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The purpose of this paper is to hone in on the degree of segment-level integration relative to corporate post-merger performance.
Abstract
Purpose
The purpose of this paper is to hone in on the degree of segment-level integration relative to corporate post-merger performance.
Design/methodology/approach
The sample consists of 89 segments in 29 combined companies resulting from large mergers and acquisitions (M&A) transactions between 2001 and 2014 in the pharmaceutical and chemical industries worldwide. The authors track the change through M&A in performance of segments with different integration forms as well as performance of entire companies with different integration levels.
Findings
The authors find that integrating the segments from the target significantly improves the acquirer’s overall performance, as well as the concerned segments’ performance, following an M&A transaction. Whereas the segments from the target company, when left unintegrated, not only exhibit subpar performance among all the segments, but also appear responsible for the worsening corporate performance. Various possible reasons for this contrast are discussed.
Originality/value
This paper raises awareness of the significance of segment-level analyses, and contributes to the post-merger integration (PMI) research by examining the influence of structural integration on operating segments. To the best of our knowledge, this paper is the first to investigate integration forms and the post-merger financial performance of various segments within companies.
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The purpose of this paper is to illustrate new methods of examining structural differences among segmented markets beyond comparing merely univariate variable mean scores, so as…
Abstract
Purpose
The purpose of this paper is to illustrate new methods of examining structural differences among segmented markets beyond comparing merely univariate variable mean scores, so as to help marketers and researchers gain better insights into segment differences for meaningful strategy development.
Design/methodology/approach
A comprehensive dataset covering various lodging market segments was constructed from Tripadvisor.com. The data then were sorted into lodging customer segments by star rating, type of operation, and level of price charged. Structural equation modeling with the −2 log‐likelihood difference test was conducted to illustrate how effectively the differences, if any, of market segments could be assessed in contrast to the traditional mean‐score comparison approach.
Findings
Guest satisfaction was influenced by the same performance variable to the same magnitude and direction across different lodging segments examined. Such stability in the amount of influence of performance on guest satisfaction was true even in the fact that the variable mean scores were significantly different across the market segments.
Research limitations/implications
The traditional approach to examining segment differences via univariate mean scores could be one set of results, while the effect‐based difference assessments in this paper resulted in another. Developing marketing strategies based on the effect‐based segment differences, as illustrated in this paper, is considered more effective than the traditional mean‐based approach. One limitation of this paper could be use of a secondary dataset with limited scope of the model employed for an illustrative purpose. Another limitation is that the sample characteristics are unknown due to the nature of a secondary dataset. The examination of the market segments was also limited to those based on only three popular variables.
Originality/value
The paper is a fresh attempt to examine market segment differences through the effect of one variable on another. The paper advances the methods of hospitality and tourism research for examining segment differences beyond the traditional univariate mean‐based examination approach. The methodological illustration is applicable to a vast majority of different theoretical frameworks known in the hospitality and tourism field. Use of the assessment method illustrated in this paper also requires future market segmentation studies to rely more on theories than data.
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Manuel Becerra and Juan Santaló
In this paper, we argue that the effect of diversification on performance is not homogeneous across industries, as previously assumed in the literature on diversification in…
Abstract
In this paper, we argue that the effect of diversification on performance is not homogeneous across industries, as previously assumed in the literature on diversification in strategy and finance. We provide empirical evidence that some industries are more friendly environments for diversified firms than for specialists, and vice versa. The implications of this qualification for the diversification‐performance relationship are investigated in this study. The results show that the number of specialists in an industry is an important moderator of the diversification‐performance relationship, and it determines the existence of a positive, negative, or curvilinear relationship. Diversification has a more negative impact on performance as the number of specialized firms in the industries in the sample increases. Although we find clear evidence of the curvilinear relationship between diversification and performance frequently found in strategy research, the relationship seems to be the result of not accounting for the relative dominance of diversifiers versus specialists in the industries in the sample.
