Dual-class firms and governance: an acquisition perspective

2015 ◽  
Vol 41 (11) ◽  
pp. 1221-1235 ◽  
Author(s):  
Ashrafee Tanvir Hossain
Keyword(s):  
Good Governance ◽  
Positive Impact ◽  
Content Type ◽  
Corporate Takeovers ◽  
Governance Quality ◽  
Return On Sales ◽  
Dual Class ◽  
Term Performance ◽  
The Impact

Purpose – The purpose of this paper is to examine the impact of governance quality on firms with multiple voting structures. Design/methodology/approach – The sample includes 487 acquisitions undertaken by dual-class firms from 1996 to 2009. The author used event studies (Patell, 1976) for short-term performance analysis around merger announcement dates; Berkovitch and Narayanan (1993) methods to identify the motive behind these transactions; and standard benchmark adjusted return on assets (and return on sales) (Barber and Lyon, 1996) and BHAR (Mitchell and Stafford, 2000) to analyze long-term post-acquisition performance. Findings – First, dual-class acquirers with better governance quality show stronger performance around takeovers which indicates that these firms make better acquisition decisions. These results hold even after controlling for different firm and deal characteristics. Second, transactions undertaken by acquirers with good governance show little or no sign of agency motive. This reinforces the findings in first. Third, the author reports that acquirers with above-median governance quality display stronger long-term post-acquisition operating as well as stock performances. These results are robust to different benchmarks used for this study. Originality/value – This paper expands the literature on dual-class firms by showing the impact of governance quality on acquisition activities undertaken by these firms. This is the first study to show that despite agency issues inherent in the dual-class structure, improving governance quality would have a positive impact, at least in the case of corporate takeovers.

Corporate governance and firm performance: empirical evidence from Pakistan

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Farooq ◽  
Amna Noor ◽  
Shoukat Ali
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Firm Size ◽  
Good Governance ◽  
Positive Impact ◽  
Least Square ◽  
Local Context ◽  
Content Type ◽  
Governance Index ◽  
Governance Quality

Purpose The purpose of this research is to look into the governance–performance relationship in the context of critical firm characteristics, such as firm size. Design/methodology/approach Based on total assets, sample firms were classified as small or large. The governance index, which is based on 29 governance provisions covering the audit committee, board committee, ownership and compensation structure of the respective firm, measures governance quality among sample firms. A higher governance index indicates a higher level of governance quality and vice versa. Accounting and market value measures are used to determine firm profitability. The authors used the two-stage least square (2SLS) method of estimation of the model to eliminate the simultaneous equation bias. Findings Corporate governance (CG) appears to have a positive impact on accounting return and market indices (Tobin’s Q), but it has little impact on return on equity. In terms of firm size, larger companies profited more from better governance implementation than smaller firms that lacked these principles, thus improving CG. The findings indicate that small businesses should improve their governance mechanisms to reap the benefits of CG in terms of increased profitability. Research limitations/implications There are certain drawbacks to this research. First, the authors omitted qualitative aspects of CG from the CG index, such as the board’s decision-making process, directors’ perceptions of the board’s position and directors’ age and qualifications. Such a qualitative component will improve the governance index in the future while building the governance index. Second, as the current study only looks at the nonfinancial sector, caution should be exercised before applying the findings to the entire population. Practical implications The findings show that companies that follow good governance standards have better accounting and market efficiency than those that do not. As a result, good governance practices can help firms in developing countries improve their performance. Academic researchers, regulators, investors, lenders and practitioners can find the findings useful in establishing a true relationship between firm performance and CG practices in Pakistan. Originality/value The relationship between governance and profitability in the context of firm size is examined in this research. Firms with varying resources and ability to implement CG codes have varying effects on profitability. To the authors’ knowledge, there was a gap in the literature that addressed this topic in the local context.

