Claire E. Crutchley and Marlin R.H. Jensen
This paper tests how changes in information asymmetry and agency variables affect changes in debt policy. Unlike previous studies that examine levels of variables to explain what…
Abstract
This paper tests how changes in information asymmetry and agency variables affect changes in debt policy. Unlike previous studies that examine levels of variables to explain what may determine debt policy, we calculate yearly changes in variables to provide a stronger test of causal relations. By examining changes in agency and information variables, we are able to identify factors that cause firms to change their optimal capital structure. We find institutional ownership has become a substitute for debt financing due to increased shareholder activism. In addition, we find support for Jensen's free cash flow theory, mixed support for informational asymmetry, and no support for Jensen and Meckling's agency model.
Jonathan J. Burson and Marlin R.H. Jensen
This study aims to examine institutional ownership of companies that go public with dual-class share structures.
Abstract
Purpose
This study aims to examine institutional ownership of companies that go public with dual-class share structures.
Design/methodology/approach
Several recent studies have discussed the potential advantages and disadvantages of the dual-class structure, which allows founders and insiders to maintain control of the firms they created through superior voting rights. Institutional investors oppose the dual-class structure, arguing that inferior voting rights make it difficult to respond to poor governance or performance. Previous research has shown the early value-added to the dual-class firm declines through time. This study examines institutional ownership of dual-class companies through time and compares institutional investments in initial public offerings with perpetual superior-class structures versus those with provisions to sunset those shares to one-share, one-vote structures.
Findings
Evidence suggests that institutional investors view perpetual dual-class structures as potentially riskier in terms of poor governance or performance and prefer dual-class companies with sunset provisions.
Originality/value
This study suggests that founders and insiders should consider either the dual-class structure with a sunset provision or if they choose the perpetual dual-class, it should include some type of event-driven safeguards.
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Marlin R.H. Jensen, Beverly B. Marshall and William N. Pugh
This study seeks to investigate whether a firm's financial disclosure size can help investors predict performance.
Abstract
Purpose
This study seeks to investigate whether a firm's financial disclosure size can help investors predict performance.
Design/methodology/approach
Controlling for size and industry, the relationship between financial disclosure size and subsequent stock performance for all Standard and Poor's (S and P) 500 firms over a seven‐year period is examined.
Findings
It is found that firms with smaller 10‐Ks tend to have better subsequent performance relative to their industries. However, the findings suggest that the performance explanation may not lie in the size of the 10‐K itself. Firms with smaller 10‐Ks tend to perform better because they are smaller in terms of total assets and more focused, with fewer business segments.
Research limitations/implications
While the study is limited to examination of S and P 500 firms, no consistent evidence is found of a relation between changes in a firm's disclosure size and future performance changes.
Practical implications
The results suggest that more disclosure relative to a firm's size is not necessarily bad. Investors attempting to predict future firm performance cannot use the firm's disclosure size alone.
Originality/value
This paper extends two recent Merrill Lynch studies that appear to contradict the extant financial literature's view that increased disclosure reduces the informational asymmetry problem. While the results confirm the findings of these studies, they suggest that the performance explanation may not lie in the size of the 10‐K itself.
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Scott W. Geiger, Dan Marlin and Sharon L. Segrest
The purpose of this paper is to contribute to the healthcare management literature and improve the understanding of the slack and performance link by examining the hospital slack…
Abstract
Purpose
The purpose of this paper is to contribute to the healthcare management literature and improve the understanding of the slack and performance link by examining the hospital slack and performance relationship using a sample of 148 US hospitals.
Design/methodology/approach
Using cluster analysis, ANCOVA and means comparisons, this study identifies different hospital slack configurations and their associated performance implications.
Findings
The results demonstrate that different configurations of slack resources result in different levels of hospital performance. The findings also demonstrate equifinality in this relationship suggesting that some configurations of slack can result in similar levels of performance.
Practical implications
The results indicate that managerial attention should be paid to not only identifying appropriate levels and types of slack for hospitals but also to appropriate ways to bundle these resources. The findings also suggest there may be multiple ways for hospitals’ administrators to effectively manage and bundle slack resources.
Originality/value
Organizational slack and its impact on organizational performance is an important area of research within the management literature. Unfortunately, no known studies have examined how different types of slack resources are configured or bundled together in healthcare organizations and how this impacts firm performance. This study provides a significant contribution to the literature by providing a first step in understanding the slack and performance relationship in the hospital industry.
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While previous research has developed unclear positions about the role of organizational resources on alliance formation, the purpose of this paper is to focus on financial slack…
Abstract
Purpose
While previous research has developed unclear positions about the role of organizational resources on alliance formation, the purpose of this paper is to focus on financial slack resources to clarify the conditions that facilitate the formation of strategic alliances. Building on the behavioral theory of the firm, this paper theorizes that internal and external financial slack resources, measured as cash holdings and financial leverage, incentivize managers to form alliances, because they protect them against the risk of alliance failure.
Design/methodology/approach
Complete data were collected from 400 biotech public companies for the period from 2000 to 2015. The data set considered alliances among over 2,200 public and private companies. Hypothesis testing relied on generalized estimating equations.
Findings
Cash holdings positively impact alliance formation; financial leverage negatively impacts alliance formation; cash holdings and financial leverage interact in the prediction of alliance formation.
Research limitations/implications
While research in financial slack resources shows equivocal results, this study illustrates that they exercise a significant effect when it comes to the choice of forming strategic alliances. Limitations include the focus on multiple forms of alliances, possible restrictions in the external validity of the findings, and a lack of measurement of explanatory mechanisms.
Practical implications
Findings help managers understand the financial conditions in which they should choose to form or avoid alliances; findings help managers select alliance partners.
