Thesis (Ph. D.)--University of Massachusetts Amherst, 2009. / Includes bibliographical references (p. 145-156). Print copy also available.

This study analyses the impact of M&As on acquiring company shareholder wealth and market risk through empirical evidence based on event study methods and cross-sectional regressions. The hypotheses investigated relate to the relevance of target status, method of payment, acquirers‘ bidding experience, and diversification motives. The evidence is based on a comprehensive sample of M&A transactions comprising 46,758 initial bids announced in 180 countries over the period 1977-2012, covering 88 industries. The study also investigates the relevance of deal and firm-specific factors affecting the likelihood of the success or failure of a deal once announced. The results of the event study indicate that acquirers‘ abnormal returns are not influenced by uncertainty about whether the announced deals will succeed or fail, which is consistent with the efficient market hypothesis. The event study evidence also confirms that acquirers‘ gains are most significant in cross-border M&As with acquirers located in developed countries and targets in developing countries. Further evidence from cross-sectional regressions confirms that cross-border and cross-industry diversification yields significant announcement gains for acquirers, although in comparison with domestic and focussed deals, such deals carry a greater risk of failure. Diversification has no significant impact on acquirers‘ market or systematic risk. In addition, the evidence with regard to the impact of target status and method of payment suggests that acquirers‘ gains are most significant in stock payment deals involving private or subsidiary targets, while stock payment deals involving publicly-listed targets yield lower returns. In general, cash payment for acquisitions serves to reduce the negative impact of acquiring public targets, while stock payment enhances the positive impact of acquiring private or subsidiary targets. Correspondingly, acquirers‘ market increases with the acquisition of non-public targets, while using cash payment reduces this risk. The overall findings in this regard are robust across various samples and are generally associated with the existence of information asymmetry between acquirers and targets. Finally, the findings reveal that acquirers‘ prior experience of bidding in M&A deals is associated with significantly lower shareholder returns for acquirers, and this also increases their risk. This finding, however, is specific to serial acquirers and generally supports the hubris motive.

Business leaders are increasingly responsible for the societal and environmental impacts of their actions. Yet conceptual views on responsible leadership differ in their definitions and theoretical foundations. This study attempts to reconcile these diverse views and uncover the phenomenon from a business leader's point of view. Based on rational egoism theory, this article proposes a formal mathematical model of responsible leadership that considers different types of incentives for stakeholder engagement. The analyses reveal that monetary and instrumental incentives are neither sufficient nor necessary for business leaders to consider societal and environmental stakeholder needs. Non-monetary and non-instrumental incentives, such as leaders' values and authenticity, as well as their planning horizons, counterbalance pure monetary and instrumental orientations. The model in this article complements the growing body of research on responsible leadership by reconciling its various conceptual views and providing a foundation for future theory development and testing.

This research focuses on the relationship between branding and company share price. This research’s purpose is to investigate the impact of branding indicators on a company share price. There has been a lot of research that has evidenced a positive relationship between marketing, of which its core component is branding, and firm performance. Even though it has been evidenced that strong branding leads to firm performance, stock analysis literature has not taken into consideration branding indicators as a key component in predicting the future performance of a company’s share price. This research addresses insights on the direct relationships between branding and share price values, which has not been extensively studied. Literature reviewed outlined three important measures of brands which offer a view of the future performance of a brand. These brand performance measurements are brand value, brand ranking and brand ratings. These are measures which are publicly available and have been measured over time. The research utilised data from Brandentity which is a brand valuing organisation which reports brand performance annually. The research investigated the impact of the change in brand value, brand ranking and brand ratings on company share price. The investigation shows brand rating as the only brand indicator tested that significantly positively impacts a company share price. This was found to mainly be because its orientation is competitor’s performance and future brand performance. Brand value and Brand rankings were found to have no significant impact on a company share price. The research thus concludes that brand indicators have a positive impact on a company share price and therefore brand measurements should be used as part of stock analysis to predict future performance of a company share price. / Dissertation (MBA)--University of Pretoria, 2014. / zkgibs2015 / Gordon Institute of Business Science (GIBS) / unrestricted

