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Article

Raymond A.K. Cox and Robert T. Kleiman

Outlines previous research on the security analyst “superstar” phenomenon, including the stochastic model of Yule and Simon. Applies this to data on the 1986‐1997…

Abstract

Outlines previous research on the security analyst “superstar” phenomenon, including the stochastic model of Yule and Simon. Applies this to data on the 1986‐1997 selections for the Institutional Investor’s All‐British Research First Team (ABRT) and finds that it does not explain the distribution, i.e. that selection does appear to be based on skill rather than luck. Considers consistency with other research and expects future research to concentrate on the ABRT’s ability to forecast earnings per share and share prices.

Details

Managerial Finance, vol. 28 no. 1
Type: Research Article
ISSN: 0307-4358

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Article

Raymond A.K. Cox and Dwight B. Means

This paper studies the effects of lawsuit settlements on stockholders and bondholders. It is hypothesized that successful plaintiffs and unsuccessful defendants will gain…

Abstract

This paper studies the effects of lawsuit settlements on stockholders and bondholders. It is hypothesized that successful plaintiffs and unsuccessful defendants will gain and lose wealth respectively upon the settlement of litigation. Furthermore, the riskiness of equity returns will be altered. The equity beta of plaintiffs (defendants) is expected to decrease (increase) after the verdict. Nonetheless, the variance of stock returns for both parties is anticipated to decrease. The results support the wealth impact hypothesis for both stockholders and bondholders. However, even though the variance of returns does drop for both parties after the settlement, the drop is not statistically significant. Lastly, the beta of both plaintiffs and defendants insignificantly decreases.

Details

International Journal of Commerce and Management, vol. 9 no. 1/2
Type: Research Article
ISSN: 1056-9219

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Article

Raymond A.K. Cox, Robert T. Kleinman and Anandi P. Sahu

Several academic studies have examined the investment performance of initial public offerings (IPOs). Since the underwriters desire to have the offering sell out quickly…

Abstract

Several academic studies have examined the investment performance of initial public offerings (IPOs). Since the underwriters desire to have the offering sell out quickly, they have an incentive to underprice the securities offering. A number of studies have found that new equity issues are generally underpriced and produce positive abnormal short‐term returns. Like IPOs, spin‐offs are issues which are new to the public capital markets. However, unlike IPOs, spin‐offs do not involve an underwriter which determines the offering price of the security. Spin‐offs are also similar to corporate sell‐offs in that a parent company makes a decision to divest a division or subsidiary; however, in a spin‐off the business unit is not sold for cash or securities. Instead, spin‐offs occur when a parent corporation distributes its entire holdings of stock in a subsidiary on a pro‐rata basis to the parent's shareholders. These transactions have the effect of completing the separation of the assets and liabilities of the parent and the subsidiary. Thus, two separate public corporations with the same proportional equity holdings now exist whereas only one firm existed previously.

Details

Competitiveness Review: An International Business Journal, vol. 2 no. 1
Type: Research Article
ISSN: 1059-5422

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Article

Raymond A.K. Cox and Rose M. Prasad

The values of assets and liabilities of financial institutions are subject to fluctuations in interest rate. The differential impact in interest rate changes between…

Abstract

The values of assets and liabilities of financial institutions are subject to fluctuations in interest rate. The differential impact in interest rate changes between assets and liabilities is referred to, in banking, as interest rate risk. Of all threats to bank competitiveness this risk dwarfs all others. Banks traditionally have dealt with interest rate risk by restructuring their loan portfolios. In this paper, we construct a model to measure interest rate risk, called the Degree of Interest Rate Sensitivity (DIRS), and demonstrate its effectiveness for banks to compete. The degree of interest rate risk is of vital importance to the commercial bank which has to know its level and degree of interest‐rate risk in order to prudently manage it. Failure to adequately manage interest rate risk can lead to bankruptcy or, at the least, a lack of competitiveness.

Details

Competitiveness Review: An International Business Journal, vol. 5 no. 2
Type: Research Article
ISSN: 1059-5422

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Article

Raymond A. K. Cox, Robert T. Kleiman and John B. Mitchell

This paper is an event time study of the valuation effects of a sample of eighty‐two permanent plant closings. The traditional approach to project termination decisions…

Abstract

This paper is an event time study of the valuation effects of a sample of eighty‐two permanent plant closings. The traditional approach to project termination decisions suggests that common stock prices should increase around the date on which firms publicly announce the termination of a project. However, the empirical results of this study indicate that, on average, no significant changes in share holder wealth are associated with the closing down of capital assets.

Details

American Journal of Business, vol. 8 no. 1
Type: Research Article
ISSN: 1935-5181

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Article

Adishwar K. Jain and Raymond A.K. Cox

The purpose of this paper is to examine the uncertainty of acquiring the lowest possible airfare when contemplating the purchase of a ticket. A real option model is…

Abstract

Purpose

The purpose of this paper is to examine the uncertainty of acquiring the lowest possible airfare when contemplating the purchase of a ticket. A real option model is applied to value insurance contracts that could be offered to passengers to cope with price risk. Furthermore, the premiums charged for such airfare price insurance contracts can augment airline carrier revenues.

Design/methodology/approach

Prices on 14 airfares were collected for 79 consecutive days on an assortment of US domestic and international flights from four airline carriers. Volatility in airfares was shown using the price range and SD. The Black‐Scholes‐Merton model was employed to value the call and put options representing different airfare price insurance contracts.