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Internal capital markets of diversified firms have been associated with inefficient allocation of investment funds across divisions, leading to value losses. Utilizing a sample of…
Abstract
Internal capital markets of diversified firms have been associated with inefficient allocation of investment funds across divisions, leading to value losses. Utilizing a sample of diversified firms that adopted or eliminated Residual Income (RI) plans between 1990 and 2009, we show that adoptions of these plans mitigate investment distortions and lead to value gains. Following the adoption of RI plans, diversified firms start allocating investment funds based on growth opportunities of their divisions. RI plan adopters lower their divisional investment levels, especially in segments with below-average growth opportunities. The overall investment allocation efficiency improves, and the diversification discount diminishes after the adoption of RI plans. However, RI plans appear to be used only as temporary tools for assessing corporate performance. The plans are adopted primarily by firms expected to immediately generate plan bonuses for management, and they are frequently eliminated by firms with bad accounting performance and low managerial bonuses. The study contributes to the literature on organizational efficiency, internal capital markets, and on the importance of measures based on economic profits or RI.
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Gordon H.G. McDougall and Terrence J. Levesqu
Effective segmentation is a challenge for financial service managers.Investigates the use of service quality, convenience, andcompetitiveness as a basis for benefit segmentation…
Abstract
Effective segmentation is a challenge for financial service managers. Investigates the use of service quality, convenience, and competitiveness as a basis for benefit segmentation. Identifies two segments, a performance driven segment that in the retail bank sector is primarily interested in having the bank “get it right the first time” and a convenience driven segment that wants location. An important benefit for both segments was competitive rates. Results indicate that the segments differ with respect to evaluation of their main financial institution and satisfaction levels.
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Gülşah Hançerlioğulları, Alper Şen and Esra Ağca Aktunç
The purpose of this paper is to investigate the impact of demand uncertainty on inventory turnover performance through empirical modeling. In particular the authors use the…
Abstract
Purpose
The purpose of this paper is to investigate the impact of demand uncertainty on inventory turnover performance through empirical modeling. In particular the authors use the inaccuracy of quarterly sales forecasts as a proxy for demand uncertainty and study its impact on firm-level inventory turnover ratios.
Design/methodology/approach
The authors use regression analysis to study the effect of various measures on inventory performance. The authors use a sample financial data for 304 publicly listed US retail firms for the 25-year period from 1985 to 2009.
Findings
Controlling for the effects of retail segments and year, it is found that inventory turnover is negatively correlated with mean absolute percentage error of quarterly sales forecasts and gross margin and positively correlated with capital intensity and sales surprise. These four variables explain 73.7 percent of the variation across firms and over time and 93.4 percent of the within-firm variation in the data.
Practical implications
In addition to conducting an empirical investigation for the sources of variation in a major operational metric, the results in this study can also be used to benchmark a retailer’s inventory performance against its competitors.
Originality/value
The authors develop a new proxy to measure the demand uncertainty that a firm faces and show that this measure may help to explain the variation in inventory performance.
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This paper analyzes what factors drive a company’s decision to align financial and management accounting policies as a measure of integration of management accounting and…
Abstract
Purpose
This paper analyzes what factors drive a company’s decision to align financial and management accounting policies as a measure of integration of management accounting and financial accounting at the highest hierarchy levels of a company.
Methodology/approach
Research hypotheses for six different determinants are developed: company size, number of operating segments and subsidiaries, internationality of the business, business strategy, company life cycle stage, and leverage. The hypotheses are tested using International Financial Reporting Standards 8 (IFRS 8) segment report data from a large sample of 175 German publicly listed companies.
Findings
A higher internationality of the business causes companies to choose a lower degree of integration. Companies with a prospector (defender) strategy choose a lower (higher) degree of integration. Companies in later life cycle stages and with higher leverage choose a lower degree of integration as well. Company size does not impact integration.
Practical implications
Companies have to decide whether, and to what extent, to integrate financial and management accounting and align the two sets of accounting policies. German companies have traditionally kept the two sets separate. As the research reported in this paper sheds light on when companies do not consider integration to be beneficial, it is useful for practitioners.
Originality/value
The legal reporting requirements in Germany as well as German accounting traditions make the German setting particularly suited for examining the integration of management accounting and financial accounting. Using the number of adjustments to financial accounting policies made for management accounting purposes is a novel approach, and the number of adjustments is a more fine-grained measure of integration at the highest hierarchy levels of a company than the measures used in prior literature.
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Saswati Tripathi, Krishnamachari Rangarajan and Bijoy Talukder
Pharmaceutical industry involves highly specialized business processes where strong research and development focus along with market differentiation and localization are the…
Abstract
Purpose
Pharmaceutical industry involves highly specialized business processes where strong research and development focus along with market differentiation and localization are the deciders of success. This has led to evolution of segments and complexities in supply chain. This paper aims to focus on segmental differences in supply chain performance of Indian Pharmaceutical firms.
