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1 – 10 of 164John S. Howe and Scott O’Brien
We examine the use of relative performance evaluation (RPE), asymmetry in pay for skill/luck, and compensation benchmarking for a sample of firms involved in a spinoff. The spinoff…
Abstract
We examine the use of relative performance evaluation (RPE), asymmetry in pay for skill/luck, and compensation benchmarking for a sample of firms involved in a spinoff. The spinoff affects firm characteristics that influence the use of the identified compensation practices. We test for differences in the compensation practices for the pre- and post-spinoff firms. We find that RPE is used for post-spinoff CEOs, but not pre-spinoff CEOs. Post-spinoff CEOs are also paid asymmetrically for luck where they are rewarded for good luck but not punished for bad luck. Both pre- and post-spinoff CEOs receive similar levels of compensation benchmarking. The study provides additional evidence on factors that influence compensation practices. Our spinoff sample allows us to examine how compensation practices are affected by changes in firm characteristics while keeping other determinants of compensation constant (i.e., the board and, in many cases, the CEO). Our findings contribute to the understanding of how the identified compensation practices are used.
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Elizabeth L. Rose and Kiyohiko Ito
The relationship between parent firms and their subsidiaries is a crucial aspect of corporate governance, and is increasingly complex in the global environment. We analyze an…
Abstract
The relationship between parent firms and their subsidiaries is a crucial aspect of corporate governance, and is increasingly complex in the global environment. We analyze an organizational arrangement quite common in Japan, the corporate spinoff, focusing on the relationship between parent firms in the Japanese service sector and their spinoff subsidiaries. The level of parental ownership is negatively related to the parent firm's net income and number of subsidiaries, but positively related to its advertising expenditures. In addition, parent firms tend to have lower ownership of more profitable subsidiaries. The ownership arrangement between the parent and the subsidiary appears to be based on issues broader than direct profit maximization.
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This paper aims to examine the prevalence of informed trading around corporate spinoffs and the relation between firm opacity and informed trading using option market data.
Abstract
Purpose
This paper aims to examine the prevalence of informed trading around corporate spinoffs and the relation between firm opacity and informed trading using option market data.
Design/methodology/approach
The author investigates the prevalence of informed trading by examining the relationship between abnormal stock returns associated with spinoffs and the volatility spread/volatility skewness of options prior to the spinoffs. Furthermore, the author examines how opacity and organizational complexity prior to the spinoffs affect informed trading.
Findings
The study shows that option volatility spread and volatility skewness for the five days prior to the spinoffs can predict the abnormal stock returns on the spinoff announcement days, suggesting that there is informed trading in the options market prior to spinoffs. The study shows that informed trading is more prevalent for firms that are more opaque prior to the spinoff. Furthermore, informed trading decreases after spinoffs.
Originality/value
To the best of knowledge, this is the first empirical research that examines the prevalence of informed trading around spinoffs by using options volatility spread/skewness and the relation between firm opacity and informed options trading.
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Hidetaka Aoki and Hideaki Miyajima
The purpose of this paper is to examine how corporate headquarters control business units, the governing of which has emerged as a vital issue as business portfolios have grown…
Abstract
Purpose
The purpose of this paper is to examine how corporate headquarters control business units, the governing of which has emerged as a vital issue as business portfolios have grown increasingly complex due to diversification, globalization, and corporate group expansion via spinoffs and mergers and acquisitions.
Design/methodology/approach
This study utilized questionnaire survey data from 251 firms listed on the First Section of the Tokyo Stock Exchange. The authors approached the issue of business unit governance by measuring the degree of decentralization and the intensity of monitoring, and compared the governance of internal business units with that of subsidiaries, and analyzed the impact of corporate governance characteristics on business unit governance.
Findings
Comparing in‐house business units and subsidiaries, the authors found a significant difference in their governance. The degree of decentralization toward subsidiaries was higher for strategic and personnel decision‐making. However, the complementarity of decentralization and monitoring was not observed for subsidiaries, whereas it was for in‐house business units. Subsidiary monitoring corresponding to decentralization was inadequate. Examining the relationship between corporate governance and business unit governance, the paper found that firms with reformed boards of directors and under a greater degree of pressure from capital markets monitored their business units more strictly.
Originality/value
The paper shows how the business portfolios and governance arrangements of Japanese firms have changed since the 1990s, and analyzes business unit governance based on valuable data obtained from a questionnaire survey.
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Kiyohiko Ito and Elizabeth L. Rose
As companies grow and increase the number of products they have on offer, they generally change and adapt their organizational structures, in order to arrange their resources and…
Abstract
As companies grow and increase the number of products they have on offer, they generally change and adapt their organizational structures, in order to arrange their resources and product mix in ways that will create value. We analyze various corporate structures that have been adopted by U.S., European, and Japanese companies, in the context of the resource‐based view of the firm. These corporate structures include functional, divisional, conglomerate diversification, core competence‐based diversification, and keiretsu. We also identify an emerging structure. This recent development is a network of alliances, aimed at pursuing economies of scale, scope, and speed.
