New CEOs’ previous experience and acquisition performance

2019 ◽  
Vol 27 (3) ◽  
pp. 745-758 ◽  
Author(s):  
Heejin Woo
Keyword(s):  
Abnormal Returns ◽  
Competitive Advantages ◽  
Upper Echelon ◽  
Acquisition Performance ◽  
Content Type ◽  
Corporate Strategies ◽  
Cumulative Abnormal Returns ◽  
The Us ◽  
Event Study Method ◽  
Industry Experience

Purpose This study aims to investigate how new CEOs’ previous experiences in other organizations and other industries create value in acquisitions. Drawing on the upper echelon perspective, this study theorizes that the multiorganizational experience of new CEOs is positively associated with acquisition performance and, in particular, that the multi-industry experience of new CEOs leads to better performance in diversifying acquisitions than in related acquisitions. While new CEOs without multiorganizational experience undergo a cognitive entrenchment in firm-specific experience, new CEOs with multiorganizational experience can lead acquisitions with more flexibility and agility. Design/methodology/approach Acquisition and organizational data were drawn from the US manufacturing industries (SIC 20-39) between 2008 and 2010. The event study method was used to test hypotheses. In 346 acquisitions made by 139 firms, acquisition performance was measured according to cumulative abnormal returns. Findings Consistent with the hypotheses, the multiorganizational experience of new CEOs was positively associated with acquisition performance and, in particular, the multi-industry experience of new CEOs led to better performance in diversifying acquisitions than in related acquisitions. Originality/value This paper contributes to the CEO literature and acquisition literature by suggesting that the multiorganizational experience of new CEOs can be a valuable source of competitive advantages, particularly when implementing corporate strategies involving interorganizational integration processes.

Asymmetric information and opportunism in insider share-pledging

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Michael R. Puleo ◽  
Steven E. Kozlowski
Keyword(s):  
Private Information ◽  
Abnormal Returns ◽  
Risk Assessments ◽  
Corporate Policies ◽  
Market Reactions ◽  
Content Type ◽  
Hurdle Models ◽  
Cumulative Abnormal Returns ◽  
Earnings Surprises ◽  
The Us

PurposeAmid growing attention from investors, regulators and advisory firms in recent years, this study assesses whether managers exploit private information to time share-pledge transactions and extract personal benefits while avoiding unintended market scrutiny.Design/methodology/approachWe use hand-collected pledging data for a random sample of S&P 1500 firms to examine whether private information influences insider share-pledging activity using Heckman selection and two-part hurdle models of the pledge decision. We also conduct an event study analysis of announcement returns to measure market reactions to pledging news and determine whether share-pledge disclosures affect investor risk assessments.FindingsConsistent with insiders timing pledges prior to anticipated performance declines, both the likelihood and level of pledging increase significantly with negative earnings surprises. New share-pledges precede significant decreases in abnormal returns, and public announcement of new pledging corresponds with significant negative cumulative abnormal returns. The evidence suggests that insiders exploit private information to time pledges, and that investors update risk assessments and value estimates based on information conveyed by these transactions.Practical implicationsOur findings hold important implications for governance and regulation of pledged shares, indicating that permissive reporting requirements in the US facilitate informed pledging and may undermine incentive alignment between managers and shareholders. The analysis promotes transaction-specific disclosures and transparent corporate policies for insider share-pledging.Originality/valueOurs is among the first empirical analyses of share-pledging in US firms and the first to examine the role of private information in pledging decisions. We offer novel evidence on the opportunistic use of pledged shares and provide insight to predictors of share-pledging behavior.

