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This paper aims to investigate the causes of mergers and acquisitions (M&A) deals that acquiring firms pay excess premium beyond the market-expected level and examine the relation between the announcement return and long-term performance of the acquiring firms.

Based on a sample of 1,767 US firms’ M&A deals from 2000 to 2014, the authors use the expectation model used by Ang and Ismail (2015) to measure normal offer premium in an M&A deal. They conduct the standard event study methodology to observe the market reaction for acquiring companies on the announcement day. Buy-and-hold abnormal returns are used for the main explanatory variable so as to find the impact of the premium paid on the long-term performance of the acquirer.

First, acquiring firms are faced with negative market returns when acquiring firms pay excess premiums. Second, poor long-term performance of the acquiring firms is observed if acquiring firms pay excess premium. Finally, the negative relation between excess premium and acquiring firms’ long-term performance weakens, as the sample period becomes longer.

The hypotheses and results of the empirical study are as follows. First, the acquirer’s market reaction on the announcement day is negative when it pays an excess offer premium. This is because the market perceives the premium to be greater than the value of the deal, which damages the value of the market, as it is not perceived as a proxy for future synergy. Second, the acquirer’s long-term performance is low when it pays the excess offer premium. It is the same result as the acquirer’s market reaction on the announcement day. This shows that the excess premium does not result in either a short-term positive reaction or a long-term profit for the acquiring shareholders. However, it is found that the relationship between the excess premium and the long-term performance of the acquirer decreases with time. This is because the long-term performance of the acquirer is more affected by management and other events after the deal.

The authors divide the total premium paid into the normal offer premium and the excess premium, and their focus is on the excess premium part. The main contribution of this paper is that it analyzes how the excess premium affects the market reaction on the announcement day and the long-term performance of acquiring firms.

This article seeks to identify the type of producers most likely to deviate from category-based expectations in the pursuit of profit. I describe circumstances under which a category’s core members are, paradoxically, more likely (than its peripheral members) to deviate. This phenomenon reflects market participants’ default expectations about core members and the resulting bias in information-search processes. I offer empirical evidence of Champagne producers getting involved in “buyer’s own brands” (BOB), a behavior that is not directly observed yet deviates considerably from grape suppliers’ category-based expectations. The econometric analysis leverages an exogenous shock that increased the scrutiny of BOB by grape suppliers. I find that before the shock, BOB products were more likely to be supplied by “traditional” houses – which grape suppliers view as core industry members and hence as being above suspicion in that regard. I discuss the implications of these results for prior work in this area as well as the article’s contribution to extant literature.

This chapter investigates the predictability of the European monetary policy through the eyes of the professional forecasters from a large investment bank. The analysis is based on forward-looking Actual and Perceived Taylor Rules for the European Central Bank which are estimated in real-time using a newly constructed database for the period April 2000–November 2009. The former policy rule is based on the actual refi rate set by the Governing Council, while the latter is estimated for the bank’s economists using their main point forecast for the upcoming refi rate decision as a dependent variable. The empirical evidence shows that the pattern of the refi rate is broadly well predicted by the professional forecasters even though the latter have foreseen more accurately the increases rather than the policy rate cuts. Second, the results point to an increasing responsiveness of the ECB to macroeconomic fundamentals along the forecast horizon. Third, the rolling window regressions suggest that the estimated coefficients have changed after the bankruptcy of Lehman Brothers in October 2008; the ECB has responded less strongly to macroeconomic fundamentals and the degree of policy inertia has decreased. A sensitivity analysis shows that the baseline results are robust to applying a recursive window methodology and some of the findings are qualitatively unaltered from using Consensus Economics forecasts in the regressions.

This paper examines perceived labor market earnings among adolescents and their parents by gender and caste. Previous research has established that lower subjective expectations of labor market returns among parents affect educational investment. Likewise, subjective expectations of adolescents about labor market returns are likely to affect their commitment to their education. In the labor market, gender and caste biases manifest itself in terms of lower wages for women and persons from marginalized communities. The authors ask if perceived earnings among adolescents and their parents vary by caste and gender over and above their intrinsic ability.

The authors use a unique dataset on adolescents that has been recently collected (2013-2015) by ASER Centre, the research and assessment wing of Pratham Education Foundation for the analysis. To answer the research question posed in the paper, they use standard OLS and quantile regression techniques.

Results confirm that girls have lower expected earnings than boys. Caste differences appear more rigid in Bihar.

The authors recognize that the results presented do not take into consideration the issue of selection bias. Hence, they are applicable not to the average adolescents in the study districts, but only to those who reported expected earnings. That said, they do not think that this technical limitation dilutes the broad policy conclusions emerging from the study.

The paper uses cognition as a measure of an adolescent’s intrinsic ability. Therein lays the uniqueness of the paper. It brings into the discussion on expected earnings test scores as a measure of an adolescent’s cognitive ability. It is also unique in that it focuses on adolescents in the age group of 11-16 years who are likely to join the labor force in few years. Previous discussion of subjective expectations in India did not include any measure to capture cognitive ability and did not focus exclusively on adolescents.

The purpose of this paper is to develop a model to analyze the role of exchange rate appreciation expectation in trade invoicing from the perspective of importers, then empirically analyze it using Japanese export data.

Constructing a theoretical model of importer behavior by analyzing the importer's utility function under an assumption such as “menu cost”, then using econometric method to justify the theoretical model's finding.

