G.D.I. Barr and R.C. van den Honert
In his article “Diversifying Mergers and Risk: Some Empirical Tests”, Thompson (1983) modelled the change in the systematic risk of the acquiring firm before and after merger. We…
Abstract
In his article “Diversifying Mergers and Risk: Some Empirical Tests”, Thompson (1983) modelled the change in the systematic risk of the acquiring firm before and after merger. We propose a modification to this method which considers the difference between the systematic risk of the merged firm and that predicted by capital market theory on the basis of the constituent firms' betas. Furthermore merger will probably lead to a change in the structure of the acquiring firm, both intrinsically and financially. Thus in order to remove any complications caused by debt restructuring of the combined firm after merger, we suggest that the analysis is carried out using ungeared or intrinsic betas. An empirical study which follows that of Thompson but implements the above modifications is performed, and conclusions are drawn which have implications for studies that have considered the benefits of merger to the acquiring and target firms.
The underlying principle of the Capital Asset Pricing Model (CAPM) is that there is a linear relationship between systematic risk, as measured by beta, and expected share returns…
Abstract
The underlying principle of the Capital Asset Pricing Model (CAPM) is that there is a linear relationship between systematic risk, as measured by beta, and expected share returns. The CAPM attempts to describe this relationship by using beta to explain the differences between the expected returns on various shares and share portfolios. The CAPM has been the subject of considerable theoretical investigation and empirical research. The aim of this article is to establish the current knowledge of the usefulness of the CAPM, i.e. whether it provides a reasonable description of reality and whether it is a useful tool for investment decision‐making. The main conclusion drawn from the study is that the CAPM is useful and that it does describe and explain the risk/return relationship. However, other risk factors (i.e. other than beta) may also be useful for explaining share returns. Investors should therefore be cautious when using the model to evaluate investment performance.
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Mashukudu Hartley Molele and Janine Mukuddem-Petersen
The purpose of this paper is to examine the level of foreign exchange exposure of listed nonfinancial firms in South Africa. The study spans the period January 2002 and November…
Abstract
Purpose
The purpose of this paper is to examine the level of foreign exchange exposure of listed nonfinancial firms in South Africa. The study spans the period January 2002 and November 2015. Foreign exchange risk exposure is estimated in relation to the exchange rate of the South African Rand relative to the US$, the Euro, the British Pound and the trade-weighted exchange rate index.
Design/methodology/approach
The study is based on the augmented-market model of Jorion (1990). The Jorion (1990) is a capital asset pricing model-inspired framework which models share returns as a function of the return on the market index and changes in the exchange rate factor. The market risk factor is meant to discount the effect of macroeconomic factors on share returns, thus isolating the foreign exchange risk factor. In addition, the study further added the size, value, momentum, investment and profitability risk factors in line with the Fama–French three-factor model, Carhart four-factor model and the Fama–French five-factor model to account for the fact that equity capital markets in countries such as South Africa are known to be partially segmented.
Findings
Foreign exchange risk exposure levels were estimated at more than 40% for all the proxy currencies on the basis of the standard augmented market model. However, after controlling for idiosyncratic factors, through the application of the Fama–French three-factor model, the Carhart four-factor model and the Fama–French five-factor model, exposure levels were found to range between 6.5 and 12%.
Research limitations/implications
These results indicate the importance of controlling for the effects of idiosyncratic facto0rs in the estimation of foreign exchange risk exposure in the context of emerging markets of Sub-Saharan Africa (SSA).
Originality/value
This is the first study to apply the Fama–French three-factor model, Carhart four-factor model and the Fama–French five-factor model in the estimation of foreign exchange exposure of nonfinancial firms in the context of a SSA country. These results indicate the importance of controlling for the effects of idiosyncratic factors in the estimation of foreign exchange risk exposure in the context of emerging markets.
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R.K. Renin Singh and Subrat Sarangi
This study explores match related factors and their impact on the batting strike rate in Twenty20 cricket – an aspect which can generate excitement and fan engagement in cricket…
Abstract
Purpose
This study explores match related factors and their impact on the batting strike rate in Twenty20 cricket – an aspect which can generate excitement and fan engagement in cricket matches.
Design/methodology/approach
Data was collected from www.cricinfo.com using a web scraping tool based on R programming from February 17, 2005, to October 25, 2022, numbering 4,221 men’s Twenty20 international innings featuring 41 national teams that had taken place in 85 venues across 11 countries of play. Hypothesis testing was conducted using one-way ANOVA.
Findings
The findings indicate that batters score faster in the first inning of a match, and mean strike rates also vary significantly based on the country of play. Further, the study analyses the top performing national sides, venues and country of play in terms of mean batting strike rate, thus providing insights to cricket boards, international regulating bodies of cricket, sponsors, media companies and coaching staff for better decision-making based on batting strike rate.
Originality/value
The originality of the study lies in its focus on using non-marketing strategies to increase fan engagement. Further, this study is the first one to examine different venues from the perspective of batting strike rate in men’s Twenty20 international matches.