Design/methodology/approach
This paper measures supply chain performance of select segmental players of the pharmaceutical industry using financial metrics and supply chain operations reference (SCOR) key performance indicators through a five-year timeline. The best performance results are compared across the segments to identify unique performance features, if any. The sample results are validated through hypothesis testing methodology.
Findings
This paper has evidenced that the innovators segment is performing better in cash-to-cash cycle time and supply chain working capital productivity, whereas generics segment is doing better in distribution cost efficiency and total cost to serve aspects.
Research limitations/implications
The paper is based on historical financial data of firms and measures the firm focused supply chain performance. The results may not be generalized in a global context but serve as a motivator for other researchers to take similar studies. The paper may further be analyzed with primary data of the firms to understand the segmental difference in customer focus supply chain performance measures.
Practical implications
This paper has brought out important segmental supply chain performance features of the Indian pharmaceutical firms and identified segment-specific problems by integrating SCOR KPIs and financial metrics.
Originality/value
This paper has integrated both SCOR KPIs and financial metrics to provide unique insights on segmental differences in the performance behavior of pharmaceutical supply chain.
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Zachary Williams, Michael S. Garver and Robert Glenn Richey Jr
The influence of security practices is increasingly common in the supply chain management and logistics literature. However, an under-researched area exists within the logistics…
Abstract
Purpose
The influence of security practices is increasingly common in the supply chain management and logistics literature. However, an under-researched area exists within the logistics service provider (LSP) selection process. The purpose of this paper is to introduce a security capability into the LSP selection process. Specifically, this research seeks to understand partner willingness to compensate and collaborate with service providers that possess a security capability.
Design/methodology/approach
Adaptive choice modeling is adopted to assess the influence of a security capability in the LSP selection process. This study represents the first use of this method in supply chain management and logistics research. Cluster analysis is also performed to uncover specific buyer segments along with traditional regression-based significance testing and counting analysis.
Findings
The findings indicate that security can have an important influence on the LSP selection process. In particular, the findings note a willingness to pay for a security capability in LSP selection. Applying segmentation techniques to the findings, three LSP buying segments are determined, each placing different importance and value on LSP capabilities.
Practical implications
This research notes an ongoing provider deficiency in security offerings. Partner firms sometimes maintain a cost focus, but others show a willingness to pay higher prices for access to partners with a security capability. Key practitioner findings include the need to include security with other traditional selection variables. The study walks the researcher and manager through the development of segments based on LSP capabilities.
Originality/value
This manuscript investigates logistic service provider selection. The authors detail an advanced form of conjoint analysis, adaptive conjoint modeling, for first time consideration. Additionally, this is the first study to integrate security into the LSP selection process. This is also the first study to identify a willingness to pay for a security capability.
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Mohammad Talha and Abdullah Sallehhuddin Abdullah Salim
The purpose of this paper is to investigate what causes a firm to choose between a business segment and a geographic segment as a primary segment for its segmental information…
Abstract
Purpose
The purpose of this paper is to investigate what causes a firm to choose between a business segment and a geographic segment as a primary segment for its segmental information disclosure. It seeks to examine Malaysian firms' experiences as they disclose segmental information under the new accounting standard known as FRS 114, Segment Reporting.
Design/methodology/approach
The paper involves 374 Malaysian public‐listed companies which disclosed segmental information in their 2006 annual reports. Four hypotheses are developed to examine the influence of these five factors, namely the size of the company, listing status, financial leverage, financial performance, and industrial membership. The non‐parametric test is employed to test the formulated hypotheses.
Findings
The results reveal two important outcomes: first, size of company, financial performance, and industrial membership are significantly associated with the choice of a primary segment; and financial leverage of a company and listing status are not significantly associated with the choice of a primary segment.
Research limitations/implications
The limited number in the sample and inherent segmental reporting problems present limitations.
Practical implications
The paper implies extensive auditing work as the new standard requires more extensive disclosure for the primary segment, although the standard allows the adoption of primary segment reporting at management's discretion.
Originality/value
The paper's value lies in determining what motivates a company to disclose a business segment or a geographic segment as its primary segmental reporting basis.
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