Mergers by family firms and managerial delegation: a Cournot model and empirical evidence from Spain

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Manel Antelo ◽  
David Peón ◽  
Xosé-Manuel Martínez-Filgueira
Keyword(s):  
Empirical Research ◽  
Price Competition ◽  
Family Firms ◽  
Early Stage ◽  
Service Differentiation ◽  
Strategic Delegation ◽  
Large Variability ◽  
Content Type ◽  
Ex Post ◽  
Ex Ante

Purpose The purpose of this paper is to analyse a key research hypothesis: Do firms ruled by managers have a greater rationale to implement a mergers and acquisitions (M&A) than (family) firms managed by their owners? Design/methodology/approach This paper uses an organizational-delegation-quantity oligopoly game to examine the profitability of M&As for firms that strategically delegate production decisions to managers versus family firms with no strategic delegation. This paper delimits the condition for delegation as aimed at increasing merger profitability: non-family CEOs will implement mergers more frequently than family CEOs and more so for inefficient firms because these require fewer synergies. The paper tests the main propositions with data on all M&As by small and medium firms in Spain in 2017 and 2018. Findings The greater the average operating margin of a firm, the more likely a merger, which is also more likely between non-family firms. The evidence of higher ex post synergies by firms is not statistically significant due to large variability, suggesting that some family firms did not obtain the expected ex ante synergies. The lesson is that family firms competing in an environment of high marginal costs (e.g. industries in the early stage of the life cycle) seeking to grow through inorganic means such as M&As have an incentive to professionalize management. Research limitations/implications This paper models competition in a Cournot fashion, representative of industries where firms compete in terms of sales growth and increased market share. Other results might hold in industries where firms are oriented to price competition or to service differentiation. The empirical research uses proxies for key variables such as the form of firm governance and unit costs, while hypotheses on ex ante synergies driving merger decisions had to be tested through ex post synergies. Originality/value M&As by small firms and family firms remain largely unexplored in the literature. This paper contributes with both a theoretical model and empirical research that highlight the implications of strategic delegation contracts for M&A deals.

Co-creation and higher order customer engagement in hospitality and tourism services

2016 ◽  
Vol 28 (2) ◽  
pp. 222-245 ◽  
Author(s):  
Prakash K. Chathoth ◽  
Gerardo R. Ungson ◽  
Robert J. Harrington ◽  
Eric S.W. Chan
Keyword(s):  
Value Creation ◽  
Higher Order ◽  
Customer Engagement ◽  
Service Dominant Logic ◽  
Content Type ◽  
Dominant Logic ◽  
Ex Post ◽  
Ex Ante ◽  
Experiential Value

Purpose – This paper aims to present a review of the literature associated with co-creation and higher-order customer engagement concepts and poses critical questions related to the current state of research. Additionally, the paper presents a framework for customer engagement and co-creation with relevance to hospitality transactions. Design/methodology/approach – Earlier research on co-production, co-creation, consumer engagement and service-dominant logic are discussed and synthesized. Based on this synthesis, links and contrasts of these varying research streams are presented providing an articulation of key characteristics of each and how these might be applied within a hospitality context. Findings – Modalities in service transactions vary among traditional production, co-production and co-creation based on changes in attitudes, enabling technologies and the logic or ideology supporting the change. Transaction characteristics vary among manufacturing, quasi-manufacturing and services based on several key categories including differences in boundary conditions, enablers, success requirements, sustainability requirements, the dominant logic used and key barriers/vulnerabilities. When creating experiential value for consumers, firms should consider several aspects ex-ante, in-situ and ex-post of the change and during the change process. Research limitations/implications – Firms need to move toward higher-order customer engagement using co-creative modalities to enhance value creation. Current practices in the hotel industry may not in their entirety support this notion. Ex-ante, in-situ and ex-post considerations for creating experiential value need to be used as part of a checklist of questions for firms to pose in order to move toward managing customer experiences using the service-dominant logic as part of the firm’s orientation toward its market. This would give it the required thrust to create superior engagement platforms that use co-creative modalities while addressing the barriers to higher-order customer engagement as identified in the literature. Originality/value – The hospitality and tourism literature on co-creation and higher-order customer engagement is still in its infancy. A synthesis of these early studies provides support for the need for future research on co-creation that more clearly articulates the modality firms could use to move toward co-creation. This paper develops a dynamic framework using characteristics of co-creation that integrate the various stages of value creation (i.e. input, throughput and output).