Cryptocurrency bubble risk and the FOMC announcements during COVID-19 black swan event

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Anis Jarboui ◽  
Emna Mnif
Keyword(s):  
Federal Reserve ◽  
Abnormal Returns ◽  
Relevant Information ◽  
Future Research ◽  
Open Market ◽  
Predictive Capacity ◽  
Federal Open Market Committee ◽  
Content Type ◽  
Cumulative Abnormal Returns ◽  
Practical Implications

Purpose After the COVID-19 outbreak, the Federal Reserve has undertaken several monetary policies to alleviate the pandemic consequences on the markets. This paper aims to evaluate the effects of the Federal Reserve monetary policy on the cryptocurrency dynamics during the COVID19 pandemic. Design/methodology/approach We examine the response and feedback effects via an event study methodology. For this purpose, abnormal returns (AR) and cumulative abnormal returns (CARs) around the first FOMC (Federal Open Market Committee) announcement related to the COVID-19 pandemic for the top five cryptocurrencies are explored. We, further investigate the effect of the eight FOMC statement announcements during the COVID19 pandemic on these cryptocurrencies (Bitcoin, Ethereum, Tether, Litecoin, and Ripple). In the above-mentioned crypto-currency markets, we investigate the presence of bubbles by using the PSY test. We then examine the concordance of the dates of these bubbles with the dates of the FOMC announcements. Findings The empirical results show that the first FOMC event has a negative significant effect after 4 days of the announcement date for all studied cryptocurrencies except Tether. The results also indicate that cumulative abnormal returns are significant during the event windows of (−3,8), (−3,9), and (−3,10). Besides, we find that Bitcoin, Ethereum and, Litecoin lived short bubbles lasting for a few days. However, Ripple and Tether markets present no bubbles and no explosive periods. Research limitations/implications This paper presents trained proof that FOMC announcements have a positive effect on volatility's predictive capacity. This work therefore promotes the study of the data quality of volatility in future research as well. Practical implications The justified effect of the FOMC announcements on cryptocurrency as a speculative asset has practical implications for investors in building their trading strategies in anticipation of the next FOMC announcement. Therefore, this study implies that the FOMC announcements contain very relevant information for investors in the cryptocurrency market. This research may not only encourage a better understanding of the evolution of the expectations of policymakers, but also facilitate a better understanding of how these expectations are developed. Originality/value The COVID-19 pandemic has disturbed the stability of financial markets, inciting the Fed to take some monetary regulations. To the best of our knowledge, this study is the first one that analyses the response of five major cryptocurrencies to FOMC announcements during COVID 19 pandemic and associates these dates with bubble occurrences.

Currency returns during democratic transition: evidence from Tunisia

2019 ◽  
Vol 45 (7) ◽  
pp. 966-979
Author(s):  
Ghadi Saad ◽  
Taoufik Bouraoui
Keyword(s):  
Design Methodology ◽  
Democratic Transition ◽  
Abnormal Returns ◽  
Market Model ◽  
Study Analysis ◽  
Content Type ◽  
Policy Effects ◽  
Cumulative Abnormal Returns ◽  
New Evidence ◽  
The International Monetary Fund

Purpose The purpose of this paper is to investigate the question whether democratic transition elections influence currency returns. Also, the paper examines the behavior of the currency market around these elections in Tunisia. Design/methodology/approach Empirical data are collected from the International Monetary Fund, the Central Bank of Tunisia and the Tunisian stock market websites. The paper employs event study analysis using a market model and investigates abnormal currency returns around the four election events that occurred during the period of democratic transition in Tunisia (2011–2015). A robustness test is also conducted to control for monetary policy effects. Findings The results indicate that democratic transition does impact currency returns. The authors did not find any significant effect on the events dates (t0). However, event windows around the elections days reacted significantly to the events. The authors notice a significant decrease in cumulative abnormal returns (CARs) at event periods leading up to the elections. Post-event windows perceived negative CARs in the first and second election, and positive CARs in the last two elections. The authors also find that the change in the victors of the elections does not cause major differences to CARs. Further, the authors do not find significant results when controlling for inflation and interest rate. Originality/value There is no evidence yet on how democratic transition elections can affect currency returns. Given that currency is a leading indicator of the performance of the financial sector, this paper should provide policymakers with new evidence on the response of currency returns to democratic transition.