Originality/value
The study contributes by proposing a new outlook on alliances; identifying financial resources as alliance predictors when previous research focused on intangible resources; offering new insights into the often equivocal outcomes of financial slack; building an uncharted bridge between the finance and alliance literatures.
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Martin Weiss, Dirk Schneider and Jekaterina Lebid
This paper aims to develop a conceptual foundation of a fit between top management teams (TMTs) and their company’s corporate strategy. The authors fortify the importance of the…
Abstract
Purpose
This paper aims to develop a conceptual foundation of a fit between top management teams (TMTs) and their company’s corporate strategy. The authors fortify the importance of the concept of fit if the impact of upper echelons on organizational performance is trying to be explained. Yet, a constitutive concept of fit for the corporate strategy, a particularly important dimension of strategy, was previously neglected.
Design/methodology/approach
In a conceptual/theoretical approach, the authors selected demographic managerial characteristics from previous empirical studies from the research stream on upper echelons and combined them with other promising characteristics. To analyze them in respect to the requirements of low and highly diversified companies, the authors applied the concept of the dominant logic, an important theory in the field of corporate strategy.
Findings
The authors establish two distinct profiles of TMT members for low and high degrees of diversification and provide guidance on how to measure the TMT-corporate strategy fit – for individual TMT members and for the entire TMT – as a degree of fit on a ratio scale.
Originality/value
This work constitutes the first exhaustive concept of a TMT-corporate strategy fit. It provides a profound research foundation for scholars in the field of TMTs and the upper echelons theory as well as a promising and complementary perspective for practitioners when assessing their TMT composition.
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María A. Agustí, Rocio Aguilar-Caro, José Luis Galán and Francisco J. Acedo
Organisational slack has been widely considered in strategic management, but there is a gap in understanding the process of accumulation and application of slack resources. From a…
Abstract
Purpose
Organisational slack has been widely considered in strategic management, but there is a gap in understanding the process of accumulation and application of slack resources. From a dynamic perspective and over an extended period of time, this paper analyses the management of slack resources and evaluates whether the different behaviours, in relation to the accumulation and consumption of slack resources, have any effect on performance.
Design/methodology/approach
The resource-based view and the dynamic extension of this theory, i.e. resource management and resource orchestration, were analysed in order to evaluate how slack resources can be managed and generate value. Assuming a configurational approach, the analysis was structured into two stages to answer the proposed hypothesis. The first stage studied whether there were different patterns of management of slack resources over time using the DistatisR package. The second stage evaluated which behaviours had the greatest impact in terms of profitability by using a dynamic panel data regression.
Findings
Three different types of slack resource management were found in companies: efficient, effective and erratic. Different types do not have the same impact on performance.
Originality/value
The dynamic management of slack resources has scarcely been considered, even during periods of crisis and economic expansion. This research advances the understanding of how firms transform slack resources into performance from a dynamic perspective.
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The purpose of this paper is to contribute to the organizational literature and improve the understanding of the slack and performance link by: examining the slack and performance…
Abstract
Purpose
The purpose of this paper is to contribute to the organizational literature and improve the understanding of the slack and performance link by: examining the slack and performance relationship using a configurational approach and by considering equifinality and its possible effects on this relationship.
Design/methodology/approach
Using cluster analysis, ANCOVA, and means comparisons this study identifies different configurations of slack and their associated performance implications.
Findings
The results show that configurations with higher levels of slack outperform those with lower levels of slack suggesting a positive relationship between slack and firm performance. The findings also demonstrate that alternative configurations of slack can result in similar levels of performance suggesting the existence of equifinality in this relationship.
Research limitations/implications
This study contributes to prior research by moving beyond traditional linear and contingency views of slack and considering a configurational approach. An important contribution of this study is that while level of slack may be important it appears that how the various types of slack are bundled also serves as an important factor in firm outcomes and should be examined by future researchers.
Practical implications
The results indicate that managerial attention should be paid to not only identifying appropriate levels and types of slack for the organization but also to appropriate ways to bundle theses resources.
Originality/value
This study provides an important contribution to the literature by determining if certain slack bundles result in higher levels of performance and if there are multiple ways of bundling slack resources that result in similar performance outcomes.
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This article surveys the literature dealing with theory and applications of life cycle costing (LCC). It deals with the literature published in the last 25 years and provides 667…
Abstract
This article surveys the literature dealing with theory and applications of life cycle costing (LCC). It deals with the literature published in the last 25 years and provides 667 references.
Mahdi Salehi, Mahbubeh Mahmoudabadi, Mohammad Sadegh Adibian and Hossein Rezaei Ranjbar
The present study aims to assess the effect of managerial entrenchment on firms’ corporate social responsibility (CSR) activities and financial performance in Iran.
Abstract
Purpose
The present study aims to assess the effect of managerial entrenchment on firms’ corporate social responsibility (CSR) activities and financial performance in Iran.
Design/methodology/approach
In this paper, the variable of managerial entrenchment, which includes board independence, management duality, management tenure, the board compensation, independence and ownership percentage, is initially analyzed using the exploratory factor analysis method, and its effect on performance and CSR is evaluated using the multivariable regression test. Given that a total of 103 listed companies on the Tehran Stock Exchange are selected during 2012–2017. In this paper, return on assets (ROA) and Tobin’s Q are the two variables to measure financial performance.
Findings
The results of hypotheses testing indicate that there is a positive and significant relationship between managerial entrenchment and financial performance based on the ROA and Tobin’s Q indices, separately. Moreover, the results of this study indicate that there is also a positive and significant relationship between managerial entrenchment and CSR activities.
Originality/value
The current study almost is the first study, conducted in a developing country similar to Iran, and the provided results might be beneficial to other developing countries.