Dividend policy and probability of extreme returns

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohammed Bouaddi ◽  
Omar Farooq ◽  
Neveen Ahmed
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Dividend Policy ◽  
Actual State ◽  
Content Type ◽  
Market Participants ◽  
Dividend Payments ◽  
Ex Post ◽  
Ex Ante ◽  
The Future

PurposeThis study examines the effect of dividend policy on the ex ante probability of stock price crash and the ex ante probability stock price jump.Design/methodology/approachWe use the data of publicly listed non-financial firms from France and the ex ante measures of crash and jump probabilities (based on the Flexible Quadrants Copulas) to test our hypothesis during the period between 1997 and 2019.FindingsOur results show that dividend payments are negatively associated with the ex ante probability of crash and positively associated with the ex ante probability of jump. Our results are robust across various sub-samples and across different proxies of dividend policy. Our findings also hold when we use ex-post measures of crash and jump probabilities.Originality/valueUnlike prior literature, we use ex ante measures of crash and jump probabilities. The main advantage of this forward looking measure is that it allows for more flexibility by modeling the dependence between market returns and stock returns as functions of their actual state. Our measure is also consistent with the behavior of investors and market participants in a way that the market participants do not know the future outcome with certainty, but rather they are anticipating the future.

The impact of guaranteed bailout assistance on bank loan overstatement

2016 ◽  
Vol 12 (2) ◽  
pp. 177-210
Author(s):  
Alejandro Hazera ◽  
Carmen Quirvan ◽  
Salvador Marin-Hernandez
Keyword(s):  
Financial Crisis ◽  
Emerging Market ◽  
Balance Sheet ◽  
Bank Loan ◽  
Content Type ◽  
Put Options ◽  
Regulatory Policies ◽  
Ex Post ◽  
Ex Ante ◽  
The Impact

Purpose – The purpose of this paper is to highlight how the basic binomial option pricing model (BOPM) might be used by regulators to help formulate rules, prior to financial crisis, that help prevent loan overstatement by banks in emerging market economies undergoing financial crises. Design/methodology/approach – The paper draws on the theory of soft budget constraints (SBC) to construct a simple model in which banks overstate loans to minimize losses. The model is used to illustrate how guarantees of bailout assistance (BA) (to banks) by crisis stricken countries’ financial authorities may encourage banks to overstate loans and delay the implementation of IFRS for loan valuation. However, the model also illustrates how promises of BA may be depicted as binomial put options which provide banks with the option of either: reporting loan values on poor projects accurately and receiving the loans’ liquidation values; or, overstating loans and receiving the guaranteed BA. An illustration is also provided of how authorities may use this representation to help minimize bank loan overstatement in periods of financial crisis. In order to provide an illustration of how the option value of binomial assistance may evolve during a financial crisis, the model is generalized to the Mexican financial crisis of the late 1990s. During this period, Mexican authorities’ guarantees of BA to the nation’s largest banks encouraged those institutions to overstate loans and delay the implementation of (previously adopted) international “best practices” based loan valuation standards. Findings – Application of the model to the Mexican financial crisis provides evidence that, in spite of Mexico’s “official” 1997 adoption of international “best accounting practices” for banks, “iron clad” guarantees of BA by the country’s financial authorities to Mexico’s largest banks provided those institutions with an incentive to knowingly overstate loans in the late 1990s and early 2000s. Research limitations/implications – The model is compared against only one country in which the BA was directly infused into banks’ loan portfolios. Thus, as conceived, it is directly applicable to crisis countries in which the bailout took this form. However, the many quantitative variations of SBC models as well as recent studies which have applied the binomial model to other forms of bailout (e.g. direct purchases of bank shares by authorities) suggest that the model could be modified to accommodate different bailout scenarios. Practical implications – The model and application show that guaranteed BA can be viewed as a put option and that ex-ante regulatory policies based on the correct valuation of the BA as a binomial option might prevent banks from overstating loans. Social implications – Use of the binomial or similar approaches to valuing BA may help regulators to determine the level of BA that will not encourage banks to overstate the value of their loans. Originality/value – Recent research has used the BOPM to value, on an ex-post basis, the BA which appears on the balance sheet of institutions which have been rescued. However, little research has advocated the use of this type of model to help prevent, on an ex-ante basis, the overstatement of loans on poor projects.

