Product Design Awards and The Market Value of The Firm

Product design has increasingly been recognized as an important source of competitive advantage. This study empirically estimates the impact of effective design on the market value of the firm. We use a firm's receipt of a product design award as a proxy for its design effectiveness. Based on data from 264 announcements of design awards given to commercialized products between 1998 and 2011, we find that award announcements are associated with statistically significant positive stock market reactions. Depending on the benchmark model used to estimate the stock market reaction, the market reaction over a two‐day period (the day of announcement and the preceding day) ranges from 0.95% to 1.02%. The market reaction is more positive for smaller firms and for firms whose award winning products are consumer goods. However, a firm's growth potential, industry competitiveness, and whether a firm is a first time or repeated award winner do not significantly affect the market reaction.     

An Empirical Analysis of the Effect of Supply Chain Disruptions on Long‐Run Stock Price Performance and Equity Risk of the Firm

This paper investigates the long‐term stock price effects and equity risk effects of supply chain disruptions based on a sample of 827 disruption announcements made during 1989–2000. Stock price effects are examined starting one year before through two years after the disruption announcement date. Over this time period the average abnormal stock returns of firms that experienced disruptions is nearly –40%. Much of this underperformance is observed in the year before the announcement, the day of the announcement, and the year after the announcement. Furthermore, the evidence indicates that firms do not quickly recover from the negative effects of disruptions. The equity risk of the firm also increases significantly around the announcement date. The equity risk in the year after the announcement is 13.50% higher when compared to the equity risk in the year before the announcement.     

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.     

Effect of Quality Management Systems and Total Quality Management on Productivity Before and After: Empirical Evidence from the Indian Auto Component Industry

We study the linkages between firm‐level quality initiatives such as quality management systems (QMS) and total quality management (TQM) and output productivity in the Indian auto component industry. We use externally validated quality certification and quality awards as proxies for QMS and TQM, respectively, as it is difficult to directly measure the QMS and TQM efforts of firms. We use an unbalanced panel of 220 firms and a balanced panel of 73 firms from the Indian auto component industry over the period 1993–2006 to study these links. Both parametric as well as non‐parametric approaches are used, as appropriate, to measure the rate of change in productivity and the impact of quality initiatives on productivity change during this period. We determine the proportion of productivity resulting from technical change and relative efficiency change, thus providing insights into the structure of productivity improvements. We find that TQM efforts resulted in a high rate of productivity change (11%) in the award‐winning firms after the award. On the other hand, pre‐certification productivity change due to QMS was 5% and post‐certification change was 3.6%. In the periods prior to certification, productivity change was driven mainly by technical change; whereas the source of productivity change after certification is mixed. However, prior to awards, productivity change was driven mainly by relative efficiency change, whereas post‐award productivity change was due to technical change. The results suggest that management focus on attaining certification did generate conceptual learning (linked to technical change) during the period leading to certification, but these effects were not significant after certification. The results also suggest that the TQM programs generated significant productivity gains in the long run, although setting the associated systems in place did not result in significant productivity change prior to winning awards. Thus, the study provides direct but nuanced evidence linking quality certification as well as the adoption of TQM programs to the associated conceptual and operational learning processes and their impact on the change in productivity.     

The Stock Market Reaction to Investment Decisions: Evidence from Italy

Based on a study of new investment announcements from 1989 to 1995 by Italian firms listed on the Milan Stock Exchange, we find a positive stock price reaction to new investment decisions. The stock price reaction is larger for joint venture announcements. The market response is also larger for non-state owned companies and when the announcement is released in a period of rising stock prices. The announced investment has no impact on the non-voting shares but increases the voting shares' market price through a significant revaluation of their vote-segment. We find some evidence that new investments lead to management's private benefits rather than towards firm value. This is consistent with the typical Italian corporate governance structure, where a majority shareholder safely controls a listed company while having only a fractional claim on the firm's cash flows.     

The Payback of Effective Innovation Programs: Empirical Evidence from Firms that Have Won Innovation Awards

Despite the widely held belief of the importance of innovation, the connection between innovation and firm performance is empirically inconclusive, partially owing to the limitations of existing innovation measures, which tend to ignore the effectiveness of innovation programs. In this study, we use the winning of innovation awards as a proxy for the effective execution of innovation. We conducted event‐study analyses based on data from more than 1000 publicly traded firms that won innovation awards between 1998 and 2003. Our statistical tests provide strong evidence that the performance of award‐winning firms is significantly higher as compared with several sets of control firms. Over an 8‐year period, starting from 4 years before to 3 years after the year of winning the first innovation award, the test sample's mean (median) change in return on assets is nearly 33% (24%) higher than that of a control sample. The evidence also suggests that effective innovation programs can increase firms' revenue, cost efficiency, and market valuation. Over the period, the control‐adjusted mean (median) change in sales, cost per dollar of sales, and Tobin's Q are 39.28% (20.71%), −5.52% (−3.80%), and 23.70% (3.16%), respectively. Panel data regression analysis provides additional insights on the performance impact of effective innovation programs. The results show that award winners are not only financially more successful but also enjoy an indirect benefit through better R&D execution, which increases firm profitability in both the short term and long term.     