This dissertation comprises three essays in the field of empirical corporate finance and it contributes to the literature on the financial and real effects of corporate governance. Broadly defined, corporate governance encompasses all mechanisms that remove frictions in the relationship between firm insiders and outside stakeholders with claims on the cash flows of the company. The field has focused on the relationships between concentrated equity-holders and managers, but there are many other firm claimants. I consider two that are understudied: (1) The government, which holds a claim on firm cash flows through its taxation power. This stake motivates the government to detect and punish manager expropriation. And (2) passive investors, which appear not to engage with the running of individual firms in their maximally diversified portfolios but which may have a portfolio-maximization incentive to do so. In the first two chapters I hypothesize that credible government monitoring creates firm value by reducing frictions between firms and their bank lenders, allowing them to access more and cheaper financing to fund new investments. I quantify the effect in the context of a tax audit program in Ecuador wherein a sub-group of firms were chosen to be audited every year indefinitely. In the first chapter, I show that banks lend more to firms that are known to be under higher government scrutiny, both on the intensive and extensive margins, and do so at lower interest rates and longer maturities. I control for selection bias using a regression discontinuity design based on the procedure the tax authority used to choose which firms to add to the auditing program. In the second chapter, I use the same Ecuadorian setting as in the first chapter to show that government monitoring affects the real economy: Firms subject to more government monitoring increase their employment and their investment in physical capital. This is true even though the firms increase their average tax payments. The estimated employment effects jointly estimate new employment and formalization of existing employees. Investment effects are concentrated in physical capital investments, rather than in intangibles. But what mechanism is driving these results? I determine that the financial and real effects act primarily through government monitoring reducing ``hidden action'' frictions between firms and their lenders. The corporate governance effects of tax enforcement are valuable to firm investors, which update their beliefs on firms' abilities to divert firm resources going forward, making firm actions more predictable under the monitoring regime. The combination of a larger supply of bank credit at a lower price supports this mechanism. Moreover, monitored firms became more likely to borrow from a bank that they had never borrowed from before and to attract investments from new private investors. Finally, it is those firms that appear to be most likely to divert ex ante, by both tax and accounting measures of diversion, that receive the largest decrease in their cost of borrowing once they are chosen for the program. I conclude that this government monitoring, even when it was designed to maximize tax collection, had a meaningful effect on firm access to capital and on the real economy. This evidence supports the hypothesis that predictable government enforcement of laws is an important part of a comprehensive corporate governance system, lowering frictions that are not mitigated through other means and complimenting other mechanisms, such as bank monitoring. The policy implication is that an increase in tax enforcement can benefit both the government and outside firm stakeholders by generating greater tax revenue and increasing the value of the firm to outsiders. In the third chapter I test the hypothesis that shareholder governance, the primary mechanism for inducing managers to maximize own-firm value, may in some circumstances lower manager incentives to maximize the value of their firm when to do so they would need to engage in fierce competition with other firms that their shareholders also own. One way that cross-holding shareholders could incentivize managers to internalize their competition preferences is to influence the composition of executive compensation by increasing the payouts to managers when their industry does well relative to the payouts when their own firm does well. I find no robust relationship between the cross-holdings of minority shareholders and the competition incentives embedded in the compensation of top firm executives. Rather, I find that firms with shareholders that hold relatively more cross-holdings in direct competitor firms are more likely to adopt performance pay that expressly rewards out-performing peers. This chapter contributes to the current policy debate on how to regulate diversified investors by casting doubt on the anti-competitive effects of these holdings, at least through the mechanism of executive compensation, the main way that firms align shareholder and executive incentives.

Hållbarhet och hållbar utveckling är mycket aktuella frågor idag och detta betonas inte minst i Förenta Nationernas Globala mål. Denna studie syftar till att identifiera och kartlägga hur personer förhåller sig till hållbarhet, hållbarhetskommunikation samt Traderas hållbarhetskommunikation. Målet är att tillföra till forskning kring hållbarhetskommunikationens nutida utmaningar i Sverige samt utforska betydelsen av hållbarhetskommunikation för organisationer idag. I denna uppsats har en enkätundersökning används som metod för att kartlägga attityder och beteenden gentemot hållbarhet och hållbarhetskommunikation. Denna studie uppvisar resultat som visar på att personer i hög grad anser att hållbarhet är viktigt samt även ofta gör aktiva val att konsumera hållbart. Studien visar även på att personer i äldre åldersgrupper i högre grad än personer i lägre åldersgrupper tycker att hållbarhet är viktigt samt gör aktivt hållbara val i sin konsumtion. De respondenter som angett att de i hög grad aktivt väljer att konsumera hållbart är även mer mottagliga för organisationers hållbarhetskommunikation. Traderas kommunikation har inte lett till att personer i stor grad ser dem som en relevant hållbar aktör, dock är de som använt Traderas plattform mer benägna att se Tradera som en hållbar aktör. Vidare dras slutsatsen att hållbarhet är en viktig fråga som organisationer bör förhålla sig till, samt att de framtida kommunikationsutmaningarna blir att skapa positiva attityder gentemot hållbarhet som leder till ett hållbart konsumtionsbeteende bland personer.

