Lin Han, Hansi Hu and Terry Walter
Are franking credit balances priced? This paper aims to investigate the valuation of franking credit balances via a determinant analysis and value relevance analysis.
Abstract
Purpose
Are franking credit balances priced? This paper aims to investigate the valuation of franking credit balances via a determinant analysis and value relevance analysis.
Design/methodology/approach
The determinant analysis examines the factors that contribute to the increasing cumulative level of franking credit balances. Value relevance studies explore whether franking credit balances are priced in the market.
Findings
The results provide strong evidence of a size effect that the level of franking credit balances increases with firm size and weak evidence of an international focus effect that the level of franking credit balances increases with international ownership. They also find an individual dividend clientele effect that the level of franking credit balances decreases with individual ownership. They find significant evidence that franking credit balances are priced in the market. One dollar of franking credit is worth 1.4 dollars in firm value. That franking balances are capitalized at more than their face value suggests that franking credits signal firms' future dividend policy. They also find that the market valuation of franking balances increases with firm size but decreases with international focus.
Originality/value
This study provides direct evidence that franking credit balances are capitalized into equity prices. In the determinant analysis, this paper improves Heaney's (2009) model by using the percentage of international ownership as the proxy of international focus, thus addressing the limitation of his measure. In the value relevance tests, the study uses a modified model that includes log-transformation to reduce the skewness of variables based on Tanza's (2014) value relevance model. Moreover, the study suggests that the market valuation of franking credit balances increases with firm size, which contradicts Heaney's (2009) findings.
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Linda Hughen, Mahfuja Malik and Eunsup Daniel Shim
The recent economic and political focus on rising income inequality and the extent of government intervention into pay policies has renewed the interest in executive compensation…
Abstract
Purpose
The recent economic and political focus on rising income inequality and the extent of government intervention into pay policies has renewed the interest in executive compensation. The purpose of this paper is to examine the impact of changing regulatory landscapes on executive pay and its components.
Design/methodology/approach
This study examines a recent 23-year period divided into three distinct intervals separated by two major regulatory changes, the Sarbanes–Oxley Act (SOX) and the Dodd–Frank Act. Bonus, long-term and total compensation are separately modeled as a function of each regulatory change while controlling for firm size, performance and year. The model is estimated using panel data with firm fixed effects. An industry analysis is also conducted to examine sector variations.
Findings
Total compensation increased 29 percent following SOX and 21 percent following Dodd–Frank, above what can be explained by size, firm performance and time. Total compensation increased following both SOX and Dodd–Frank in all industries except for the financial services industry where total compensation was unchanged. Results are robust to using smaller windows around each regulation.
Research limitations/implications
This study does not seek to determine whether executive compensation is at an optimal level at any point in time. Instead, this study focuses only on the change in executive compensation after two specific regulations.
Originality/value
The debate over the extent to which the government should intervene with executive compensation has become a frequent part of political and non-political discourse. This paper provides evidence that over the long-term, regulation does not curtail executive compensation. An important exception is that total compensation was restrained for financial services firms following the Dodd–Frank Act.
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The corporate dividend decision has been of interest to researchers in finance for many years. Early theoretical and empirical work such as Graham and Dodd [1951], Lintner [1956]…
Abstract
The corporate dividend decision has been of interest to researchers in finance for many years. Early theoretical and empirical work such as Graham and Dodd [1951], Lintner [1956], Miller and Modigliani [1961] and in part Ball and Brown [1968] concentrated upon the signalling properties of dividend announcements. As a result of this early work, a nexus between dividends and current or foreseeable corporate earnings was proposed.
Fariss‐Terry Mousa and David J. Lemak
This paper aims to discuss the work of Frank and Lillian Gilbreth and how it is still a fundamental part of business in the twenty‐first century. It is also proposed that the…
Abstract
Purpose
This paper aims to discuss the work of Frank and Lillian Gilbreth and how it is still a fundamental part of business in the twenty‐first century. It is also proposed that the system developed by the Gilbreths could be added as a supplement, or even considered as a replacement to certain modern process management systems.
Design/methodology/approach
A qualitative methodology is used and the Gilbreths' system as described in their original works are compared and contrasted with modern process management systems appearing in contemporary literature.