Mcdonald’s versus Vikram Bakshi

2021 ◽  
Vol 11 (4) ◽  
pp. 1-27
Author(s):  
Nitin Pangarkar ◽  
Neetu Yadav
Keyword(s):  
Emerging Markets ◽  
Multinational Corporations ◽  
Service Industry ◽  
Executive Development ◽  
Content Type ◽  
Academic Level ◽  
Quick Service ◽  
Term Performance ◽  
The Impact

Learning outcomes The case illustrates the challenges of managing JVs in emerging markets. specifically, after going through the case, students should be able to: i.Analyze the contexts in which firms need to form JVs and evaluate this need in the context of emerging markets such as India; ii.Understand how multinational corporations can achieve success in emerging markets, specifically the role of strategic (broader than the product) adaptation in success; iii.Evaluate the impact of conflict between partners on the short-term and long-term performance of a JV; and iv.Create alternatives, evaluate each alternative’s pros and cons, and recommend appropriate decisions to address the situation after a JV unravels and the organization is faced with quality and other challenges. Case overview/synopsis McDonald’s, the global giant in the quick service industry, entered India in 1993 and formed two JVs in 1995 one with Vikram Bakshi (Connaught Plaza Restaurants Ltd or CPRL) to own and operate stores in the northern and eastern zones, and another with Amit Jatia (Hardcastle Restaurants Private Limited or HRPL) to own and operate stores in the western and southern zones. Over the next 12 years, both the JVs made steady progress by opening new stores while also achieving better store-level metrics. Though CPRL was ahead of HRPL in terms of the number of stores and total revenues earned in 2008, the year marked the beginning of a long-running dispute between the two partners in CPRL, Bakshi and McDonald’s. Over the next 11 years, Bakshi and McDonald’s tried to block each other, filed court cases against each other and also exchanged recriminations in media. The feud hurt the performance of CPRL, which fell behind HRPL in terms of growth and other metrics. On May 9, 2019, the feuding partners reached an out-of-court settlement under which McDonald’s would buy out Bakshi’s shares in CPRL, thus making CPRL a subsidiary. Robert Hunghanfoo, who had been appointed head of CPRL after Bakshi’s exit, announced a temporary shutdown of McDonald’s stores to take stock of the current situation. He had to make a number of critical decisions that would impact the company’s performance in the long-term. Complexity academic level MBA, Executive MBA and executive development programs. Supplementary materials Teaching Notes are available for educators only. Subject code CSS 11: Strategy.

Blending work and learning: the impact of a workplace learning programme on the low-skilled and long term unemployed

2014 ◽  
Vol 46 (7) ◽  
pp. 406-414 ◽  
Author(s):  
Peter Tiernan ◽  
Jane O’Kelly
Keyword(s):  
Workplace Learning ◽  
Positive Impact ◽  
Integrated Approach ◽  
Skilled Workers ◽  
Staff Perceptions ◽  
Content Type ◽  
Mind Set ◽  
The Impact ◽  
Academic Content

Purpose – The purpose of this paper is to evaluate the effectiveness of a workplace learning programme on the low-skilled and long term unemployed. The paper evaluates improvements in skills and attitudes from the workers perspective. Design/methodology/approach – The paper builds on current literature in the area to design and evaluate a workplace learning programme. Quantitative and qualitative data are used to evaluate staff perceptions. Findings – Findings indicate that providing a mix of workplace learning, and focused academic content can have an extremely positive impact on the skill-set and mind-set of low-skilled and long term unemployed workers. The effect of this is that workers are more likely to apply for further educational and employment opportunities. Practical implications – Findings reinforce the view that an integrated approach to tackling long-term unemployment and the up-skilling of workers may be more effective than providing employment initiatives alone. Originality/value – While statistics on long term unemployment and the vulnerability of low-skilled workers are widely available right across the EU, there is a comparative lack of literature around initiatives designed to tackle these problems, and even less which incorporates the views of workers themselves. This paper provides a unique look at the implementation of a workplace learning programme and its impact on staff.