Prior research on covenants show that they are frequently included in corporate debt agreements as means of mitigating bondholder-stockholder conflicts. As covenants should be more frequently included when there is a higher degree of bondholder-stockholder conflict, what is then the relation between covenants and spread? Our results show that on the Norwegian corporate debt market, bonds that include covenants have a higher spread than those that do not. The results of an OLS-regression using some of the most common covenants, Z’-score and bond spread shows that the 43 % of bond spread can be explained by whether the bond includes dividend restrictions, equity restrictions and poison puts, and the Z’-score of the issuer.

Research concerning covenants has at large not examined what quantifiable relationship covenants have with yield spreads. We shed light on this topic as we evaluate Swedish bond indentures. By examining the relationship between covenants and yield spread, our results indicate whether covenants effectively mitigate the bondholder-stockholder conflict. The results from our OLS-model indicate that the poison put option and covenants restricting dividends and mergers have a positive relationship with the yield spread, and that the negative pledge has a negative relationship with the yield spread. Furthermore, our results indicate that some covenants are too costly for companies issuing investment grade bonds. Those covenants are therefore only included in bonds with higher yield spreads, where a conflict between bondholders and stockholders could be greater. / Ett kvantifierbart förhållande mellan kovenanter och räntebasmarginalen har överlag i tidigare forskning inte undersökts. I denna uppsats åskådliggör vi detta förhållande genom att undersöka svenska företagsobligationer. Genom att studera relationen mellan kovenanter och räntebasmarginalen kan våra resultat visa på huruvida kovenanter motverkar konflikten mellan obligationsinnehavare och aktieägare. Resultaten från vår OLS-modell visar att poison put option och kovenanter som begränsar utdelningar och fusioner har ett positivt samband med räntebasmarginalen, medan negative pledge har ett negativt samband med räntebasmarginalen. Vidare visar våra resultat att vissa kovenanter är för dyra för företag som ger ut investment grade obligationer. Dessa kovenanter finns därför bara med i obligationer med högre räntebasmarginaler, där en konflikt mellan obligationsinnehavare och aktieägare kan vara större.

This dissertation investigates the immediate effects of securities analysts' statements on shareholders. Two of the most important questions posed in research on capital markets are when and how analysts matter. A time at which analysts might matter is when they make pronouncements regarding a firm or industry; ways in which they might matter is through their word choices and the context of their words in these pronouncements. The question, "Do analysts matter?," has been explored before and has been answered in terms of the securities analysts' quantitative earnings forecasts and their effects on the capital markets. I investigated the discourse used in these earnings forecasts and other statements regarding the focal firm or industry in analyst reports. Therefore, I answered the question, "Do analysts matter, as defined by their words used, and do they change investors' judgments about a firm's future prospects?" The study employed content analysis of analysts' language to determine whether the words they use in their statements cause a response in the market. The study also investigated how the analysts' language differs based on their affiliations. To examine this question, I drew on the efficient markets theory from finance. Data sources included the Chicago Centre for Research on Security Prices (CRSP) tapes and First Call analyst reports. The research applied quantitative computer text analysis, the event study methodology, and regression to test the hypotheses. By studying statements from the All-American Team analysts, the present work shows that investors do consider the pronouncement of analyst statements significant. The results demonstrate support for the idea that analyst statements have an impact on the stock market. Moreover, the statement characteristics have an incremental effect on the market response. The key findings illustrate that words in the analysts' report matter. The analyst characteristics were instrumental in deciding the words that the analysts use in their reports. Finally, analysts use words to signal information to investors when they are pressured from investment banking relationships. / text

This paper proposes that managerial incentive compensation affects the firm choice between public and bank debt. To motivate the case I analyze a simple model with complete and perfect information that implies a positive relation between managers’ incentive compensation and preference toward bank debt. Using firm-level data over the period 1992-2005, I empirically examine the relation between managerial incentives and financing decisions. Specifically, I examine whether managers whose compensation is tied to firm performance choose bank over public debt as a commitment mechanism to reduce the cost of debt. Consistent with a monitoring role of banks, I find that the probability of choosing bank over public debt is positively related to the level of incentive compensation. Further, I find that public lenders price the incentive alignment between manager and shareholders by increasing the cost of debt, while the overall cost of bank loan does not depend on the manager’s incentive compensation. Finally, I find that banks are more likely to include a collateral provision in the debt contract if the manager’s compensation is tied to firm performance.