Considering the shareholder perspective: value-based management systems and stock market performance

We empirically study the use of value-based management systems in listed German firms and examine implications for firms’ stock market performance. Using a novel, hand-collected data set covering 1,083 firm years from 2002 to 2008, we find that value-based management systems become increasingly common. Specifically, in 2008 42% of our sample firms have implemented such a system. In the empirical analysis, we find that firms implementing value-based management systems earn both statistically significant and economically substantial abnormal stock market returns measured within a 2-year adoption phase. These excess returns are not jeopardized by poor post-adoption returns. In the analysis, we carefully control for risk and account for endogeneity concerns. Overall, our findings support the view that shareholders consider the adoption of a value-based management system as a credible signal that management will focus on shareholder interests and that such systems actually increase shareholder value.     

Business Exit and Strategic Change: Sticking to the Knitting or Striking a New Path?

The purpose of this study is to examine the potential of business exit for initiating strategic change in divesting parent firms. In contrast to prior literature that mainly investigates the impact of different antecedents on the likelihood of business exit in general, this study additionally tests the influence of these antecedents on the choice between two exit types with a cross‐industry sample of divesting firms listed in the German CDAX over the time period 1999–2004. A divestiture involving strategic change is a strategic business exit; otherwise it is denoted as status quo preserving. The findings reveal that a relatively highly dissipated focus does not automatically enhance the likelihood of business exit in general and status‐quo‐preserving business exit in particular. CEO turnover and pressures exerted by institutional investors predict neither strategic nor status‐quo‐preserving business exit. Low firm performance does not nurture the likelihood of business exit per se but especially promotes status‐quo‐preserving business exit.     

F?rdern aktienkursbasierte Vergütungsinstrumente langfristig orientierte Unternehmensentscheidungen? Lehren aus der Kreditkrise

The question whether stock-based management incentives encourage long-term oriented management decisions is the topic of a controversial public debate. Also, the existing academic literature provides no clear picture, mainly due to endogeneity problems. In this paper, we reexamine the issue in the context of the recent credit crises, which allows us to solve the endogeneity problem. In the empirical analysis we find that firms, which have awarded stock-based incentives to their executives prior or during the financial crises, face substantially lower cuts in investment spending. These firms also show higher levels of R&D investments during the financial crises. Overall, our results suggest that stock based long-term incentives promote long-term oriented management decisions.     

Too Big to Learn: The Effects of Major Acquisition Failures on Subsequent Acquisition Divestment

We examine whether firms learn from their major acquisition failures. Drawing from a threat‐rigidity theoretical framework, we suggest that firms do not learn from their major acquisition failures. Furthermore, we hypothesize that host‐country experience reinforces the negative effects of major acquisition failures. Our research hypotheses are tested using an event history analysis of 741 acquisitions undertaken by French listed and non‐listed firms in the USA between January 1988 and December 2008. We use failure divestment (divestment resulting from acquisition failure) as a proxy for acquisition performance. Consistent with our theoretical framework, we find that major acquisition failures have a negative impact on future acquisition performance. Furthermore, we find that such negative effects are reinforced by firms’ host‐country experience.     

Economies of Scope through Multi‐unit Skill Systems: The Organization of Large Design Firms

From a study of three large design firms in Italy, the UK and the USA, we derive a distinct model of how large knowledge‐intensive business services (KIBS) firms organize to manage growth and realize economies in ways that differ from the organizational techniques that are familiar from scale and scope studies of large manufacturing enterprises. Case studies were compiled from interviews conducted at the three firms. Large design firms were selected as a contrasting context to Chandlerian manufacturing firms. Design firms were expected to differ from manufacturing firms in terms of strategy, organization and the overall possibilities of achieving economies of scale and scope. Our results show that competitive advantage of these large KIBS design firms derives from a particular multi‐unit skill system that enables the firms to exploit economies of scope. There are four distinctive organizational features of such KIBS firms. First, multiple business units within the firm play a dual role. These are able both to engage in inter‐unit coordination and resource sharing and to attract business independently, often with heterogeneous business models among units. Second, these firms develop formal organizational routines for involving multiple business units in client projects, thus facilitating the migration of clients' business from one unit to another. Third, there is an important role for cross‐unit strategic ‘insight’ agents. Fourth, these firms expand through the founding of specialized, even idiosyncratic, new business units (often with the important role of mastering new technological skills).     