Findings

Airfare price insurance contracts affordability was demonstrated ranging from 1.55 to 11.28 percent of the average dollar ticket price.

Research limitations/implications

The valuations in the paper were based on ex post data that would not be available to the customer purchaser. Nonetheless, the airline carriers that sell the insurance would have better estimates of the price volatility and therefore could price the contracts to make a profit.

Practical implications

Airline passengers would have an opportunity to reduce the ticket price risk they face when buying their tickets. Airline carrier could increase revenues by offering such products.

Social implications

The opportunity to manage price risk contributes to the completeness of markets.

Originality/value

The paper shows that airfare price insurance contracts are a viable tool in the management of price risk.

Details

The Journal of Risk Finance, vol. 12 no. 1
Type: Research Article
ISSN: 1526-5943

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Article

Raymond A.K. Cox and James D. Schultz

To examine the initial stockholder wealth impact of firms announcing corporate headquarters relocation.

Abstract

Purpose

To examine the initial stockholder wealth impact of firms announcing corporate headquarters relocation.

Design/methodology/approach

The LexisNexis Academic database were searched from December 1994 to April 2005 for US firms announcing headquarters relocation. The companies were then categorized according to the rationale (cost/consolidation, space, managerial interests, none given) for moving. Standard event study methodology, market‐model version of the capital asset pricing model, was employed to ascertain the impact of this event to stockholders.

Findings

In general, the stock‐market reaction is favorable for companies moving their head office. Moreover, stockholders react most positively to the managerial interest reason for such a shift. Nevertheless, the cost/consolidation reason and to some extent even when no reason is given shareholders viewed relocation announcements with an increase in stock returns. However, when space reasons are given for headquarters relocation, the stock returns are negative.

Research limitations/implications

The sample is restricted to the USA and may not be reflective of other countries. Also, this study focuses on the initial stockholder wealth impact which may not be reflective of the long‐run effect of corporate headquarters relocation.

Practical implications

Organizations considering moving their head office should evaluate their decision based on the perception of their shareholders and how they may react to such announcements. Changes in the market value of the equity, caused by headquarters relocation, will have a direct impact on the firm's ability to raise capital.

Originality/value

This paper updates empirical research in the field and provides contrary evidence of the rationale that generates a favorable stock‐market reaction.

Details

International Journal of Commerce and Management, vol. 17 no. 3
Type: Research Article
ISSN: 1056-9219

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Article

Raymond A.K. Cox and Thomas R. Weirich

Explores the impact that recent fraudulent financial reporting has had on the capital markets. Attempts to examine the stock market reaction, both to return and risk, to…

Abstract

Explores the impact that recent fraudulent financial reporting has had on the capital markets. Attempts to examine the stock market reaction, both to return and risk, to fraudulent financial reporting that has occurred in major corporations during the decade 1990‐1999. Finds that capital market impact is significant in dollar terms with strong negative announcement effects the day before and on the day of a news event. Concludes that auditor and regulator vigilance needs to be strongly maintained in monitoring firms’ financial reporting.

Details

Managerial Auditing Journal, vol. 17 no. 7
Type: Research Article
ISSN: 0268-6902

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Article

Joel M. Shulman, Raymond A.K. Cox and Thomas T. Stallkamp

The purpose of this paper is to present the development of the model of the strategic entrepreneurial unit (SEU) as an alternative means for large firms to harness the…

Abstract

Purpose

The purpose of this paper is to present the development of the model of the strategic entrepreneurial unit (SEU) as an alternative means for large firms to harness the entrepreneurial spirit and creation of intellectual property.

Design/methodology/approach

Several competing organizational models are critiqued based on factors that will impact the growth and return performance of the unit. The organizational units examined include corporate intrapreneurship, corporate spinout, corporate venturing, corporate venturing with venture capitalist participation, and the SEU.

Findings

Theoretically, by design, the SEU is a superior growth model to incubate newly created intellectual property. The achievement of greater growth and return with the SEU is shown because of equity compensation incentives, facilitator as liaison between the parent and new SEU with no control over harvest timing, lifeline back to parent for employees, intellectual property settlement prior to unit formation, and the financing provided by the internal capital market of the parent.

Research limitations/implications

The general review paper is conceptual in nature and would benefit from empirical evidence research. The case study method is proposed as a means to discern the efficacy of the SEU relative to other organizational forms.

Originality/value

The paper advances a business unit form to foster higher performance from new ideas within the confines of a large corporation.

Details

Competitiveness Review: An International Business Journal, vol. 21 no. 1
Type: Research Article
ISSN: 1059-5422

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Article

Raymond W. Cox and Tricia M. Ostertag

Public administration has become the victim of its own success. Public policy making and problem solving during the first three decades after WWII began from an assumption…

Abstract

Public administration has become the victim of its own success. Public policy making and problem solving during the first three decades after WWII began from an assumption that public managers had the competence to overcome policy barriers. The ʼdo more with less” slogan was a statement of professional competence. It was adopted because many believed it was an affirmation of that competence. Now it represents a fiscal demand as a scold to those who will otherwise waste the money. What the public hears is a perverse joke. The goal must be more effective governance, by approaching fiscal stability as a strategic enterprise. The potential tools for more effective services exist and are applied by governments across the globe. Yet the public clings to failed practices (NPM) that are best when dealing with short-term issues

Details

International Journal of Organization Theory & Behavior, vol. 17 no. 4
Type: Research Article
ISSN: 1093-4537

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