Awards recognizing quality in health care

A variety of awards have been recognizing business, public, and educational sectors for their quality efforts. As of 1995, 10 states include the health care sector in their programs. The national Malcolm Baldrige Award now accepts volunteer applications from the health care sector as a prelude to their inclusion in 1996 in the regular award program. An evaluation model is common to the several award programs that describes how quality is enabled, the systems that make it work, and the desired goals in seven categories. Each category has criteria that allow the flexibility desired by individual programs. The important features are the self-examination required of the organization in preparing the application and the feedback reports to all applicants that note the strengths of applicant and the areas for improvement by the applicant. Health care organizations are encouraged to participate in these award programs as part of their individual improvements efforts.     

Demand–Supply Mismatches and Stock Market Performance: A Retailing Perspective

We provide empirical evidence that the volatility of inventory productivity relative to the volatility of demand is a predictor of future stock returns in a sample of publicly listed U.S. retailers over the period 1985–2013. This key performance indicator, entitled demand–supply mismatch (DSM), captures the fact that low variation in inventory productivity relative to variation in demand is indicative of the superior synchronization of demand‐ and supply‐side operations. Applying the Fama and French (1993) three‐factor model augmented with a momentum factor (Carhart 1997), we find that zero‐cost portfolios formed by buying the two lowest and selling the two highest quintiles of DSM stocks yield abnormal stock returns of up to 1.13%. These strong market anomalies related to DSM are observed over the entire sample period and persist after controlling for alternative inventory productivity measures and firm characteristics that are known to predict future stock returns. Further, we reveal that DSM is indicative of lower future earnings and lower sales growth and provide evidence that the observed market inefficiency results from investors’ failure to incorporate all of the information that inventory contains into the pricing of stocks.     

Kapitalmarktreaktionen auf Personalabbauprogramme: Welchen Einfluss haben Motiv,Umfang und Freiwilligkeit?

This study examines the effects of layoff announcements on the market value of German listed companies. Analyzing 136 announcements being published between 2000 and 2009, the results show marginal abnormal returns but high variance indicating that the market reaction might depend on specific characteristics. As potential determinants we particularly discuss the reasons for layoff, the size of layoff and the voluntariness of layoff. We find that reactive reasons like plant closures have a negative impact on shareholder value whilst active reasons like cost improvements enhance shareholder value. The size of layoff tends to induce negative effects. A voluntary layoff announcement however increases the value of a firm. Furthermore, we find a positive relationship between abnormal returns and human capital intensity and a negative one with both the manufacturing industry membership and financial leverage. In addition, the regression model extends prior literature since its coefficient of determination exceeds those in Anglo-American studies.     

Family Control and Stock Market Reactions to Innovation Announcements

Although family firms are common around the world, studies on family‐controlled business are limited. Prior studies mainly focused on the influences of family ownership on overall firm performance, and the results were mixed. In this study we attempted to explore the impacts of family ownership on innovation by examining the association of family control and stock market reactions to innovation announcements. We found that firms with greater family control experienced significantly more negative stock market reactions to innovation announcements. The results further indicated that divergence of cash flow and voting rights was strongly and negatively correlated with announcement‐period abnormal returns. In addition, the findings suggested a significantly positive moderating effect of institutional ownership. The conclusions were robust under various measures of family control, and remained valid after controlling other influential factors for stock market reactions to innovation announcements.     

Does restricted stock turn CEOs into risk-averse managers? Insights from the regulatory focus theory

Restricted stock awards carry upside and downside risks for CEOs. We follow a socio-cognitive perspective by suggesting that awards of restricted stock are viewed as potential gains or potential losses depending on each CEO's dominant regulatory focus. Regulatory focus, therefore, helps determine how a CEO responds to restricted stock awards. We also propose that the moderating effect of regulatory focus strengthens as firm complexity increases and as CEO tenure lengthens, because complexity and tenure both increase CEOs' reliance on heuristic information processing. Specifically, complexity restricts a CEO's cognitive capacity for thoughtful deliberation during decision making, and tenure affects a CEO's motivation to search for and process information thoroughly. We find general support for the hypotheses and discuss the implications of our findings for future research and practice.     

股价暴涨的风险:基于中国股市的实证

股价暴涨直观上带来高收益，激发市场正面情绪，那么为什么暴涨被视为风险?本文利用2006年至2016年中国A股上市公司数据，通过计量建模对暴涨股票的特征和日后的市场表现进行刻画。实证发现：（1）股价暴涨频度高的股票，呈现低资产收益率、高市值账面比、多散户持股、少沪深300成份股等特点；（2）易发生暴涨的股票其长期超额收益率更低，未来有更大的暴跌风险和更高的收益率波动率；（3）对于运营基本面较差、市场过于乐观、信息披露质量较低的股票，暴涨后的暴跌风险更加明显。研究结论在不同代理变量选择、多种计量模型设定下均稳健成立。本文揭示了暴涨不仅仅是极端价格波动，而且更容易发生在高风险股票中，未来蕴含着更大的潜在损失。暴涨是实实在在的风险。     

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.     