scholarly journals Daily abnormal price changes and trading strategies in the FOREX

2020 ◽  
Vol 48 (1) ◽  
pp. 211-222
Author(s):  
Guglielmo Maria Caporale ◽  
Alex Plastun
Keyword(s):  
Design Methodology ◽  
Abnormal Returns ◽  
Trading Strategies ◽  
Price Changes ◽  
Content Type ◽  
Cumulative Abnormal Returns ◽  
Market Inefficiency ◽  
Intraday Data ◽  
Abnormal Profits ◽  
New Evidence

PurposeThis paper explores abnormal price changes in the FOREX by using both daily and intraday data on the EURUSD, USDJPY, USDCAD, AUDUSD and EURJPY exchange rates over the period 01.01.2008–31.12.2018.Design/methodology/approachIt applies a dynamic trigger approach to detect abnormal price changes and then various statistical methods, including cumulative abnormal returns analysis, to test the following hypotheses: the intraday behaviour of hourly returns on overreaction days is different from that on normal days (H1), there are detectable patterns in intraday price dynamics on days with abnormal price changes (H2) and on the following days (H3).FindingsThe results suggest that there are statistically significant differences between intraday dynamics on days with abnormal price changes and normal days respectively; also, prices tend to change in the direction of the abnormal change during that day, but move in the opposite direction on the following day. Finally, there exist trading strategies that generate abnormal profits by exploiting the detected anomalies, which can be seen as evidence of market inefficiency.Originality/valueNew evidence on abnormal price changes and related trading strategies in the FOREX.

scholarly journals The long-run performance of US firms pursuing IPOs in foreign markets

2018 ◽  
Vol 17 (1) ◽  
pp. 58-77 ◽  
Author(s):  
Robert Killins ◽  
Peter V. Egly
Keyword(s):  
Capital Markets ◽  
Abnormal Returns ◽  
Listed Companies ◽  
Foreign Markets ◽  
Content Type ◽  
Long Run ◽  
The Us ◽  
Long Term Performance ◽  
Term Performance

Purpose The purpose of this paper is to investigate the long-run performance of a unique set of US domiciled firms that have bypassed the US capital markets in pursuit of their initial public offering (IPO) overseas. Additionally, this paper then tests the popular underwriter prestige impact and the window of opportunity hypothesis on this unique subset of IPOs. Design/methodology/approach Using a sample of foreign and purely domestic IPOs made by US firms from 2000 to 2011, this study investigates the long-term performance, one-, two- and three-year by using two measures (buy-and-hold return and cumulative abnormal returns) to test the long-run returns of newly listed companies. Finally, the research incorporates both the traditional matching methodology (issue year and size) along with propensity score matching methodology. Findings FIPOs of US companies underperform DIPOs and their matched DIPOs; furthermore, FIPOs underperform the index of the two listing countries they use the most (UK and Canada). Although the choice of a reputable underwriter mitigates underperformance, the choice of listing in a foreign country only may be a result of possible high valuations accorded by foreign investors who buy US-listed companies on the domestic exchange possibly for reducing exchange rate risk and gaining US diversification without incurring additional costs. It is, thus, possible that US companies that undertake Foreign IPOs not only escape potentially higher Security and Exchange Commission regulations and disclosure but also benefit from higher valuations in the foreign markets. Originality/value To the best of the authors’ knowledge, this is the first study to investigate the long-term performance of US firms bypassing the US capital markets in pursuit of their initial equity offering elsewhere. Caglio et al. (2016) investigated why firms decide to pursue such equity raising activity but fail to investigate the firms’ actual performance after issuing equity. This research fills such a gap in the literature and is important for both academics and practitioners. Practitioners can use this information in assessing the quality of such investments in the long-run, and firms can use such information when determining the different options of issuing equity. Further, regulators should be aware of the implications that increased regulations have on capital raising activities in their domestic market.

