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Article
Publication date: 1 February 1996

Claire E. Crutchley and Marlin R.H. Jensen

This paper tests how changes in information asymmetry and agency variables affect changes in debt policy. Unlike previous studies that examine levels of variables to…

Abstract

This paper tests how changes in information asymmetry and agency variables affect changes in debt policy. Unlike previous studies that examine levels of variables to explain what may determine debt policy, we calculate yearly changes in variables to provide a stronger test of causal relations. By examining changes in agency and information variables, we are able to identify factors that cause firms to change their optimal capital structure. We find institutional ownership has become a substitute for debt financing due to increased shareholder activism. In addition, we find support for Jensen's free cash flow theory, mixed support for informational asymmetry, and no support for Jensen and Meckling's agency model.

Details

Managerial Finance, vol. 22 no. 2
Type: Research Article
ISSN: 0307-4358

Article
Publication date: 19 February 2021

Jonathan J. Burson and Marlin R.H. Jensen

This study aims to examine institutional ownership of companies that go public with dual-class share structures.

Abstract

Purpose

This study aims to examine institutional ownership of companies that go public with dual-class share structures.

Design/methodology/approach

Several recent studies have discussed the potential advantages and disadvantages of the dual-class structure, which allows founders and insiders to maintain control of the firms they created through superior voting rights. Institutional investors oppose the dual-class structure, arguing that inferior voting rights make it difficult to respond to poor governance or performance. Previous research has shown the early value-added to the dual-class firm declines through time. This study examines institutional ownership of dual-class companies through time and compares institutional investments in initial public offerings with perpetual superior-class structures versus those with provisions to sunset those shares to one-share, one-vote structures.

Findings

Evidence suggests that institutional investors view perpetual dual-class structures as potentially riskier in terms of poor governance or performance and prefer dual-class companies with sunset provisions.

Originality/value

This study suggests that founders and insiders should consider either the dual-class structure with a sunset provision or if they choose the perpetual dual-class, it should include some type of event-driven safeguards.

Details

Journal of Financial Economic Policy, vol. 13 no. 2
Type: Research Article
ISSN: 1757-6385

Keywords

Article
Publication date: 1 January 2006

Marlin R.H. Jensen, Beverly B. Marshall and William N. Pugh

This study seeks to investigate whether a firm's financial disclosure size can help investors predict performance.

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Abstract

Purpose

This study seeks to investigate whether a firm's financial disclosure size can help investors predict performance.

Design/methodology/approach

Controlling for size and industry, the relationship between financial disclosure size and subsequent stock performance for all Standard and Poor's (S and P) 500 firms over a seven‐year period is examined.

Findings

It is found that firms with smaller 10‐Ks tend to have better subsequent performance relative to their industries. However, the findings suggest that the performance explanation may not lie in the size of the 10‐K itself. Firms with smaller 10‐Ks tend to perform better because they are smaller in terms of total assets and more focused, with fewer business segments.

Research limitations/implications

While the study is limited to examination of S and P 500 firms, no consistent evidence is found of a relation between changes in a firm's disclosure size and future performance changes.

Practical implications

The results suggest that more disclosure relative to a firm's size is not necessarily bad. Investors attempting to predict future firm performance cannot use the firm's disclosure size alone.

Originality/value

This paper extends two recent Merrill Lynch studies that appear to contradict the extant financial literature's view that increased disclosure reduces the informational asymmetry problem. While the results confirm the findings of these studies, they suggest that the performance explanation may not lie in the size of the 10‐K itself.

Details

Managerial Finance, vol. 32 no. 1
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 12 February 2019

Scott W. Geiger, Dan Marlin and Sharon L. Segrest

The purpose of this paper is to contribute to the healthcare management literature and improve the understanding of the slack and performance link by examining the…

Abstract

Purpose

The purpose of this paper is to contribute to the healthcare management literature and improve the understanding of the slack and performance link by examining the hospital slack and performance relationship using a sample of 148 US hospitals.

Design/methodology/approach

Using cluster analysis, ANCOVA and means comparisons, this study identifies different hospital slack configurations and their associated performance implications.

Findings

The results demonstrate that different configurations of slack resources result in different levels of hospital performance. The findings also demonstrate equifinality in this relationship suggesting that some configurations of slack can result in similar levels of performance.

