Should the Pre‐Notification of Mergers Be Compulsory in Australia?

Australia is unusual among the world's antitrust jurisdictions in not making the pre‐notification of mergers compulsory. However, if the parties are concerned that the Australian Competition and Consumer Commission (ACCC) is likely to object to the merger, there are strong incentives for them to notify the ACCC as the regulator has developed a strong reputation for imposing heavy costs on parties that fail to notify such mergers. The result is a system of quasi‐compulsory notification that creates the strongest incentives for parties to notify the ACCC of those proposals to which it is most likely to object. This study analyses data extracted from the ACCC's merger database and the empirical results are consistent with this characterisation. Mergers reported voluntarily by the parties are found to experience longer delays to completion, and are more likely to be challenged by the ACCC, when compared with a sample of all other mergers assessed by the regulator. The results suggest that non‐compulsory notification allows the parties themselves to pre‐sort the proposed merger vis‐à‐vis its interest to the ACCC.     

Is conventional debriefing adequate? An ethical issue in consumer research

Issues relating to ethics are infrequently addressed in the marketing literature. One area in which there might be ethical concerns is debriefing. In an experiment, when false information is provided by the researcher to subjects, those false beliefs can persist despite conventional debriefing. The persistence of false beliefs has ethical implications, of which consumer researchers should be aware. Anexplicit debriefing involving a formal discussion of the belief perseverance phenomenon is proposed as an alternative to conventional approaches. This is tested in three separate studies, including a partial replication of Ross, Lepper, and Hubbard (1975) as well as two extensions to marketing situations. Implications for corrective advertising are also discussed.     

The Causes and Consequences of Accelerated Stock Repurchases

We examine the choice between accelerated share repurchase (ASR) and open market repurchase (OMR) as repurchase mechanisms between 2004 and 2007. For a sample of ASRs and OMRs that actually buy shares in the announcement quarter, we find that ASR firms have lower market‐to‐book ratios, less cash, but greater managerial entrenchment. Prior to repurchase, ASR firms are subject to significantly more takeover rumors than OMR firms are, and this, along with entrenchment and undervaluation, affects the choice to use ASRs. ASR firms experience positive average abnormal returns both before and after the announcement. Moreover, the latent takeover probability is significantly lower for both ASR and OMR firms (when compared with pre‐announcement levels), but the reduction for ASR firms is more pronounced. Our results suggest that repurchases, and especially ASRs, indeed make a firm a less attractive prospect for takeover.     

The profit versus loss heuristic and firm financing decisions

This paper examines the extent to which the profit versus loss heuristic directly affects debt issuance decisions. We hypothesize that reporting a loss and its use as a heuristic rather than firms’ economic fundamentals has an impact both on the decision to raise external debt finance and on the choice between debt and equity financing. The results are consistent with the hypothesis. We find that there is a sharp and economically-significant discontinuity around the zero-earnings threshold in the level of debt issues. Firms reporting small losses issue significantly less debt than firms reporting small profits. We also find that the loss heuristic has an impact on the choice between debt and equity in that loss firms issue less debt relative to equity. Taken together the results are consistent with the notion that profit versus loss heuristic impacts the debt issuance decision and provide explanations that add to those offered by the traditional theories.     

Enriching interactions: Incorporating outcome data into static discrete games

When modeling the behavior of firms, marketers and micro-economists routinely confront complex problems of strategic interaction. In competitive environments, firms make strategic decisions that not only depend on the features of the market, but also on their beliefs regarding the reactions of their rivals. Structurally modeling these interactions requires formulating and estimating a discrete game, a task which, until recently, was considered intractable. Fortunately, two-step estimation methods have cracked the problem, fueling a growing literature in both marketing and economics that tackles a host of issues from the optimal design of ATM networks to the choice of pricing strategy. However, most existing methods have focused on only the discrete choice of actions, ignoring a wealth of information contained in post-choice outcome data and severely limiting the scope for performing informative counterfactuals or identifying the deep structural parameters that drive strategic decisions. The goal of this paper is to provide a method for incorporating post-choice outcome data into static discrete games of incomplete information. In particular, our estimation approach adds a selection correction to the two-step games approach, allowing the researcher to use revenue data, for example, to recover the costs associated with alternative actions. Alternatively, a researcher might use R&D expenses to back out the returns to innovation.     

THE VALUE OF EXPERIENTIAL LEARNING BY ORGANIZATIONS: EVIDENCE FROM INTERNATIONAL JOINT VENTURES

We use a sample of international joint venture announcements to test the hypothesis that organizations learn from experience, such that prior learning enhances the value of later ventures. We find that experience with ventures in the same foreign location, as well as experience with international joint ventures in general, is valued by the market. In contrast, experience in the same type of joint venture activity does not add any incremental value. These findings suggest the market recognizes and values some, although not all, forms of organizational learning.     

DO SCANDALS TRIGGER GOVERNANCE CHANGES? EVIDENCE FROM OPTION BACKDATING

We examine whether firms charged with backdating option grants make discernible changes to board structure and activity and whether such changes help recoup value losses from the revelation of option backdating. We find that these firms increased board size, reduced duality, and increased board independence. In addition, the boards and the compensation committees of these firms experienced significant increases in meeting frequency. We also find that firms in the same sectors that had not been identified as backdating option grants experienced similar changes in board activity and some elements of board structure. Additional analysis reveals that increases in board size, chief excutive officer turnover, and the meeting frequency of the audit committee are related to buy‐and‐hold abnormal returns in the postscandal period.