基于联立方程模型的公司治理溢价研究——兼谈如何检验公司治理评价指标的有效性

公司治理溢价研究可以揭示公司治理与企业价值之间的互动机理,不仅有助于深化和丰富公司治理理论,为上市公司优化公司治理指明方向和重点,而且有助于投资者全面评估企业价值.而对公司治理的客观评价是公司治理溢价研究中的关键问题,本文在以往研究成果基础上,以上证公司治理板块的评选结果为参照样本,给出了检验公司治理评价指标有效性的科学方法,进而验证了以DEA方法构建的公司治理效率值指标的有效性;在此基础上利用联立方程模型对公司治理溢价进行研究,解决了公司治理与企业价值之间可能存在的内生性问题;以2007年中国沪市578家A股公司为样本对联立方程模型进行估计.结果表明,中国股票市场存在公司治理溢价,公司治理效率值每增加0.1,流通盘市场附加值就会有37.2%的溢价.     

Does Quality Still Pay? A Reexamination of the Relationship Between Effective Quality Management and Firm Performance

Because of the changing competitive environment, quality might have lost some of its luster and emphasis in business. The research question we aim to address in this paper is: Does quality still pay in the new competitive environment? Using replication research, we re‐examine the impact of an effective total quality management (TQM) program on a firm's operating performance in the new competitive environment. We use publicly available data for award‐winning firms and adopt several control‐firm‐selection approaches in our event study. Based on data from more than 500 firms, we find that over a 10‐year period—6 years before to 3 years after winning their first quality award—firms in our sample perform significantly better than control groups in various operating performance measures. Not only do award‐winning firms have better results after receiving awards, they also have superior performance records before the award. Our results suggest that quality is still critical to achieving long‐term competitive advantages, and firms who continuously improve their quality continue to reap rewards by way of sales and financial performances exceeding those of their competitors.     

Essential Micro‐foundations for Contemporary Business Operations: Top Management Tangible Competencies,Relationship‐based Business Networks and Environmental Sustainability

Although various studies have emphasized linkages between firm competencies, networks and sustainability at organizational level, the links between top management tangible competencies (TMTCs) (e.g. contemporary relevant quantitative‐focused education such as big data analytics and data‐driven applications linked with the internet of things, relevant experience and analytical business applications), relationship‐based business networks (RBNs) and environmental sustainability have not been well established at micro‐level, and there is a literature gap in terms of investigating these relationships. This study examines these links based on the unique data collected from 175 top management representatives (chief executive officers and managing directors) working in food import and export firms headquartered in the UK and New Zealand. Our results from structural equation modelling indicate that TMTCs are the key determinants for building RBNs, mediating the correlation between TMTCs and environmental sustainability. Directly, the competencies also play a vital role towards environmental practices. The findings further depict that relationship‐oriented firms perform better compared to those which focus less on such networks. Consequently, our findings provide a deeper understanding of the micro‐foundations of environmental sustainability based on TMTCs rooted in the resource‐based view and RBNs entrenched in social network theory. We discuss the theoretical and practical implications of our findings, and we provide suggestions for future research.     

我国会计师事务所变更的因素分析——一项基于安永大华合并前后客户构成变化的案例分析

本文运用安永大华会计师事务所合并前后上市公司客户构成变化的案例,分析了引起事务所变更的各种因素。有关事务所变更的研究文献提出8个方面的因素可能引起事务所变更,本文的分析发现,事务所出具不清洁审计意见、控股股东或高层管理人员变更、公司财务状况恶化、行业竞争、原签字注册会计师跳槽、异地审计都可能是导致大华事务所客户变更事务所的原因。此外,通过回归分析我们还发现,经营业绩对大华事务所上市公司客户的减少有显著影响。     

The Structure of Wages by Firm Size: A Comparison of Canada and the USA

Cross‐country comparisons of the skill premium between USA and Canada show differences in the returns to higher education between the two countries since the 1980s. This paper analyses whether such differences could be related to differences in skill distribution and worker sorting across firm size between the two countries. Estimation of the wage structure by size for male non‐unionized workers in the private sector reveals that selectivity effects on wages are present and similar in both countries. There are significant and substantial cross‐country differences in the returns to education among large firms, especially for younger workers.     