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Damian Tago, Henrik Andersson and Nicolas Treich
This study contributes to the understanding of the health effects of pesticides exposure and of how pesticides have been and should be regulated.
Abstract
Purpose
This study contributes to the understanding of the health effects of pesticides exposure and of how pesticides have been and should be regulated.
Design/methodology/approach
This study presents literature reviews for the period 2000–2013 on (i) the health effects of pesticides and on (ii) preference valuation of health risks related to pesticides, as well as a discussion of the role of benefit-cost analysis applied to pesticide regulatory measures.
Findings
This study indicates that the health literature has focused on individuals with direct exposure to pesticides, i.e. farmers, while the literature on preference valuation has focused on those with indirect exposure, i.e. consumers. The discussion highlights the need to clarify the rationale for regulating pesticides, the role of risk perceptions in benefit-cost analysis, and the importance of inter-disciplinary research in this area.
Originality/value
This study relates findings of different disciplines (health, economics, public policy) regarding pesticides, and identifies gaps for future research.
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Research has highlighted the cognitive nature of the business model intended as a cognitive representation describing a business’ value creation and value capture activities…
Abstract
Research has highlighted the cognitive nature of the business model intended as a cognitive representation describing a business’ value creation and value capture activities. Although the content of the business model has been extensively investigated from this perspective, less attention has been paid to the business model’s causal structure – that is the pattern of cause-effect relations that, in top managers’ or entrepreneurs’ understandings, link value creation and value capture activities. Building on the strategic cognition literature, this paper argues that conceptualizing and analysing business models as cognitive maps can shed light on four important properties of a business model’s causal structure: the levels of complexity, focus and clustering that characterize the causal structure and the mechanisms underlying the causal links featured in that structure. I use examples of business models drawn from the literature as illustrations to describe these four properties. Finally, I discuss the value of a cognitive mapping approach for augmenting extant theories and practices of business model design.
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Gerard P. Hodgkinson, Robert P. Wright and Jamie Anderson
Developments in the social neurosciences over the past two decades have rendered problematic the main knowledge elicitation techniques currently in use by strategy researchers, as…
Abstract
Developments in the social neurosciences over the past two decades have rendered problematic the main knowledge elicitation techniques currently in use by strategy researchers, as a basis for revealing actors’ mental representations of strategic knowledge. Extant elicitation techniques were advanced during an era when cognitive scientists and organizational researchers alike were preoccupied with the basic information of processing limitations of decision makers and means of addressing them, predicated on an outmoded conception of strategists as affect-free, cognitive misers. The need to adapt these techniques to enable the investigation of the emotional content and structure of actors’ mental representations is now a pressing priority for the advancement of theory, research, and practice pertaining to several interrelated areas of strategic management, from dynamic capabilities development, to upper echelons theory, to strategic consensus formation. Accordingly, in this chapter, we report the findings of two studies that investigated the feasibility of adapting the repertory grid, a robust method, widely known and well used in strategic management, for this purpose. Study 1 elicited a series of commonly mentioned strategic issues (the elements) from a sample of senior managers similar in composition to the sample recruited to the second study. Study 2 participants evaluated the elements elicited in Study 1 in relation to a series of researcher-supplied bipolar attributes (the constructs), based on the well-known affective circumplex model of human emotions. In line with expectations, a series of vector-based multivariate analyses revealed a number of interesting similarities and variations among participants in terms of the basic structure and emotional salience of the issues under consideration.
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To explain the origin of novel strategies I elaborate the managerial judgment perspective as an alternative to the serendipity and managerial foresight views on the origin of…
Abstract
To explain the origin of novel strategies I elaborate the managerial judgment perspective as an alternative to the serendipity and managerial foresight views on the origin of novel strategies proposed in the earlier literature. The managerial judgment perspective closely integrates resource-based theories and theories of managerial cognition. It builds centrally on the construct of “management’s theory of success” as a representation of managers’ beliefs and expectations concerning the factors that lead to desired outcomes in the light of Knightean uncertainty and that is formed through learning from small samples over time. The managerial judgment perspective may be seen as a theory that explains the formation of strategies independently from their eventual performance, but may also shed light on the cognitive antecedents of superior performance. It also argues for a conception of strategic agency in terms of ecological rationality.
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Shane W. Reid, Aaron F. McKenny and Jeremy C. Short
A growing body of research outlines how to best facilitate and ensure methodological rigor when using dictionary-based computerized text analyses (DBCTA) in organizational…
Abstract
A growing body of research outlines how to best facilitate and ensure methodological rigor when using dictionary-based computerized text analyses (DBCTA) in organizational research. However, these best practices are currently scattered across several methodological and empirical manuscripts, making it difficult for scholars new to the technique to implement DBCTA in their own research. To better equip researchers looking to leverage this technique, this methodological report consolidates current best practices for applying DBCTA into a single, practical guide. In doing so, we provide direction regarding how to make key design decisions and identify valuable resources to help researchers from the beginning of the research process through final publication. Consequently, we advance DBCTA methods research by providing a one-stop reference for novices and experts alike concerning current best practices and available resources.