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This paper aims to provide empirical evidence on the impact of a corporate label change (CLC) from investors' perspective, especially based on the stakeholder approach to…
This paper aims to provide empirical evidence on the impact of a corporate label change (CLC) from investors' perspective, especially based on the stakeholder approach to corporate identity. The resource-based theory has been used as a theoretical root of understanding the antecedents and consequences of brands. The authors specifically examine how two important types of firm-level heterogeneity – firm size and firm age – change shareholder reactions. In addition, the authors also test the moderating effects of firm performance.
Using Korean company data, the authors first calculate the cumulative abnormal return (CAR) with the two-day event window [−1,0]. Then, the authors test the impacts of firm size and age on CAR with ordinary least squares regressions. To understand greater dynamics, the authors also test the moderation effects of firm performance. For the robustness check, the authors test using a different event window and different measures as well.
The findings for South Korean companies reveal that CLC itself does not significantly affect shareholder value. However, firm size and firm age show positive and significant coefficients. This means that larger and older firms are more likely to have better investor reactions. In addition, the authors also test a moderation effect of firm performance. The result shows that the impact of firm size weakens when firms have better performance.
The first limitation is the generalizability of the findings, particularly those regarding the impacts of CLC on investor reactions. A second limitation is that the authors did not consider the time gaps between CLCs. Third, there are limitations of using an event study with stock market data due to the ambiguity of the causal relationship between a firm's strategic choices and market reactions. Lastly, the authors use all CLCs except CLCs related to corporate governance (i.e. mergers and acquisitions).
Although managers expect positive relations by introducing new corporate label, the outcomes may not be sufficient because potential losses (i.e. losing royal customers) are significant. Hence, more careful considerations are required when a manager forms a new CLC. The results provide valuable insights for the conditions when large and aged companies pursue CLCs. In addition, the needs of a CLC are increasing when a company shows underperformance. Poor performance is a trigger for introducing new strategic choices (Boeker, 1997). The finding can be another supporting material for managers to consider when they intend to perform CLCs.
The authors probe the effect of CLC on external stakeholders, particularly investor reactions. The current literature has discussed the impacts of CLC on employees, internal stakeholders, and customers, external stakeholders. To the best of the authors’ knowledge, there is no strategy for understanding a CLC under stakeholder aspects. The authors believe that the findings contribute to the extant literature on CLC. This question is also important to a manager. Although introducing a new corporate label is a popular strategy for firms to provide corporate identity to various stakeholders, many cases have shown mixed results. This research provides evidence of what to consider when a manager makes its decision.
This chapter examines the impact of working capital management (WCM now onwards) which is measured by cash conversion cycle (CCC now onwards) on the financial performance…
This chapter examines the impact of working capital management (WCM now onwards) which is measured by cash conversion cycle (CCC now onwards) on the financial performance of firms in the Indian context. The period of study is from the year 2000 to 2014, that is, for a span of 15 years for 4,687 companies listed on the National Stock Exchange. This chapter uses regression model to analyze panel data. Data for 4,687 listed companies have been analyzed for a period of 15 years. For some companies with data availability issues, the period of inclusion is less than 15 years. This chapter is limited to a sample of Indian firms; further research could examine the generalizability of these findings to other countries. Some previous studies have been undertaken on this topic, but the dataset used for this chapter is comprehensive enough to delineate the WCM and performance dynamics in the Indian context. Improved working capital policy could improve firm profitability by reducing the firm’s CCC, thereby creating additional firm value. In addition, the results can be used for other purposes, including monitoring of firms by auditors, debt holders, and other stakeholders. This chapter contributes to the literature by extending the extant literature in an emerging market context. To the authors’ knowledge, this is the first empirical study to address this issue in the Indian context based on a large dataset covering more than 4000 companies.
This chapter reports the results of an empirical study on the “gender–performance gap,” the alleged difference in business performance between firms started or owned by…
This chapter reports the results of an empirical study on the “gender–performance gap,” the alleged difference in business performance between firms started or owned by females and males. Although numerous studies have compared the business performance of firms started by or owned by female and male entrepreneurs, most research to date has employed financial performance metrics and has often produced inconsistent results. The present research compared gender-based business performance by examining self-perceptions of a large sample of female and male Black and Mexican-American entrepreneurs. As such, the present study overcame several limitations of prior gender–performance gap research and addressed entrepreneurial groups seldom studied. While there were no perceptual differences between female and male entrepreneurs surveyed regarding the performance of their respective businesses, Mexican-American entrepreneurs surveyed perceived the performance of their business as being better than Black entrepreneurs surveyed, and this result held for both females and males. Findings from the study provide insights into the perceptions held by Black and Mexican-American female and male entrepreneurs and provide a context for further race and gender studies.
We study how price dispersion varies with product characteristics at a popular online price comparison site – Shopper.com. Our primary finding suggests that price…
We study how price dispersion varies with product characteristics at a popular online price comparison site – Shopper.com. Our primary finding suggests that price dispersion in online markets varies with product characteristics and firm behavior. We also find evidence that the level of dispersion varies with the percent of firms listing price information in multiple categories. When the percent of firms listing prices in multiple categories is relatively high (low), price dispersion is low (high).
