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Helen Xu, Eric C. Lin and John W. Kensinger
Previous studies show that crude oil is negatively correlated with stocks but has almost the same rate of return as stocks, and so adding crude oil into a portfolio with equities…
Abstract
Previous studies show that crude oil is negatively correlated with stocks but has almost the same rate of return as stocks, and so adding crude oil into a portfolio with equities can provide significant diversification benefits for the portfolio. Given the diversification benefit of crude oil mixed with equities, we examine the value effect of crude oil derivatives transactions by oil and gas producers. Differing from traditional corporate risk management literature, this study examines corporate derivatives transactions from the shareholders' diversification perspective. The results show that crude oil derivatives transactions by oil and gas producers do impact value. If oil and gas producing companies stop shorting crude oil derivatives contracts, company stock prices increase significantly. In contrast, if oil and gas producing companies initiate short positions in crude oil derivatives contracts, stock prices tend to drop (still significant, but less so). Thus, hedging by producers is not necessarily good. Transaction limitation is shown to be one of the possible sources of the value effect of corporate derivatives transactions.
Elio Shijaku and David R. King
The potential for resource combinations to have adverse consequences for acquiring firms is often overlooked in research. However, considering potential inimical resources can…
Abstract
The potential for resource combinations to have adverse consequences for acquiring firms is often overlooked in research. However, considering potential inimical resources can explain target and acquiring firm actions across the phases (evaluation, completion, and integration) of an acquisition. The authors outline how managers deal with inimical resources in acquisitions. Specifically, during evaluation, due diligence offers managers from acquiring firms the opportunity to avoid potential inimical resources by abandoning an acquisition. During integration, inimical resources can be dealt with either by limiting integration, or with planned or unplanned divestment. As a result, inimical resources explain observed actions and provide a context for making and improving corporate restructuring decisions.
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Helen Xu, Eric C. Lin and John W. Kensinger
The issue of risk premium in commodity futures market has long been examined since Keynes’ (1930) normal backwardation hypothesis. We further examine the normal backwardation…
Abstract
The issue of risk premium in commodity futures market has long been examined since Keynes’ (1930) normal backwardation hypothesis. We further examine the normal backwardation hypothesis in the gold futures market, using a Goldman Sachs Commodity Index (GSCI) approach. We find no evidence that risk premium exists in the gold futures market over the period 1980–2005. Finally, we provide further explanations as to why there is no risk premium in the gold futures market by investigating the actual gold futures positions taken by gold mining firms. We contend that lack of hedging activity by gold miners may explain the lack of risk premium in gold market.
Carl Arthur Solberg and François Durrieu
This paper studies the moderating effect of industry structure on strategy-performance relationships in international markets.
Abstract
Purpose
This paper studies the moderating effect of industry structure on strategy-performance relationships in international markets.
Methodology
We have carried out a survey among a sample of German, Norwegian and Singaporean small and medium sized firms, and test – using structural equation modelling (EQS) – four hypotheses founded in industrial organisation,
Findings
We find that industry structure indeed matters. The general picture is that cautious internationalisation strategies are more effective in fragmented industries than in concentrated industries. Also, with somewhat more nuance, global marketing strategies – such as standardisation and integration – seem by and large to be more effective in concentrated industries than in fragmented industries.
Limitations
The operationalisation of industry structure in an international context is challenging and we have deviated from the traditional Herfindahl–Hirschman Index. This may be a limitation but we also consider it a strength, given the weaknesses of this index in an international setting. The study is cross-sectional and should ideally follow each firm over time, again a challenging endeavour.
Originality
Despite a considerable amount of studies on strategy – performance relationships in international markets, there is no general agreement on the topic. We argue that a contingency approach needs to be taken, and that industry structure is one important factor not yet analysed.
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