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Michael S. Minor, J. Michael Patrick and Wann‐Yih Wu
Although corporate structures in Japan and, to a lesser extent Korea, have been examined in the literature, in most cases the framework is not comparative. In other cases the…
Abstract
Although corporate structures in Japan and, to a lesser extent Korea, have been examined in the literature, in most cases the framework is not comparative. In other cases the framework is comparative, with keiretsu and chaebol compared to US conglomerates. A third foreign conglomerate, the Mexican grupo, has thus far escaped much serious attention by scholars. Attempts to compare the structure of keiretsu, chaebol, and grupo in terms of the other. Aims to identify what can be learned from comparing foreign corporate structures with other foreign corporate structures, rather than with corporate structures in the USA.
Planning was not always a major consideration at R. J. Reynolds. Ten years ago RJR, like most companies, had very little formal planning. However, since we first opened our doors…
Abstract
Planning was not always a major consideration at R. J. Reynolds. Ten years ago RJR, like most companies, had very little formal planning. However, since we first opened our doors as a small tobacco business in 1875, we've grown dramatically, becoming a somewhat curious assortment of related and unrelated businesses.
Muhammad Burhan, Omar Abou Hamdan, Hussain Tariq, Zahid Hameed and Rana Muhammad Naeem
This study examines the influence of contextual factors (e.g. age and ownership type) on HRM formality (including the underlying functions of recruitment, selection, training and…
Abstract
Purpose
This study examines the influence of contextual factors (e.g. age and ownership type) on HRM formality (including the underlying functions of recruitment, selection, training and development, performance appraisal and compensation) in SMEs.
Design/methodology/approach
Data were collected through a quantitative survey of 300 owners/managers of services, manufacturing and trade SMEs in Pakistan.
Findings
Firm age, association with a larger parent entity, existence of a strategic business plan and the presence of a human resource information system (HRIS) are positively related with higher HRM formality. Firm size, family ownership and exporting characteristics had no association with formality.
Practical implications
This study suggests a highly influential role for contextual factors in shaping HRM practices in Pakistani SMEs. Since the lack of a strategic approach towards human resource development is directly linked to the inferior performance of SMEs in Pakistan, this study provides an understanding of the contextual institutional setting that shapes the nature of HRM practices. The findings inform both SME owners/managers and policy makers.
Originality/value
Institutional influences on HRM systems have attracted attention but organisational factors are less often studied. Studies mostly relate to Western contexts and lack perspectives from SMEs. The findings of this empirical investigation highlight the importance of context specific research given the different nature of institutional settings.
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This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies.
Abstract
Purpose
This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies.
Design/methodology/approach
This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context.
Findings
A study of 300 owners of SMEs in Pakistan found that firm age, association with a larger parent entity, existence of a strategic business plan and the presence of a human resource information system (HRIS) are positively related with higher HRM formality. But firm size, family ownership and exporting characteristics had no association with formality.
Originality/value
The briefing saves busy executives, strategists and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.
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Students will need to know basic capital budgeting techniques to value UrsaNav and its divisions. Students must determine which cash flows are relevant and determine an…
Abstract
Theoretical basis
Students will need to know basic capital budgeting techniques to value UrsaNav and its divisions. Students must determine which cash flows are relevant and determine an appropriate return on investment. Some of the issues that need to be addressed include: how to handle taxes in a discounted cash flow analysis when valuing an S Corp. where incentives depend on current (known) tax provisions and future (unknown) tax provisions; how to use comparable multiples to develop a cost of capital for a DCF valuation; and how to value a firm using comparable transactions.
Research methodology
Case information was obtained through interviews with the owner, Charles Schue. In addition, the authors researched industry and comparable company data, along with current events relating to government consulting.
Case overview/synopsis
UrsaNav is a US-based, international provider of advanced engineering and information management consulting services in the naval navigation industry. After about a decade of operating and growing, the firm had become successfully diversified; however, it had also grown too large to manage effectively. Thus, the company was spun-off into three separate segments: Tagence, Geodesicx and UrsaNav. These segments went “back to the basics,” and focused more on serving customers, with each having a more defined company focus. Is this a move that creates or destroys value? How could it create value for the firms’ founders?
Complexity academic level
This case is intended for an advanced undergraduate or an MBA corporate finance class or an entrepreneurship elective. Students interested in analyzing whether or not decision makers within a company would want to spin-off divisions, or merge with another company, or divest a company would find this case appealing. Other students who just want to analyze whether the company has grown too much would be good candidates to do this case.
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