This chapter applies arguments advanced by Drnevich and Shanley (this volume) to the strategic leadership literature – an area of work where such multi-level analyses seem…
This chapter applies arguments advanced by Drnevich and Shanley (this volume) to the strategic leadership literature – an area of work where such multi-level analyses seem likely to be particularly appropriate. In an analysis of the relationship between managerial capabilities and firm performance, this chapter breaks from tradition in the strategic leadership literature by examining the interaction between three levels of analysis. In doing so, this chapter identifies the conditions under which leadership can be a source of competitive advantage for a firm, when labor markets will allocate managerial talent imperfectly across competing firms, and when managers will and will not be able to appropriate the rents their specific managerial talents might generate.
This chapter investigates the relationship between financial measures and dividend payout policy choices of firms. We examine why firms choose to pay dividends…
This chapter investigates the relationship between financial measures and dividend payout policy choices of firms. We examine why firms choose to pay dividends continuously, intermittently, or not pay them. Specifically, the findings provide evidence that firms with relatively larger debts tend to pay dividends less frequently than firms with smaller debts.
The results also suggest that good financial performers are more likely to pay dividends more regularly. Additionally, the results of this study indicate that highly leveraged firms tend to make less frequent payouts than lowly leveraged firms.
Overall, this research adds to our understanding of firms’ dividend payout policy choices. First, evidence on the relationship between the various types of financial measures and firms’ choice of dividend payout frequencies should be useful to investors. Second, the findings of this study provide financial statement users with useful information about the firm’s dividend payout patterns. Third, in general, it also adds to the accounting and finance literature on dividends.
Acquisition is one of key corporate strategic decisions for firms’ growth and competitive advantage. Firms: (1) diversify through acquisition to balance cash flows and…
Acquisition is one of key corporate strategic decisions for firms’ growth and competitive advantage. Firms: (1) diversify through acquisition to balance cash flows and spread the business risks; and (2) eliminate their competitors through acquisition by acquiring new technology, new operating capabilities, process innovations, specialized managerial expertise, and market position. Thus, firms acquire either unrelated or related business based on their strategic motivations, such as diversifying their business lines or improving market power in the same business line. These different motivations may be related to their assessment of market growth, firms’ competitive position, and top management’s compensation. Thus, it is hypothesized that firms’ acquisition decisions may be related to their industry growth potential, post-acquisition firm growth, market share change, and CEO’s compensation composition between cash and equity. In addition, for the two alternative acquisition accounting methods allowed until recently, a test is made if the type of acquisition is related to the choice of accounting methods. This study classifies firms’ acquisitions as related or unrelated, based on the standard industrial classification (SIC) codes for both acquiring and target firms. The empirical tests are, first, based on all the acquisition cases regardless of the firm membership, and then, deal with the firms acquiring only related businesses or unrelated businesses exclusively.
The type of acquisitions was more likely related to industry growth opportunities, indicating that the unrelated acquisition cases are more likely to be followed by higher industry growth rate than the related acquisition cases. While there were a substantially larger number of acquisition cases using the purchase method, the related acquisition cases used the pooling-of-interest method more frequently than in the unrelated acquisition cases. The firm-level analysis shows that the type of acquisition decisions was still related to acquiring firms’ industry growth rate. However, the post-acquisition performance measures, using firm’s growth and change in market share, could support prior studies in that the exclusive-related acquisitions helped firms grow more and get more market share than the exclusive-unrelated acquisitions. CEO’s compensation composition ratio was not related to the types of acquisition.
The concept of core competence underlies competence-based competition and competence-based management. When new firms get established, due to resource constraints…
The concept of core competence underlies competence-based competition and competence-based management. When new firms get established, due to resource constraints, managers have to make conscious decisions to develop certain competencies and not others. In order to have all competencies that are required to be successful, firms look for strategic alliances and to leverage their partner firms’ competencies. In this paper, we develop a contingency model for firms that have to go for strategic alliances to explain which core competencies should be developed internally, which core competencies could be from the alliance partner, which type of alliance will be suitable and whether the firm should choose a short-term, long-term or permanent alliance. Using Hamel’s (1994) generic core competencies and the type of market (industrial or individual), we suggest which type of strategic alliance should be chosen for leveraging a partner’s competencies.
In acquisitions of technology-based firms the focus is typically on the technology and the target firm's engineers and scientists. But a firm is a social entity with a…
In acquisitions of technology-based firms the focus is typically on the technology and the target firm's engineers and scientists. But a firm is a social entity with a range of important internal and external relationships that are essential to the exploitation of existing capabilities, and the development of new ones. These relationships need to be maintained, subsequent to acquisition, to preserve the target firm's ability to innovate and compete. I argue for the importance of the target firm's relationships with its customers, and show that the degree to which the acquisition creates or destroys value for the target firm's customers is a significant predictor of acquisition success.