Determinants of house buyers’ expected holding periods in boom and bust markets in California

2017 ◽  
Vol 10 (2) ◽  
pp. 256-281 ◽  
Author(s):  
Ekaterina Chernobai ◽  
Tarique Hossain
Keyword(s):  
Rational Expectation ◽  
House Price ◽  
Housing Markets ◽  
Real Estate Market ◽  
Disposition Effect ◽  
Content Type ◽  
Ex Post ◽  
Novel Approach ◽  
Ex Ante ◽  
Financial Characteristics

Purpose This study aims to investigate the determinants of homeowners’ planned holding periods. Real estate market is known for displaying buying and selling behavior that does not conform to traditional economic theories such as rational expectation or expected utility. Mounting evidence of anomalous observations appear to be supported by other theories, such as prospect theory, which in particular helps explain the disposition effect – sellers are too quick to sell when prices are climbing and hold on to properties longer when prices are plummeting. While this evidence is widely documented in housing studies based on data on realized holding periods (i.e. ex post), this study explores factors that may motivate homeowners to alter their expected holding horizons (i.e. ex ante) to form new preferred holding periods that may be shorter or longer than those planned during house search. Design/methodology/approach The empirical study uses data collected from two cross-section surveys of recent homebuyers in rising and declining housing markets in Southern California in 2004-2005 and 2007-2008, respectively. Findings The empirical results demonstrate that in addition to the financial characteristics of the recent homebuyer, the characteristics of the buying experience – non-monetary, such as the realized search duration, and monetary, such as perception of negative or positive premium paid for the house relative to its market value – have a statistically significant effect on the holding horizon revision. The data strongly indicate that the perception of having overpaid increases the likelihood of upward revision of the original holding horizon. This effect is stronger in the declining than in the rising market – a crucial finding that mirrors the disposition effect. Originality/value This study sheds new light on what may contribute to the disposition effect in housing markets that has not yet been investigated in past literature. The novel approach here is to look at how different house price environments may affect homeowners’ holding periods ex ante when they begin, rather than ex post when already realized.

The continuation and recommendation intention of artificial intelligence-based voice assistant systems (AIVAS): the influence of personal traits

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kyung Young Lee ◽  
Lorn Sheehan ◽  
Kiljae Lee ◽  
Younghoon Chang
Keyword(s):  
Artificial Intelligence ◽  
Early Stage ◽  
Market Penetration ◽  
Personal Traits ◽  
Content Type ◽  
Personal Innovativeness ◽  
Ex Post ◽  
Perceived Security ◽  
Assistant Systems ◽  
Technology Anxiety

PurposeBased on the post-acceptance model of information system continuance (PAMISC), this study investigates the influence of the early-stage users' personal traits (specifically personal innovativeness and technology anxiety) and ex-post instrumentality perceptions (specifically price value, hedonic motivation, compatibility and perceived security) on social diffusion of smart technologies measured by the intention to recommend artificial intelligence-based voice assistant systems (AIVAS) to others.Design/methodology/approachSurvey data from 400 US AIVAS users were collected and analyzed with Statistical Product and Service Solutions (SPSS) 18.0 and the partial least square technique using advanced analysis of composites (ADANCO) 2.1.FindingsAIVAS technology is presently at the early stage of market penetration (about 25% of market penetration in the USA). A survey of AIVAS technology users reveals that personal innovativeness is directly and indirectly (through confirmation and continuance) associated with a stronger intention to recommend the use of the device to others. Confirmation is associated with all four ex-post instrumentality perceptions (hedonic motivation, compatibility, price value and perceived security). Among the four, however, only hedonic motivation and compatibility are significant predictors of satisfaction, which lead to use continuance and, eventually, intention to recommend. Finally, technology anxiety is found to be indirectly (but not directly) associated with a lower intention to recommend.Originality/valueThis is the first study conducted on the early-stage AIVAS users that evaluates the influence of both personal traits and ex-post instrumentality perceptions on users' intention for continuance and recommendation to others.