Determinants of short-term value creation for the bidder: evidence from France

This paper analyses bidder short-term returns of 58 takeover bids that occur between 1997 and 2005 on the French market. Furthermore, the determinants of this performance are examined to improve understanding of the sources of value creation or destruction arising from M&A. This study reports that M&A are typically friendly, horizontal transaction, and relate to the entire target capital. The event study methodology is used to estimate bidder value creation. Three findings are shown in this study. First, we find strong evidence that the announcement of a takeover bid generates significant, high returns for the bidder with prebid blockholder position in the target (toehold) versus the bidder without toehold. In this case, there is a strong presumption that the synergies’ motive is the prime reason for the offer. Second, these results show that bidders with low potential growth positively influence share price around the bid announcement. In addition, the growth profile of the target is associated with value creation for the bidder.     

The interaction between stock prices and corporate investment: is Europe different?

I find limited evidence of firm learning from stock prices in Europe and uncover multifaceted complementarities between firm informational and operating environments in determining investment sensitivity to stock prices. Specifically, European firms seemingly do not shift away from their own (peer) stock prices even in instances in which their peers’ (own) stock prices become relatively more informative about firms’ fundamentals. This is consistent with European managers adopting more conservative strategies relative to their U.S.-based peers, and stock prices being less revealing in Europe than in the U.S. Furthermore, while a firm may attach equal weight to both its own stock prices and peer price innovations when peer firms are relatively smaller, investment responds more positively to peers’ price shocks than to that firm’s own stock prices when peers are relatively larger. Interestingly, investment sensitivity to peers’ stock prices decreases in peers’ market share, operating performance, and capital intensity. The decrease is accentuated when peer firms have more informative stock prices and are industry leaders or more capital intensive, thereby signaling perceived reduced growth opportunities. Broadly, these results imply that the specifics of the interaction between stock prices and firm behavior in the U.S. do not necessarily generalize to Europe. More important, these different learning patterns are partly attributable to differences in the amount of internal information, which in turn depends on country-level institutional infrastructures.     

The use and effectiveness of top executive dismissal

We provide a systematic assessment of the empirical evidence on the use and effectiveness of top executive dismissal as a governance and performance improvement mechanism. Our results suggest that poor individual and firm performance significantly increase the likelihood of executive dismissal. A strong power base might help under-performing top executives to extend their tenure in office, but effective ownership and governance structures can provide a counterweight to such entrenchment behaviors. However, our review casts doubt on the effectiveness of top executive dismissal as a means to enhance future firm performance: employing meta-analytical techniques we show that, although the dismissal announcement leads to positive abnormal returns, it has no significant effect on long-term measures of firm performance. On the basis of our findings, we develop a conceptual model of the possible antecedents and consequences of top executive dismissal. We derive implications for boards involved in situations of executive dismissal and for the successors of dismissed executives, and we provide directions for future leadership research on executive dismissal.     

聚焦活动与企业价值之关系——从公司治理机制探讨

本研究系探讨企业聚焦活动宣告对股票报酬之影响,采用1993年至2002年间33家台湾上市上柜公司宣告聚焦活动为研究对象,并以事件研究法市场模型为分析工具,同时以复回归方法从公司治理角度去探讨影响累积异常报酬之因素。研究结果发现,企业聚焦之宣告可获得显著且正向累积异常报酬;而董事会规模、上一年多角化程度以及研究发展费用等因素与累积异常报酬呈正相关。然而,大股东持股比率与累积异常报酬呈负相关。     

Evolution of Quality: First Fifty Issues of Production and Operations Management

Many contributions have been made to the field of quality since the inaugural issue of Production and Operations Management in 1992. The first issue called for more research and teaching on TQM, which resulted in two special issues dedicated to TQM. Many other articles related to quality have also been published in the first fifty issues of the journal on topics ranging from technical methods to the Baldrige Award and ISO 9000. As we review these articles, we assess their contribution and the progression of the field of quality. Although past research has advanced our understanding of quality, there still exists many research opportunities in developing more theory, using additional research methodologies, and studying emerging topics in this field.     

信息不确定性与盈余公告后漂移现象(PEAD)——来自中国上市公司的经验证据

盈余公告后的漂移现象(PEAD)一直是财务学和会计学关注的热点之一。本文从信息不确定性的角度出发,对PEAD现象的存在性和持续性问题作了研究。我们的结论是:信息质量是PEAD产生和持续的重要原因之一,它既可以通过影响未预期盈余的大小,间接影响盈余公告后的漂移现象(PEAD),这主要表现在,信息质量差的股票多集中在未预期盈余极端组合中;也可以直接对PEAD产生影响,即在盈余公告后,信息质量差的投资组合平均累计超常收益大于信息质量好的投资组合。另外,随着时间推移,信息质量差的投资组合的超常收益下降幅度较大,这主要是因为随着理性的投资者对盈余公告中的相关信息的解读,信息不确定性下降,风险逐步释放,所以这类股票的超常收益下降幅度较大,而信息质量好的股票有较少的信息不确定性,故超常收益下降较少。