Corporate strategies for technology acquisition: evidence from patent transactions

2017 ◽  
Vol 55 (6) ◽  
pp. 1163-1181 ◽  
Author(s):  
Federico Caviggioli ◽  
Antonio De Marco ◽  
Giuseppe Scellato ◽  
Elisa Ughetto
Keyword(s):  
Firm Level ◽  
Data Set ◽  
Content Type ◽  
Technology Acquisition ◽  
Corporate Strategies ◽  
Area Of Interest ◽  
Core Technology ◽  
Acquisition Strategies ◽  
The Us ◽  
Ip Management

Purpose The purpose of this paper is to examine, for a sample of ten corporations in three industries (i.e. automotive suppliers, semiconductors, and computer networks), the different strategies that firms undertake when acquiring patent-protected technologies. In particular, the authors analyze and compare two alternative channels for patent acquisition: markets for technology (MFT) and merger and acquisition (M&A) processes. Design/methodology/approach The authors implement two types of analyses, at both patent and firm level. First, the authors perform an econometric analysis to evaluate whether acquired patented technologies differ in their patent bibliographic characteristics with respect to patent-protected technologies that have been developed internally by the examined firms. The authors then investigate the presence of differences in the characteristics of transacted patents acquired in the MFT or by means of M&A activities. Second, the authors take a firm-level perspective and examine the technology acquisition strategies adopted by selected companies to identify the presence of common patterns, industry-driven specificities and firm peculiarities. Findings The authors find that acquired patented technologies are, on average, more complex, of higher technical merit and the corresponding patents show a higher legal robustness. Econometric results reveal the presence of differences between M&A and MFT patents: the latter seem to protect less complex, and thus easier to trade, inventions. The analysis of the patterns of patent acquisitions at the firm level shows the presence of different strategies for the external sourcing of patented technologies, based on whether acquired patents protect core or non-core technology areas of the analyzed firms. Such patterns are discussed in the light of the different streams of the literature on intellectual property (IP) management. Originality/value This paper makes use of a new and comprehensive data set of the US patent transactions that took place between 2002 and 2010. The authors added detailed data on the evolution of the corporate trees of analyzed firms. The paper contributes to the literature on technology acquisitions and MFT by examining the different channels for patented technology acquisitions. The issue represents an emerging area of interest in the field of IP management.

Evaluation of downstream integration in the US pharmaceutical industry

2007 ◽  
Vol 1 (2) ◽  
pp. 143-158 ◽  
Author(s):  
Daniel Simonet
Keyword(s):  
Pharmaceutical Industry ◽  
Vertical Integration ◽  
Descriptive Analysis ◽  
Drug Market ◽  
Competitive Advantages ◽  
Strategic Decisions ◽  
Content Type ◽  
Theoretical Perspectives ◽  
The Us ◽  
Integration Strategies

PurposeThis paper aims to review the vertical or quasi‐vertical integration that characterized the pharmaceutical industry in the mid‐1990s. The acquisitions and vertical partnerships that linked pharmacy benefits managers and drug manufacturers modified the structure of the market at that time. What were the motivations of those agreements? Did they induce any distortion on competition in the drug market? And why did they fail to achieve their desired strategic advantages?Design/methodology/approachThe paper uses established theoretical perspectives, such as the resource‐based view and the theory of contestable markets, as the basis for a descriptive analysis, documenting strategic decisions of vertical integration using supporting literature in marketing and strategy.FindingsVertical integration did not obtain the intended results (e.g. acquisition of competitive advantages). This perspective provides a framework to examine vertical integration strategies, applicable to other industries.Originality/valueThe paper reviews the objectives of vertical integration strategies of US drug firms in the 1990s and their hidden agendas.