Counting the spoons: what really influences corporate reputation

2017 ◽  
Vol 38 (6) ◽  
pp. 54-58 ◽  
Author(s):  
Peter Buell Hirsch
Keyword(s):  
Corporate Reputation ◽  
Business Strategy ◽  
Positive Impact ◽  
Marketing Strategies ◽  
Business Success ◽  
Content Type ◽  
The Subject ◽  
The Impact ◽  
Practical Implications

Purpose The purpose of this paper is to examine and assess the importance of corporate reputation as a tool of business strategy. The topic has been the subject of significant discussion particularly with respect to reputation rankings and metrics. The author wanted to assess the evidence for the importance of reputation to a company’s success and whether there were related activities that might be of equal or greater value. Design/methodology/approach The approach was to review some of the more prominent reputation rankings and metrics and, anecdotally, to assess the impact of negative reputation impacts on market share and revenues. The author also tried to identify other corporate marketing strategies that might be of greater value than a focus on reputation alone. Findings What the author has determined was that there would always be a place for opinion surveys of reputation and the rankings that go with them, as well as certain outcomes-based metrics with a reputation component. However, the author believes that comprehensive influencer engagement programs have the greater potential for a positive impact on a company’s business success while, at the same time, supporting its reputation. Research limitations/implications The findings’ principal limitations are the subjective nature of the review and evaluation which are based on the author’s 30-year career in helping companies manage their reputation. Practical implications The practical implications of the paper are that companies should pursue a balanced reputation strategy, not solely restricted to seeking rankings and awards but equally, if not more, focused on creating the kinds of influencer engagement that are a richer and truer source of long-term reputation. Social implications The author believes that by focusing on the needs and interests of real influencers as opposed to abstract opinion survey panels, companies will do much more concrete work that creates social as well as business value. Originality/value While a great deal has been written about reputation and trust, the author believes that this is the first attempt to connect reputation with influencer engagement as a strategy.

scholarly journals The Impact of Financial Constraints on the Convertible Bond Announcement Returns

Economies ◽  
2019 ◽  
Vol 7 (2) ◽  
pp. 32 ◽  
Author(s):  
Chong-Chuo Chang ◽  
Tai-Yung Kam ◽  
Chih-Chung Chien ◽  
Wan Su
Keyword(s):  
Financial Constraints ◽  
Positive Impact ◽  
Cash Flows ◽  
Convertible Bonds ◽  
Convertible Bond ◽  
Short And Long Term ◽  
Long Term Performance ◽  
Term Performance ◽  
The Impact

As of now, very few research studies have examined the effects of financial constraints on the short- and long-term performances of companies after their announcement of convertible bonds. Due to asymmetric information, previous studies consider issuance of convertible bonds as negative news. As a result, the short- and long-term performances of companies generally decline after their convertible bond announcement. This study argues that when companies have investment plans, they are expected to have higher future cash flows. They will become increasingly more valuable regardless of the fact that they raise funds through the issue of convertible bonds (due to financial constraints), positively affecting the performance of companies. The results indicate that financial constraints have no effect on short-term performance, but did have a significantly positive impact on the long-term performance of companies after their issuance of convertible bonds.

Do we have to downsize – does the empirical evidence suggest any alternatives?

2018 ◽  
Vol 11 (4) ◽  
pp. 449-460 ◽  
Author(s):  
Michael Carriger
Keyword(s):  
Negative Impact ◽  
Positive Impact ◽  
Financial Health ◽  
Content Type ◽  
Financial Outcomes ◽  
Cost Cutting ◽  
Financial Decline ◽  
Long Term Impact ◽  
The Impact

Purpose Given a growing literature indicating that downsizing is not an effective way to address financial decline, having either little impact or negative impact on the financial health or market valuation of financially troubled companies, what is the alternative for those companies in financial trouble? Three sets of alternatives to downsizing are available to companies suffering financial trouble: strategies addressing personnel/fix costs, strategies focused on addressing cost cutting/variable costs and strategies addressing strategic planning/revenue. Although alternatives to downsizing have been identified, little research has been conducted comparing the impact of downsizing vs alternatives to downsizing on firm performance. The paper aims to discuss this issue. Design/methodology/approach This present study looked solely at strategies focused on addressing personnel/fix costs. Focusing primarily on forced attrition (downsizing) vs temporary attrition and/or natural attrition, this research attempts to determine whether specific groupings of alternatives to downsizing are more effective at addressing financial decline that companies find themselves in as compared to downsizing. This included relying on temporary attrition, natural attrition or doing nothing at all. Findings The research presented here indicates that various alternatives to downsizing have an immediate positive impact on measures of profitability and a positive long-term impact on one measure of efficiency: revenue per employee. Evidence shows that temporary attrition leads to better financial outcomes than natural attrition than forced attrition or downsizing. Originality/value The research presented here indicates that various alternatives to downsizing have an immediate positive impact on measures of profitability and a positive long-term impact on one measure of efficiency: revenue per employee. This has implications for managers put in the position of having to make a decision whether to downsize or not.