It was found that under the assumption of “menu cost”, risk neutrality and price rigidity, there are three directions of appreciation expectation's effect: increasing, unchanged and decreasing theoretically; but under common condition, only a large appreciation expectation will cause an importer to reduce the use of exporter's currency, and the role is constricted by exporters' bargaining capacity. The empirical results of Yen's use in Japan's exports justifies the model's conclusion and shows that commercial pressure and political events are the most important signals to form large appreciation expectation.

This paper has important policy implications for Renminbi (RMB)'s exchange rate policy under the context of RMB internationalization, in order to promote RMB's use in exports; China should control the large appreciation expectation of RMB and the best way is to rigorously tackle trade deficit with US and European countries, and to eliminate the explicit appreciation signal.

The paper analyzes the role of exchange rate appreciation in trade invoicing theoretically and empirically for the first time; and reasonably explains the development of currency invoicing in Japanese exports and contemporary Chinese exports, as well as having important policy implications for Chinese exchange rate policy.

The purpose of this research paper is to investigate the role of price and price expectations in service quality evaluations based on a study of the US hotel sector.

The paper is based on an experimental study to test service quality and price congruency through randomly assigned treatments to a quota sample of 120 students.

The research shows that the degree to which subjects' price expectations are met influences their evaluations of service quality. This is especially true in the case of a price loss; when the actual price exceeds the expected price. However, when there is a price gain, subjects' evaluations of service quality were not affected.

The experiment sacrificed external validity for internal control; an artificial stimulus was used in a carefully controlled experimental setting to control the subjects' exposure to price and service manipulations. A small sample size of student subjects was used; only 20 subjects in each treatment group. The results obtained were based on subjects' evaluation of a written script, and not an actual service encounter. By virtue of using an experimental design, the experiment did not consider a broad range of potential factors.

The paper uses an experiment to test the effects of price gains and price losses on consumers' perceptions of the quality of a service encounter.

Industrial marketing is generally viewed from the vantage point of firms marketing to other firms. Yet organizations devote extensive resources to situations where managers market their capabilities to other units within the same firm. Presents a case study of industrial health and safety to emphasize internal marketing concepts that managers and staff professionals should use to strengthen their internal contribution to company objectives. The case has implications for managers who deal with internal marketing problems of many in‐house services such as information systems, market research, data processing, education and training and other functions. Staff unit managers in a range of disciplines who want to serve internal publics better can effectively market their services internally by understanding and responding to internal decision processes and expectations. Moreover, internal customers will receive higher quality services if these staff functions focus their capabilities on meeting or exceeding management expectations.

The purpose of this paper is to examine the behavior of buyers and sellers in making housing decision and analyses the mechanisms of the seller‐buyer interaction affecting house sale prices.

The research methodology relies on a cross‐sectional telephone survey and the statistical analysis of housing transactions in Hong Kong.

The list price is unimportant to the formation of the sale price. Rather buyer‐seller interactions affect housing prices. The list price is positively related to the number of revisions, and the size of reduction, in the list price, and the list period, but negatively related to the sale‐to‐list‐price ratio. Overpriced properties trigger larger price reductions, noticeably, in the first round of negotiation, and stay on the market longer. Short negotiation periods and time‐till‐sale, and a sale at a marginal reduction in the list price is expected by market participants and conforms with the historical sales data. Hence, market expectations are generally fulfilled and support rationality in a steady market.

There are sample size limitations, which might bias the results and weaken the generalizability. The limited housing transactions may not be representative of the population at large.

When the market conditions are moderate, offering the property for sale at close to its current market value would determine the best possible selling price.

Telephone surveys on home buyer‐seller interactions and critical analysis of sale records are extremely rare in Hong Kong. The paper illustrates how, in times of moderate economic conditions and housing prices, the strategic negotiation process will rationally bring the selling price close to the market value price.

The importance of alignment between users’ and providers’ expectations of accounting services has long been recognized as paramount in the auditing profession. The importance of expectations, and especially expectations gaps, is even more compelling for new assurance services, where the importance of marketing the service is pronounced. This paper develops the Assurance Gaps Model, which describes expectations gaps in general, defining these holistic differences between users’ and providers’ perceptions of assurance services as assurance gaps. The model suggests that assurance gaps really have a number of components – expectations, evaluations of performance and disconfirmation – all of which impact users’ satisfaction with the service. The magnitude of each of these components, as well as the emphasis placed on each one, is important in describing the nature of the gap. This model is consistent with previous research in auditing as well as a large body of research in marketing studying expectations and the satisfaction process (Oliver, 1997). To illustrate potential applications of the Assurance Gaps Model, hypotheses are developed and tested using an online simulation of the ElderCare assurance service proposed by the AICPA/CICA. Results indicate that users and providers demonstrate similar magnitude of each of the factors in the model, but differ in that users emphasize performance in forming satisfaction judgments while providers emphasize expectations. The study and results illustrate the usefulness of the model for performing detailed analysis of assurance gaps and for suggesting appropriate courses of action to manage the factors that contribute to them.

Reports in a segmentation study conducted to determine whether consumer‐based variables such as activities, interests and opinions could be used to segment markets based on service quality expectations. Identifies those consumer‐based variables found to be significantly related to service quality dimensions and discusses their managerial significance to the healthcare market.