Price and volume effects around Islamic index revisions: the case of DJIM-GCC

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Chiraz Labidi ◽  
Dorra Laribi ◽  
Loredana Ureche-Rangau
Keyword(s):  
Trading Volume ◽  
Islamic Law ◽  
Market Reaction ◽  
Abnormal Returns ◽  
Content Type ◽  
Cumulative Abnormal Returns ◽  
Volume Response ◽  
Study Methodology ◽  
Compliance Certification ◽  
Volume Effects

PurposeThis study explores the price and trading volume effects around the quarterly Dow Jones Islamic Market-GCC index (DJIM-GCC) revisions and investigates whether these reactions are driven by firms' fundamentals or by investors' perception of ethical screening.Design/methodology/approachThe authors adopt an event study methodology to analyze the price and volume effects of Islamic indices redefinitions.FindingsThe results exhibit a positive (negative) price reaction for added (deleted) stocks. The authors also document an asymmetric volume response for index additions and deletions. The multivariate analysis of the cumulative abnormal returns reveals that the documented market reaction around Islamic index revisions is mainly related to the compliance attribution (withdrawal).Originality/valueThe approach allows to separate the market reaction arising from changes in firms' fundamentals from that induced by investors' perception of the attribution or withdrawal of a compliance certification. Moreover, the focus on the GCC region, where countries share the same cultural traits and perceive Islamic law identically excludes any social effect that would influence the market reaction due to cultural differences between countries.

The role of boutique financial advisors in mergers and acquisitions

2018 ◽  
Vol 44 (2) ◽  
pp. 212-247 ◽  
Author(s):  
Anna Loyeung
Keyword(s):  
Mergers And Acquisitions ◽  
Information Asymmetry ◽  
Abnormal Returns ◽  
Jel Classification ◽  
Financial Advisors ◽  
Acquisition Performance ◽  
Cumulative Abnormal Returns ◽  
Acquiring Firms ◽  
Target Firms

This study examines the choice of boutique financial advisors in mergers and acquisitions, and the consequences of this choice on deal outcomes and post-acquisition performance. Boutique advisors often specialize in a particular industry and focus exclusively on providing advice in mergers and acquisitions. The results suggest that boutique financial advisors are preferred when the deal is considered complex and when information asymmetry is high. The study finds that the benefits of hiring a boutique advisor flow to both the acquirers and the target firms. Acquiring firms benefit in terms of improved post-merger performance, while target firms benefit in terms of higher completion of value-enhancing deals and positive cumulative abnormal returns. Overall, these results provide support for the growing popularity of boutique financial advisors in the Australian market. JEL classification: G24, G34

Impact of COVID-19 on listed European electricity companies: a comparative analysis of investment in renewable and traditional electricity

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
José Antonio Clemente-Almendros ◽  
Florin Teodor Boldeanu ◽  
Luis Alberto Seguí-Amórtegui
Keyword(s):  
Abnormal Returns ◽  
Electricity Sector ◽  
World Health ◽  
Policy Uncertainty ◽  
Content Type ◽  
Event Study Method ◽  
Before And After ◽  
Health Organization ◽  
The Impact ◽  
The Eu

PurposeThe authors analyze the impact of COVID-19 on listed European electricity companies and differentiate between renewable and traditional electricity, to show the heterogenous characteristics of electricity subsectors and the differences between renewable and traditional electricity.Design/methodology/approachUsing the event study method, the authors calculate the cumulative average abnormal returns (ARs) before and after the World Health Organization pandemic announcement and the declaration of national lockdowns in Europe.FindingsThe results show that while the European electricity sector was overall negatively impacted by the COVID-19 announcement, this impact was larger for renewable companies due to their riskier investment profile. Moreover, after the national lockdowns came into effect, the recovery in the financial markets return was smaller for the latter.Research limitations/implicationsThere may be variables to be included in the model to analyze possible differences between companies and countries, as well as alternative econometric models. Limited to the data, the authors did not investigate the different impact of the economic policy uncertainty from various countries inside or outside the EU.Practical implicationsThe results have important implications for both investors and policymakers since the heterogenous characteristics of electricity subsectors. This heterogeneity prompts different investor reactions, which are necessary to know and to understand.Originality/valueAs far as the authors know, this is the first study that analyses the effect of COVID-19 in heterogeneity profile of both types of electricity, renewable and traditional.

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