Excess offer premium and acquirers’ performance

2018 ◽  
Vol 35 (3) ◽  
pp. 407-425
Author(s):  
Won-Seok Woo ◽  
Suhyun Cho ◽  
Kyung-Hee Park ◽  
Jinho Byun
Keyword(s):  
Market Reaction ◽  
Abnormal Returns ◽  
Market Returns ◽  
Content Type ◽  
Acquiring Firms ◽  
Study Methodology ◽  
Long Term Performance ◽  
Term Performance ◽  
The Impact

PurposeThis paper aims to investigate the causes of mergers and acquisitions (M&A) deals that acquiring firms pay excess premium beyond the market-expected level and examine the relation between the announcement return and long-term performance of the acquiring firms.Design/methodology/approachBased on a sample of 1,767 US firms’ M&A deals from 2000 to 2014, the authors use the expectation model used by Ang and Ismail (2015) to measure normal offer premium in an M&A deal. They conduct the standard event study methodology to observe the market reaction for acquiring companies on the announcement day. Buy-and-hold abnormal returns are used for the main explanatory variable so as to find the impact of the premium paid on the long-term performance of the acquirer.FindingsFirst, acquiring firms are faced with negative market returns when acquiring firms pay excess premiums. Second, poor long-term performance of the acquiring firms is observed if acquiring firms pay excess premium. Finally, the negative relation between excess premium and acquiring firms’ long-term performance weakens, as the sample period becomes longer.Research limitations/implicationsThe hypotheses and results of the empirical study are as follows. First, the acquirer’s market reaction on the announcement day is negative when it pays an excess offer premium. This is because the market perceives the premium to be greater than the value of the deal, which damages the value of the market, as it is not perceived as a proxy for future synergy. Second, the acquirer’s long-term performance is low when it pays the excess offer premium. It is the same result as the acquirer’s market reaction on the announcement day. This shows that the excess premium does not result in either a short-term positive reaction or a long-term profit for the acquiring shareholders. However, it is found that the relationship between the excess premium and the long-term performance of the acquirer decreases with time. This is because the long-term performance of the acquirer is more affected by management and other events after the deal.Originality/valueThe authors divide the total premium paid into the normal offer premium and the excess premium, and their focus is on the excess premium part. The main contribution of this paper is that it analyzes how the excess premium affects the market reaction on the announcement day and the long-term performance of acquiring firms.

Promoting healthy backs in schools: an evaluative study

2007 ◽  
Vol 107 (5) ◽  
pp. 463-479 ◽  
Author(s):  
Angela G. Springett ◽  
Joyce E.M. Wise
Keyword(s):  
Positive Impact ◽  
Population Group ◽  
Specific Area ◽  
Target Population ◽  
Feedback Form ◽  
Content Type ◽  
Back Care ◽  
Long Term Impact ◽  
The Impact