融资约束与代理成本对上市公司非效率投资的影响——基于双边随机边界模型的实证度量

在有效地控制企业最优投资水平的前提下,本文将融资约束与代理成本同时纳入到前沿异质性双边随机边界模型(Two-tier stochastic frontier model)框架下对我国上市公司的非效率投资程度进行了实证度量,并探讨了各种财务因素对融资约束与代理成本的影响.实证结果表明:融资约束的存在使得上市公司的投资支出较最优水平低了37.5％,而代理成本导致上市公司的投资支出超出其最优水平的30.6％,两者的净效果使我国上市公司整体上表现为投资不足,投资不足率为6.9％.此外,流动资产净额和资本存量的增加有助于缓解公司面临的融资约束程度,而规模较大、持有较多自由现金流的公司内部代理问题更为严重,并且不同规模和地区之间的上市公司非效率投资程度存在较大的差异.     

Does Rent‐sharing Profit Female and Male Workers? Evidence from Israeli Matched Employer–Employee Data

This paper analyses the impact of workplace characteristics on individual wages based on a unique cross‐section matched employer–employee data set for the Israeli private manufacturing sector in 1995. Specifically, we examine the effects of the interaction between profit‐sharing and wages on the gender wage gap. The empirical findings show that individual compensation is significantly and positively correlated with firms’ profits‐per‐employee, even when controlling for all of the following: group effects in the residuals, individual and firms’ characteristics, industry wage differentials and endogeneity of profits. Wage–profit elasticity is found to be 11 per cent and it does not significantly differ between genders. With respect to the overall gender wage gap (on average women earn 28 per cent less than men), the results show that within firms there is no gender discrimination and that 12 per cent of this gap can be explained by the wage–profits profile and by the fact that women are more likely to be employed in less profitable firms than men.     

Promotion,Turnover, and Compensation in the Executive Labor Market

This paper develops a generalized Roy model with human capital accumulation, moral hazard, and career concerns. We identify and estimate the model with a large panel that matches data on publicly listed firms to information on their executives. The structural estimates obtained are used to decompose the firm‐size pay gap. We find that although total compensation and incentive pay increase with firm size, certainty‐equivalent pay decreases with firm size. In larger firms, and for more highly ranked executives, weaker signal quality about effort results in higher risk premiums. This risk premium accounts for roughly 80 percent of the firm‐size gap in total compensation. Larger firms are also willing to pay more than smaller ones to attract executives. Finally, the estimated coefficients on human capital accumulation from formal education and experience gained from different firms are individually significant, but their collective effect on firm‐size pay differentials nets out.     

Optimizing the Staffing and Routing of Small‐Size Hierarchical Call Centers

Multiple‐skill call centers propagate rapidly with the development of telecommunications. An abundance of literature has already been published on call centers. Here, we want to focus on centers that would typically occur in business‐to‐business environments; these are call centers that handle many types of calls but where the arrival rate for each type is low. To find an optimal configuration, the integrality of the decision variables is a much more important issue than for larger call centers. The present paper proposes an approach that uses elements of combinatorial optimization to find optimal configurations. We develop an approximation method for the evaluation of the service performance. Next, we search for the minimum‐cost configuration subject to service‐level constraints using a branch‐and‐bound algorithm. What is at stake is to find the right balance between gains resulting from the economies of scale of pooling and the higher cost or cross‐trained agents. The article shows that in most cases this method significantly decreases the staffing cost compared with configurations with only cross‐trained or dedicated operators.     

PERFORMANCE AND BEHAVIOR OF FAMILY FIRMS: EVIDENCE FROM THE FRENCH STOCK MARKET

This paper empirically documents the performance and behavior of family firms listed on the French stock exchange between 1994 and 2000. On the French stock market, approximately one third of the firms are widely held, whereas the remaining two thirds are family firms. We find that, in the cross‐section, family firms largely outperform widely held corporations. This result holds for founder‐controlled firms, professionally managed family firms, but more surprisingly also for firms run by descendants of the founder. We offer explanations for the good performance of family firms. First, we present evidence of a more efficient use of labor in heir‐managed firms. These firms pay lower wages, even allowing for skill and age structure. We also find that descendants smooth out industry shocks and manage to honor implicit labor contracts. Second, we present evidence consistent with outside CEOs in family firms making a more parsimonious use of capital. They employ more unskilled, cheap labor, use less capital, pay lower interest rates on debt and initiate more profitable acquisitions. (JEL: G32, L25, J31)     

