their relationships with manufacturers. The results provide strong support for the impact of communication, trust and commitment on satisfaction, as well as the interrelationships among the economic and the non-economic dimensions of satisfaction. Theoretical and managerial implications are extracted from these findings.     

Stakeholder Engagement: Defining Strategic Advantage for Sustainable Construction

Although sustainable development is increasingly becoming a part of business plans, it is unclear what makes the economic, social and environmental dynamics strategically compatible. This research examines which of the following in sustainable development – government policy, managerial attitude and stakeholder engagement – is the most influential on the profitability of companies in the UK construction sector. Quantitative and qualitative analyses were rendered through a survey and semi‐structured interviews. Patterns of ambiguity in legislation were discovered as an obstacle for changing the sector's mind‐set. Stakeholder engagement was identified as the defining factor increasing managers' awareness, helping legislation to be effectively implemented and making sustainability highly appealing to clients. These findings indicate that to gain competitive advantage, companies should embark on long‐term strategic alliances which adopt the proposals of environmental non‐governmental organisations and closely follow public opinion. This, strengthens brand equity, allows for premium pricing, increases market share and maximizes profit. Copyright © 2011 John Wiley & Sons, Ltd and ERP Environment.     

Be bad but (still) look good: Can controversial industries enhance corporate reputation through CSR initiatives?

Even though the link between perceived corporate social responsibility fit (PCSR‐fit) and corporate reputation has received much attention from scholars, this tradition has ignored that the underpinnings of this association vary depending on the particular characteristics of each industry under study. To delve into this matter, we investigate in the increasingly relevant context of controversial industries (CIs) how PCSR‐fit could enhance corporate reputation and which are the mediating mechanisms of this association. Our academic contribution is twofold. First, we find that controversial sectors indeed can increase corporate reputation through CSR activities. However, we find that to achieve this goal, the nature of PCSR‐fit should be different than what extant literature indicates, because companies in these settings should directly focus on avoiding or reducing their inherent controversial harm or impact. Second, we evidence that “CSR initiatives' legitimacy” and “situational skepticism” mediate the PCSR‐fit and corporate reputation relationship in CIs. Therefore, we further unravel the underpinnings of this association to advance what we know on the matter and aid practitioners in this particular context.     

Corporate Stock and Bond Return Correlations and Dynamic Adjustments of Capital Structure

This paper analyses the effects of dynamic correlations between stock and bond returns issued by the same firm on the speed of adjustment towards target leverage. The results show that the estimated correlations are time varying, show persistence and differ among firms. Analysis of the potential explanatory variables reveals that the correlations decrease with negative expectations about future aggregate risks, but only for firms with a low default probability. In contrast, correlations are positively associated with specific risk measures, especially idiosyncratic stock risk and financial leverage. The positive relationship between the correlations and the leverage ratio suggests that target leverage can be achieved faster when the stock–bond correlation is high. Our results show that this is the case.