Findings
It is found that most modern process management systems are based on the work of the Gilbreths and other seminal thinkers. However, it is suggested that by paying more attention to the human element, the Gilbreths might have developed a more comprehensive system in comparison with current ones.
Originality/value
This paper attempts to reemphasize the role and importance of Frank and Lillian's work as foundational to modern process management systems and to suggest that more attention needs to be given to the human interface in such systems.
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I have been asked to explore how James Buchanan’s work on public finance and constitutional political economy might have emerged out of themes present in Frank Knight’s oeuvre…
Abstract
I have been asked to explore how James Buchanan’s work on public finance and constitutional political economy might have emerged out of themes present in Frank Knight’s oeuvre, especially his Risk Uncertainty, and Profit. Buchanan’s body of work has inspired the development of a style of political economy sometimes described as Virginia or Constitutional Political Economy to distinguish it from the Chicago Political Economy with which George Stigler is associated, and with Stigler and Buchanan both being students of Knight. While Buchanan, unlike Stigler, did not write his dissertation under Knight’s supervision, this is a minor distinction because Buchanan regarded Knight as his de facto supervisor even though Roy Blough was his de jure supervisor. The author explains how Knight’s scholarly oeuvre can in large measure be detected in Buchanan’s effort to fashion an alternative approach to public finance and to articulate the field of study now called constitutional political economy.
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Dean C.H. Wilkie, Lester W. Johnson and Lesley White
This research aims to provide an empirical comparison of the results of three brands' marketing defence strategies used in advance of generic brands entering the market. By…
Abstract
Purpose
This research aims to provide an empirical comparison of the results of three brands' marketing defence strategies used in advance of generic brands entering the market. By reviewing the effectiveness of these strategies, this research looks to extend the research on marketing defence strategies into the importance of anticipating competitor launches.
Design/methodology/approach
A data set containing 243 weeks of scanned sales for 21 generic brands was used in a regression model aimed at measuring the effectiveness of each brand's defence strategies in deterring entry and limiting the market share of these generic brands.
Findings
The analysis shows that several marketing mix components were effective in limiting the impact of generic brands. What was critical to each component's success was ensuring that they were implemented before the launch of the generic brands.
Research limitations/implications
This research has the limitation of being confined to a category of pharmaceutical allergy brands, which limits generalisation of the findings.
Practical implications
The managerial relevance of this research has two parts. First, it will encourage managers to move from implementing strategies in reaction to a competitor launch to implementing strategies in advance of their entry. Second, it provides insights into the effectiveness of several strategic options for brands facing the entry of generic brands.
Originality/value
This study brings together literature regarding entry deterrence and market share loss prevention to help highlight the importance of proactive marketing defence strategies in reducing both the number of entrants and the amount of market share lost. It uses a data set to provide an empirical review of a range of marketing mix components used by pharmaceutical brands against low‐price generic brands.
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Jiaxin Duan, Yixin (Lucy) Wei and Lei Lu
This study aims to examine the behaviour of institutional and retail investors in response to news about industry leaders (peer firms) and to determine its impact on the stock…
Abstract
Purpose
This study aims to examine the behaviour of institutional and retail investors in response to news about industry leaders (peer firms) and to determine its impact on the stock prices of other firms (focal firms) within the same industry.
Design/methodology/approach
The study investigates the impact of peer news on investor behaviour of Chinese A-shares listed on the Shanghai and Shenzhen Stock Exchanges from 2010 to 2019. The media coverage of industry leaders is sourced from prominent Chinese online financial outlets and the Chinese Financial Press. Support vector machine is applied to identify the positive, neutral and negative news within the articles. The study uses event study and logistic regression to examine the effects of peer news on focal firms’ investor behaviour.
Findings
The results show that both good and bad news about leaders cause peers’ stock prices to increase initially, but then reverse within one quarter. Further analysis reveals that when leaders’ shares receive positive news coverage, institutional investors tend to exert excessive abnormal buying pressure on peers’ shares, resulting in overreactions. Conversely, retail investors do not actively trade on peers on leaders’ news day due to limited attention. In addition, the study shows that short-selling constraint inhibits bad news from reflecting in the stock prices.