PurposeThe purpose of this paper is to evaluate the impact of educating adolescents in practical ways of looking after their backs to reduce the incidence of back‐pain, with particular focus on the use and carrying method of ergonomically designed schoolbags.Design/methodology/approachAn educational leaflet containing a range of back care information was designed specifically for a target population group of Year 7 schoolchildren, aged 11 to 12 years, and distributed to Year 7 students (n=682) attending three main secondary education schools in West Sussex during September 2004. A feedback form was used to evaluate the impact of the leaflet on one class in each school (total n=81).FindingsThe main findings in this paper indicated education had immediate positive impact on students' awareness of the importance of looking after their backs, and achieving positive back‐health. Information gained was likely to influence future choice of schoolbag type, and intention to change to more back‐health aware schoolbook and equipment carrying behaviours.Research limitations/implicationsThe paper shows that long‐term impact was not evaluated, and is a limitation of this study. Further research is required to evaluate the long‐term impact of education on back care in adolescents, and at which age optimum educational impact in this area is gained.Originality/valueThis paper contributes evidence, which could be used to inform national and international health agendas, focusing on the specific area of healthy back education for adolescents through a school‐based health promotion initiative.

Governance failure and its impact on financial distress

2021 ◽  
Vol 21 (7) ◽  
pp. 1416-1439
Author(s):  
Sourour Hazami-Ammar ◽  
Amal Gafsi
Keyword(s):  
Corporate Governance ◽  
Financial Distress ◽  
Business Performance ◽  
Positive Impact ◽  
Short Term ◽  
Content Type ◽  
Distress Risk ◽  
Thomson Reuters ◽  
Term Performance ◽  
The Impact

Purpose The purpose of this paper is to examine the effects of corporate governance failure, excess remuneration and entrenchment of managers, company variables and corporate governance variables on the company’s financial distress risk (DETR) in the French context. Design/methodology/approach Using the regression analysis, this paper is based on 201 observations about 67 companies of SBF 120 from 2015 to 2017. Data are collected on the Thomson Reuters database and in the referenced documents, which are published on the internet. Findings The research findings reveal that firm’s DETR is influenced negatively by excess remuneration and entrenchment of managers. In addition, there is a positive and significant relationship between DETR and company variables (performance and ownership structure) and corporate governance variables (power structure). However, a company’s size and board of directors’ independence do not affect firms’ DETR. Practical implications The impact highlighted between remuneration and entrenchment of managers and the financial distress of the company is explained by the intention of managers to work for announcing good short-term performance indicators that are most favorable to them. Originality/value The shareholder/manager agency problem can be changed when business performance tends to decline. Certainly, the managerial latitude adopted by the managers is used as an external careerism strategy. Its positive impact on the reduction of the firm’s financial distress can benefit shareholders who aim to sell their securities in the short term.

The Sarbanes-Oxley Act and corporate acquisitions

2017 ◽  
Vol 43 (4) ◽  
pp. 452-470 ◽  
Author(s):  
Harjeet Singh Bhabra ◽  
Ashrafee Tanvir Hossain
Keyword(s):  
Market Competition ◽  
Abnormal Returns ◽  
Publicly Traded ◽  
Short Term ◽  
Corporate Acquisitions ◽  
Content Type ◽  
Tender Offers ◽  
Term Performance ◽  
The Impact

Purpose The purpose of this paper is to analyze and compare the performance of corporate acquisitions between the pre- and post-SOX periods, using both short-term and long-term analyses. Design/methodology/approach The sample includes 9,463 mergers and tender offers undertaken by publicly traded US firms between 1996 and 2009. The authors used the standard event study methodology for short-term performance analysis; Berkovitch and Narayanan (1993) method to identify merger motives; and standard benchmark adjusted return on assets (sales) (Barber and Lyon, 1996) and buy-and-hold abnormal returns (Mitchell and Stafford, 2000) to analyze long-term performance. Findings Compared to the pre-SOX period, US acquirers experience significantly higher announcement returns in the post-SOX period; the results are robust to various controls like bidder, target and deal characteristics, bidder management quality, and product market competition. Similar results (in favor of post-SOX US acquirers) are obtained with long-term post-acquisition operating and stock performance analyses. Research limitations/implications This paper only addressed domestic acquisitions. Originality/value This paper adds to the growing body of research on the impact of SOX on publicly traded US corporations. By examining corporate acquisitions, an important long-term investment decision for a firm, the paper shows that despite the complex nature of SOX, substantial compliance costs and the unintended negative consequence it engendered, the act had a beneficial impact in an important area of corporate finance.

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