Is the new issue puzzle real? Evidence from implied cost of capital

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Snow Han
Keyword(s):  
Initial Public Offering ◽  
Risk Premium ◽  
Cost Of Capital ◽  
Expected Returns ◽  
Limited Information ◽  
Content Type ◽  
Listed Firms ◽  
Implied Cost Of Capital ◽  
Ex Post ◽  
Ex Ante

PurposeThis study aims to provide new explanation of the new issue puzzle.Design/methodology/approachThis study uses market implied cost of capital (ICC), rather than ex post realized returns, as proxy for ex ante expected returns, and sheds new light on the question why initial public offering (IPO) firms underperform the market within a 3–5 years period after the offerings.FindingsUsing ICC, the author finds that the market expects to earn higher risk premium for new listing firms than similar firms, which is contradictory to the documented new issue puzzle. The higher expected returns come from higher idiosyncratic volatility for newly listed firms, which are young and have more growth opportunities. The author also reports that investors are negatively surprised by lower-than-expected performances of newly listed firms.Originality/valueThe author’s results provide new empirical evidence that the new issue puzzle does not exist. Previous results observed IPO firms' under-performance is attributable to that ex post realized returns are a noisy proxy for ex ante expected returns, especially for newly listed firms with limited information.

Do professional sport franchise owners overpromise and underdeliver the public? Lessons from Brooklyn’s Barclays Center

2019 ◽  
Vol 32 (1) ◽  
pp. 80-101 ◽  
Author(s):  
Geoffrey Propheter
Keyword(s):  
Public Sector ◽  
Local Governments ◽  
Financial Incentive ◽  
Content Type ◽  
The Public ◽  
Public Benefits ◽  
Ex Post ◽  
Ex Ante ◽  
The Usa

Purpose The purpose of this paper is to evaluate a number of promises typically made by owners of professional sports franchises in the USA that are also typically ignored or underevaluated by public bureaus and their elected principals using the Barclays Center in Brooklyn, New York as a case study. Ex post subsidy outcomes are evaluated against ex ante subsidy promises in order to draw lessons that can inform and improve subsidy debates elsewhere. Design/methodology/approach The case study adopts a pre-post strategy drawing on data from multiple sources over a period of up to ten years in order to triangulate the narrative and build credibility. The franchise owner’s ex ante promises and financial projections were obtained from various media including newspaper, video and interviews between December 2003, when the arena was publicly announced, and September 2012, when the arena opened. Data on ex post outputs were obtained from financial documents and government records covering periods from September 2011 through June 2016. Findings The franchise owner is found to have exaggerated the arena’s financial condition, under-delivered on its employment promises, and exaggerated the scope and timeliness of ancillary real estate development. Only promises of event frequency and attendance levels, measures of the public’s demand for the facility, have been met during the first three years. Research limitations/implications Because the evaluation is a case study, causal conclusions cannot be drawn and some aspects of the Barclays Center context may not be applicable in other jurisdictions or subsidy debates. In addition, the case study does not evaluate an exhaustive list of the promises franchise owners make. Practical implications Franchise owners have a financial incentive to overpromise public benefits, since subsidy levels are tied to what the public is perceived to receive in return. This case study demonstrates that the public sector should not take owners’ promises and projections of public benefits at face value. Moreover, the case study reveals that the public sector should put more effort into ensuring ex post policy and data transparency in order to facilitate benefit-cost analyses of such subsidies. Originality/value The data required to evaluate promises, other than economic development ones, made by franchise owners are not systematically collected across state and local governments in the USA, making large-n studies impossible. Case studies are underutilized approaches in this area of public affairs, and this paper illustrates their usefulness. By focusing on a single facility, an evaluation of the franchise owner’s less acknowledged and arguably more important promises about the facility and its local impact is possible.