Business model in IPO prospectuses: insights from Italian Innovation Companies

How do companies to be listed deal with the voluntary disclosure of their business model? Is it true that firms with greater intellectual capital resources and technological innovation endowments are less prone to full disclosure? This paper aims to examine the choices of voluntary disclosure of the business model made by three Italian manufacturing companies in initial public offering prospectuses. The objective is to explore whether any differences exist and may be related to the type of innovation underlying the firms’ business model. A series of interviews with the top management allows to deeply understand the business model of each company. A content analysis allows to measure the level of disclosure and identify the strategic concepts of the business model and their relevance. The study provides evidence that companies with a business model based on technology-push and design-driven innovation have a lower propensity to the full disclosure of their intangible resources, particularly of those based on knowledge as some could be also invisible. The paper contributes to the ongoing debate on the role of business and financial reporting.     

On pricing and protection of complementary products

The business literature advises firms producing complementary products to sell the core product at a low price, but to price the complementary product at a higher premium. This strategy, however, is problematic if firms face competitors in the market for complementary products as well, as observed in recent years for instance in the market for printers/ink cartridges. Motivated by several measures the firms have taken in this market, the current paper analyzes whether firms are interested in protecting their complementary product from outside competition. We find that firms protect their products only if consumers underestimate the demand for the complementary product when deciding which core product to buy. Moreover, we investigate how the decision to protect the complementary product interacts with a firm’s pricing decision. We show that the price policy proposed in the business literature should only be applied, if consumers sufficiently underestimate their demand for the complementary product so that firms strongly protect these products from outside competition.     

Complementary Drivers of New Product Development Performance: Cross‐Functional Coordination,Information System Capability,and Intelligence Quality

Coordination efforts that access and align relevant cross‐functional expertise are regarded as an essential element of innovation success. In recent years, these efforts have been further augmented through complementary investments in information systems, which provide the technological platforms for information sharing and coordination across functional and organizational boundaries. Somewhat overlooked has been the critical mediating role of the intelligence gained through these efforts and capabilities. This study draws on the theory of complementarity to elaborate on the nature of this mediating concept. Theoretical predictions of the model are tested using instrument variable regression analysis of data collected from a sample of publicly traded US manufacturing firms. The findings suggest that the effects of both internal and external coordination on market intelligence and supply‐chain intelligence are moderated by the firm's information system capability. The effect of both types of intelligence quality on new product development performance was contingent with the effects being enhanced (attenuated) when the market conditions were dynamic (stable). The results are robust to common‐method bias, endogeneity concerns, and alternative estimation methods.     

Decision-making Autonomy in UK International Equity Joint Ventures

This paper investigates approaches to decision making in international joint ventures (IJVs) from the perspectives of the transactions cost and resource‐based theories of the firm. In particular, the concept of autonomy in decision‐making in a sample of UK‐European equity joint ventures is examined. The study adopts a multi‐method personal interview and self‐administered questionnaire approach to examine managerial perceptions of decision‐making and autonomy in the parent firms and the joint venture. The findings show that there are differences in the perception of autonomy between each of the parent firms, and between the parent firms and the IJV management. When we unpack the nature of autonomy in detail, it is found that IJV managers have greater degrees of operational autonomy than strategic autonomy and that decision making by IJV managers takes place within the context of constraints set within the IJV's business plan. This confirms the transaction cost theory which posits that key internal markets (for management, technology and capital) will be under parent control and also supports the resource based view that key capabilities are protected under the business plan established by the parent firms. The influence on IJV autonomy of the moderating variables IJV performance and IJV duration are also examined.     

Breaking down the “Green Wall” (part one): Early efforts at integrating business and environment at SC Johnson

Integrating environmental management initiatives with business functions, such as manufacturing and purchasing, is now a major goal in many firms. Most environmental professionals agree that success in this pursuit is a product of their greater involvement with traditional business management areas as well as their ability to avoid the “green wall”—the separation between environmental and business functions that companies often experience.In this article, the first of a two-part series, Mark Haveman and Mark Dorfman examine how some firms deliberately break down these barriers. The case study of SC Johnson specifically illustrates how elements such as gaining senior management commitment, explicitly aligning environmental issues with key business goals, and designing consistency into the overriding management system can all lead to breaking down that integration. In the next issue, authors from SC Johnson and the Alliance for Environmental Innovation will discuss a recent project to further the efforts of business-environment integration.