Originality/value
The study highlights differences in investor behaviour. The finding that institutional investors tend to overreact more to peer firms’ news when focal firms are smaller and have a lower frequency of information disclosure supports the salient theory. This is consistent with the previous framework that suggests overreaction is more pronounced when it is difficult to combine external sources of information to evaluate the focal firms. In contrast, retail investors do not engage in active trading on peers on leaders’ news day due to the limited attention theory.
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Lawrence J. Ring, Mark H. Johnson and Gary Shaw
Perdue Farms, the highly successful marketer of brand-name chicken, is considering the introduction of a chicken hot dog to the market. The decision is complicated by a variety of…
Abstract
Perdue Farms, the highly successful marketer of brand-name chicken, is considering the introduction of a chicken hot dog to the market. The decision is complicated by a variety of factors, including top management's concerns and conditions, potential ramifications of the hot dog for the company's high-quality image, the uncertainty of market response, uncertainties about how to position the new product, potential consumer objections to use of mechanically deboned meat, and the uncertainty of profitability at recommended levels of marketing costs.
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This paper aims to study the post-patent ethical drug market and simulate the impact of Patient Protection and Affordable Care Act (ACA) on individuals, health-care providers and…
Abstract
Purpose
This paper aims to study the post-patent ethical drug market and simulate the impact of Patient Protection and Affordable Care Act (ACA) on individuals, health-care providers and pharmaceutical firms. US policymakers have been looking at various ways to curb rising health-care costs in USA, including ways to promote the use of generic drugs in lieu of brand drugs. In this broader context, the implementation of ACA in December 2013 will introduce major changes in the pharmaceutical market.
Design/methodology/approach
To fully understand the impact of such policy changes, we develop a structural model to study consumers’ buying behavior and firm competition in the post-patent ethical drug markets. We use the estimated model parameters to conduct four policy simulations to illustrate the effect of Obamacare on increasing the relative size of price-insensitive segment, reducing price sensitivity in the price-sensitive segment, providing brand price discount to Medicare patients previously in the “donut hole” and the effect of change in people’s attitude toward generics.
Findings
Our model estimation reveals two classes of consumers with different price sensitivities. This heterogeneity explains the increase in the brand price after generic entry. We identify consumers’ switching costs between generic and brand drugs, as well as among different generics. From the policy simulation, we find that except the closure of Medicare donut hole, all other policy changes lead to increased usage of the focal molecule, and the efforts to increase insurance coverage and reduce the out of pocket payment for prescription drugs lead to increase in firm profit.
Originality/value
This paper is the first to illustrate the potential policy effect of Obamacare through a structural model on post-patent ethical drug market.
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The purpose of this study is to examine factors influencing decisions to repurchase shares on-market in Australia. The present study also examines the role of board size, board…
Abstract
Purpose
The purpose of this study is to examine factors influencing decisions to repurchase shares on-market in Australia. The present study also examines the role of board size, board independence and chief executive officer duality on the decision to repurchase shares on-market by Australian firms.
Design/methodology/approach
This study blends the traditional motivations of share repurchases with the influences of governance. The sample consists of all non-financial firms included in the Australian All Ordinaries Index (AOI) for the period 2004-2010. The repurchase sample consists of 104 repurchases undertaken by 62 firms. A probit panel model is used to analyse the decision to repurchase shares on the market. To account for unobserved heterogeneity, random effects panel models are also used.
Findings
Analyses of a sample of non-financial firms included in the AOI for the period 2004-2010 show that size is significantly positively correlated with the decision to repurchase shares, thus supporting the agency cost. Findings also support the undervaluation and signalling hypotheses. Similarly, there is evidence in support of the view that firms repurchase shares to reach their target optimal capital structure. The present study also finds a significant positive association between board independence and the decision to repurchase shares in Australia.
Research limitations/implications
On-market share repurchases help firms to signal their future growth opportunities and resolve agency conflicts. Signals from repurchases also help markets discover the true fundamental values of firms. Governance plays an important role in improving the effectiveness of on-market share repurchases, as independent directors provide both monitoring and discipline which helps to ensure that firms have valid motivations in undertaking share repurchases.
Practical implications
These findings have implications for capital restructuring and governance policies. Principle-based governance frameworks that prevail in countries like Australia work as well as rule-based governance.
Originality/value
This study highlights the complementary roles that financial policies and corporate boards play in corporate governance. Independent boards ensure that firms pursue appropriate financial policies that help resolve agency conflicts and information asymmetry problems.