Practical implications

The results indicate that managerial attention should be paid to not only identifying appropriate levels and types of slack for hospitals but also to appropriate ways to bundle these resources. The findings also suggest there may be multiple ways for hospitals’ administrators to effectively manage and bundle slack resources.

Originality/value

Organizational slack and its impact on organizational performance is an important area of research within the management literature. Unfortunately, no known studies have examined how different types of slack resources are configured or bundled together in healthcare organizations and how this impacts firm performance. This study provides a significant contribution to the literature by providing a first step in understanding the slack and performance relationship in the hospital industry.

Details

Management Decision, vol. 57 no. 11
Type: Research Article
ISSN: 0025-1747

Keywords

Article
Publication date: 20 March 2017

Lorenzo Bizzi

While previous research has developed unclear positions about the role of organizational resources on alliance formation, the purpose of this paper is to focus on…

Abstract

Purpose

While previous research has developed unclear positions about the role of organizational resources on alliance formation, the purpose of this paper is to focus on financial slack resources to clarify the conditions that facilitate the formation of strategic alliances. Building on the behavioral theory of the firm, this paper theorizes that internal and external financial slack resources, measured as cash holdings and financial leverage, incentivize managers to form alliances, because they protect them against the risk of alliance failure.

Design/methodology/approach

Complete data were collected from 400 biotech public companies for the period from 2000 to 2015. The data set considered alliances among over 2,200 public and private companies. Hypothesis testing relied on generalized estimating equations.

Findings

Cash holdings positively impact alliance formation; financial leverage negatively impacts alliance formation; cash holdings and financial leverage interact in the prediction of alliance formation.

Research limitations/implications

While research in financial slack resources shows equivocal results, this study illustrates that they exercise a significant effect when it comes to the choice of forming strategic alliances. Limitations include the focus on multiple forms of alliances, possible restrictions in the external validity of the findings, and a lack of measurement of explanatory mechanisms.

Practical implications

Findings help managers understand the financial conditions in which they should choose to form or avoid alliances; findings help managers select alliance partners.

Originality/value

The study contributes by proposing a new outlook on alliances; identifying financial resources as alliance predictors when previous research focused on intangible resources; offering new insights into the often equivocal outcomes of financial slack; building an uncharted bridge between the finance and alliance literatures.

Details

Management Decision, vol. 55 no. 2
Type: Research Article
ISSN: 0025-1747

Keywords

Article
Publication date: 8 June 2015

Martin Weiss, Dirk Schneider and Jekaterina Lebid

This paper aims to develop a conceptual foundation of a fit between top management teams (TMTs) and their company’s corporate strategy. The authors fortify the importance…

Abstract

Purpose

This paper aims to develop a conceptual foundation of a fit between top management teams (TMTs) and their company’s corporate strategy. The authors fortify the importance of the concept of fit if the impact of upper echelons on organizational performance is trying to be explained. Yet, a constitutive concept of fit for the corporate strategy, a particularly important dimension of strategy, was previously neglected.

Design/methodology/approach

In a conceptual/theoretical approach, the authors selected demographic managerial characteristics from previous empirical studies from the research stream on upper echelons and combined them with other promising characteristics. To analyze them in respect to the requirements of low and highly diversified companies, the authors applied the concept of the dominant logic, an important theory in the field of corporate strategy.

Findings

The authors establish two distinct profiles of TMT members for low and high degrees of diversification and provide guidance on how to measure the TMT-corporate strategy fit – for individual TMT members and for the entire TMT – as a degree of fit on a ratio scale.

Originality/value

This work constitutes the first exhaustive concept of a TMT-corporate strategy fit. It provides a profound research foundation for scholars in the field of TMTs and the upper echelons theory as well as a promising and complementary perspective for practitioners when assessing their TMT composition.

Details

Team Performance Management: An International Journal, vol. 21 no. 3/4
Type: Research Article
ISSN: 1352-7592

Keywords

Article
Publication date: 16 November 2015

Dan Marlin and Scott W Geiger

The purpose of this paper is to contribute to the organizational literature and improve the understanding of the slack and performance link by: examining the slack and…

1083

Abstract

Purpose

The purpose of this paper is to contribute to the organizational literature and improve the understanding of the slack and performance link by: examining the slack and performance relationship using a configurational approach and by considering equifinality and its possible effects on this relationship.

Design/methodology/approach

Using cluster analysis, ANCOVA, and means comparisons this study identifies different configurations of slack and their associated performance implications.