Ex post, ex ante und dazwischen. Überlegungen zu einem zu wenig beachteten Problem der Empirischen Wirtschaftsforschung / Ex post, ex ante and Between. Some Thoughts on an often Disregarded Problem of Empirical Research

1995 ◽  
Vol 214 (6) ◽  
Author(s):  
Hans Werner Holub ◽  
Gottfried Tappeiner
Keyword(s):  
Empirical Research ◽  
Ex Post ◽  
Ex Ante

ZusammenfassungEin großer und zunehmender Teil der zeitgenössischen ökonomischen Daten wird mit Hilfe analytischer Modelle erzeugt und hat deshalb den Charakter von Hypothesen. Wenn man auf der Grundlage solcher modellerzeugter Daten dann selbst analytische Modelle konstruiert, führt dies zu einem „Modellieren auf der Basis der Ergebnisse von Modellen“.In dem vorliegenden Artikel zeigen die Autoren, daß eine solche Vorgangsweise die Qualität der betroffenen Studien ernsthaft in Frage stellt. Um eine weitere unreflektierte Ausbreitung dieses Typs empirischer Arbeiten zu verhindern, schlagen sie eine „Charta für die Erstellung und den korrekten Umgang mit ökonomischen Daten“ vor.

International strategic alliance relationships within the foreign investment decision process

2005 ◽  
Vol 22 (4) ◽  
pp. 399-419 ◽  
Author(s):  
Matthew J. Robson ◽  
Constantine S. Katsikeas
Keyword(s):  
Empirical Research ◽  
Foreign Investment ◽  
Decision Process ◽  
Strategic Alliance ◽  
Investment Decision ◽  
Research Work ◽  
Relationship Development ◽  
Content Type ◽  
Ex Post

PurposeThe purpose of this study is to develop and test a theoretical model of international strategic alliance (ISA) relationship development underpinned by the foreign investment decision process.Design/methodology/approachThe conceptual model demonstrates an ISA investment decision process consisting of three ex ante formation aspects – parent firm top management's general attitude towards alliances, scope of parent's cooperation analysis for the focal alliance, and interfirm collaborative history – and two key ex post relational outcomes – parent's willingness to invest in the alliance business and satisfaction with the relationship. The theoretical propositions were tested among a sample of 94 ISAs using structural equation modelling.FindingsThe results show that top management attitude towards alliances is negatively associated with scope of cooperation analysis, but only where collaborative history exists. Scope of cooperation analysis, in turn, positively influences willingness to invest. And together these factors exert a positive influence on relationship satisfaction.Originality/valueThe ISA literature has devoted significant attention to partner characteristics important in venture formation, as well as to post‐formation partnership management issues. However, there is a dearth of empirical research explaining the role of venture formation aspects in influencing ISA relationship development and success. The study adds to the limited empirical research work on the role of venture formation aspects in influencing ISA relationship development and success. It provides new and detailed insights for business practitioners and academic researchers concerning the behavioural, decision process underlying ISA partnership progression.

scholarly journals When do family firms consider issuing external equity? Understanding the contingent role of families’ need for control

2019 ◽  
Vol 9 (3) ◽  
pp. 271-296
Author(s):  
Martin Kupp ◽  
Bianca Schmitz ◽  
Johannes Habel
Keyword(s):  
Decision Making ◽  
Empirical Research ◽  
Family Firms ◽  
Family Firm ◽  
Equity Financing ◽  
Content Type ◽  
Financing Decisions ◽  
Firm Owners ◽  
Insight Into ◽  
External Equity

Purpose Prior research has argued that family firms are reluctant to consider external equity as a source of financing because they fear a loss of control, which would limit their socioemotional wealth. However, prior empirical research has neglected potential contingencies that determine whether family firms’ need for control affects their equity financing decisions. The purpose of this paper is to provide first insight into this research void. Design/methodology/approach The paper builds on rational choice theory and a logit regression using secondary data. Findings The study shows that the effect of family firm owners’ need for control on their consideration of external equity depends on the extent to which owners expect investors to interfere with management and the extent to which decision making is affected by emotions. Hereby, the present study provides evidence that family firm owners’ decisions to use external equity are more complex than previously presumed. Research limitations/implications This study has several limitations that provide fruitful avenues for further research. Overall, the authors list and detail seven different limitations in the paper, e.g. the narrow focus on equity financing, the use of a partial model, the fact that the authors did not conceptualize differences between different types of investors (such as high net worth individuals, private equity firms and venture capital firms) in the model and further more. Practical implications The study shows that investors need to understand the complex interplay among family firms’ need for control, expected investor interference and emotional decision making, to correctly assess their chances of success when approaching family firms for equity. Originality/value Prior empirical research has neglected potential contingencies that determine whether family firms’ need for control affects their equity financing decisions. The present paper provides first insight into this research void.

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