Findings

The results show that configurations with higher levels of slack outperform those with lower levels of slack suggesting a positive relationship between slack and firm performance. The findings also demonstrate that alternative configurations of slack can result in similar levels of performance suggesting the existence of equifinality in this relationship.

Research limitations/implications

This study contributes to prior research by moving beyond traditional linear and contingency views of slack and considering a configurational approach. An important contribution of this study is that while level of slack may be important it appears that how the various types of slack are bundled also serves as an important factor in firm outcomes and should be examined by future researchers.

Practical implications

The results indicate that managerial attention should be paid to not only identifying appropriate levels and types of slack for the organization but also to appropriate ways to bundle theses resources.

Originality/value

This study provides an important contribution to the literature by determining if certain slack bundles result in higher levels of performance and if there are multiple ways of bundling slack resources that result in similar performance outcomes.

Details

Management Decision, vol. 53 no. 10
Type: Research Article
ISSN: 0025-1747

Keywords

Article
Publication date: 1 March 1985

Yash Gupta and Wing Sing Chow

This article surveys the literature dealing with theory and applications of life cycle costing (LCC). It deals with the literature published in the last 25 years and…

Abstract

This article surveys the literature dealing with theory and applications of life cycle costing (LCC). It deals with the literature published in the last 25 years and provides 667 references.

Details

International Journal of Quality & Reliability Management, vol. 2 no. 3
Type: Research Article
ISSN: 0265-671X

Article
Publication date: 6 August 2020

Mahdi Salehi, Mahbubeh Mahmoudabadi, Mohammad Sadegh Adibian and Hossein Rezaei Ranjbar

The present study aims to assess the effect of managerial entrenchment on firms’ corporate social responsibility (CSR) activities and financial performance in Iran.

Abstract

Purpose

The present study aims to assess the effect of managerial entrenchment on firms’ corporate social responsibility (CSR) activities and financial performance in Iran.

Design/methodology/approach

In this paper, the variable of managerial entrenchment, which includes board independence, management duality, management tenure, the board compensation, independence and ownership percentage, is initially analyzed using the exploratory factor analysis method, and its effect on performance and CSR is evaluated using the multivariable regression test. Given that a total of 103 listed companies on the Tehran Stock Exchange are selected during 2012–2017. In this paper, return on assets (ROA) and Tobin’s Q are the two variables to measure financial performance.

Findings

The results of hypotheses testing indicate that there is a positive and significant relationship between managerial entrenchment and financial performance based on the ROA and Tobin’s Q indices, separately. Moreover, the results of this study indicate that there is also a positive and significant relationship between managerial entrenchment and CSR activities.

Originality/value

The current study almost is the first study, conducted in a developing country similar to Iran, and the provided results might be beneficial to other developing countries.

Details

International Journal of Productivity and Performance Management, vol. 70 no. 7
Type: Research Article
ISSN: 1741-0401

Keywords

Article
Publication date: 16 April 2018

Carlos Noronha, Jieqi Guan and Jing Fan

This study aims to investigate the relationship between corporate social contribution measures and investors’ reaction under the effect of corporate governance for firms…

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Abstract

Purpose

This study aims to investigate the relationship between corporate social contribution measures and investors’ reaction under the effect of corporate governance for firms listed in China, the largest emerging economy in the world. Corporate social contribution is examined from an informative perspective by using a financial indicator – social contribution value per share (SCVPS) brought up by the Shanghai Stock Exchange in 2008.

Design/methodology/approach

Data are obtained from two channels: financial information during 2007-2015 generated from database and social accounting information manually collected from the 2007-2015 annual reports and social reports.

Findings

It is predicted that investors’ reaction toward corporate social contribution becomes stronger for companies with higher corporate governance quality.

Practical implications

This paper is one of the first to use Chinese SCVPS data to indicate the informativeness of social contribution toward firm value. It can serve as a valuable reference to both investors and companies in terms of the issue of social contribution.

Social implications

The study highlights the importance of social contribution on firm value by using an empirical approach in the Chinese market. The study can be used as a reference for many other developing countries in the world.

Originality/value

The findings of this study can provide guidance to investors on how to evaluate a firm’s social performance and encourage companies to improve the transparency of their social reporting, as well as the quality of corporate governance.

Details

Sustainability Accounting, Management and Policy Journal, vol. 9 no. 2
Type: Research Article
ISSN: 2040-8021

Keywords

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