How does ownership structure affect capital structure and firm value?:Recent evidence from East Asia

The present paper examines the effects of ownership structures on capital structure and firm valuation. It argues that the effects of separation of control from cash flow rights on capital structure and firm value also depend on the separation of control from management as well as on legal rules and enforcement defining investors' protection. We obtain firm-level panel data (three stage least squares, 3SLS) estimates from four of the East Asian countries worst affected by the last crisis. There is evidence that the general wisdom that higher control than cash flow rights may lower firm value may be reversed among owner-managed family firms in the sample countries. © 2007 The Authors Journal compilation © 2007 The European Bank for Reconstruction and Development.

Executive remuneration, financial performance and corporate governance in UK and Spanish listed firms

This study examines the relationship between executive directors’ remuneration and the financial performance and corporate governance arrangements of the UK and Spanish listed firms. These countries’ corporate governance framework has been shaped by differences in legal origin, culture and backgrounds. For example, the UK legal arrangements can be defined as to be constituted in common-law, whereas for Spanish firms, the legal arrangement is based on civil law. We estimate both static and dynamic regression models to test our hypotheses and we estimate our regression using Ordinary Least Squares (OLS) and the Generalised Method of Moments (GMM). Estimated results for both countries show that directors’ remuneration levels are positively related with measures of firm value and financial performance. This means that remuneration levels do not lead to a point whereby firm value is reduced due to excessive remuneration. These results hold for our long-run estimates. That is, estimates based on panel cointegration and panel error correction. Measures of corporate governance also impacts on the level of executive pay. Our results have important implications for existing corporate governance arrangements and how the interests of stakeholders are protected. For example, long-run results suggest that directors’ remuneration adjusts in a way to capture variation in financial performance

Trade marks and performance in UK firms:evidence of Schumpeterian competition through innovation

This paper uses novel data on trade mark activity of UK manufacturing and service sector firms to investigate whether trade marks improve the profitability and productivity of firms. We first analyse Tobin`s q, the ratio of stock market value to book value of tangible assets. We then investigate the relationship between trade mark activity and productivity, using a value added production function. Finally we examine interactions between firms IP activity, to explore creative destruction and growth via innovation. We find trade marks are positively related to both Tobin`s q and to productivity. Also in the short run greater IP activity by other firms in the industry reduces the value added of the firm, but this same competitive pressure has later benefits via productivity growth, also reflected in higher stock market value. This describes the Schumpeterian process of competition through innovation, restraining profit margins while increasing product variety and quality.

Managing the quality, value and impact of academic libraries: the role of external standards

Purpose – The purpose of this paper is to explore the role and relevance of external standards in demonstrating the value and impact of academic library services to their stakeholders. Design/methodology/approach – Two UK standards, Charter Mark and Customer Service Excellence, are evaluated via an exploratory case study, employing multiple data collection techniques. Methods and results of phases 1-2 of a three phase research project are outlined. Findings – Despite some limitations, standards may assist the manager in demonstrating the value, impact and quality of academic libraries in a recessional environment. Active engagement and partnership with customers is imperative if academic libraries are to be viewed as vital to their parent organisations and thus survive. Originality/value – This paper provides a systematic evaluation of the role of external accreditation standards in measuring academic library service value and impact.

Effect of support and cultural intelligence on the adjustment and performance of expatriates and their family members in Malaysia

Theory suggests that people fear the unknown and no matter how experienced one is, the feelings of anxiety and uncertainty, if not managed well would affect how we view ourselves and how others view us. Hence, it is in human nature to engage in activities to help decipher behaviours that seem contrary to their beliefs and hinder the smooth-flowing of their work and daily activities. Building on these arguments, this research investigates the two types of support that are provided by multinational corporations (MNCs) and host country nationals (HCNs) to the expatriates and their family members whilst on international assignments in Malaysia as antecedents to their adjustment and performance in the host country. To complement the support provided, cultural intelligence (CQ) is investigated to explain the influence of cultural elements in facilitating adjustment and performance of the relocating families, especially to socially integrate into the host country. This research aims to investigate the influence of support and CQ on the adjustment and performance of expatriates in Malaysia. Path analyses are used to test the hypothesised relationships. The findings substantiate the pivotal roles that MNCs and HCNs play in helping the expatriates and their families acclimatise to the host country. This corroborates the norm of reciprocity where assistance or support rendered especially at the times when they were crucially needed would be reciprocated with positive behaviour deemed of equal value. Additionally, CQ is significantly positive in enhancing adjustment to the host country, which highlights the vital role that cultural awareness and knowledge play in enhancing effective intercultural communication and better execution of contextual performance. The research highlights the interdependence of the expatriates? multiple stakeholders (i.e. MNCs, HCNs, family members) in supporting the expatriates whilst on assignments. Finally, the findings reveal that the expatriate families do influence how the locals view the families and would be a great asset in initiating future communication between the expatriates and HCNs. The research contributes to the fields of intercultural adjustment and communication and also has key messages for policy makers.

Entry modes and performance of foreign direct investment in China

How does a firm choose a proper model of foreign direct investment (FDI) for entering a foreign market? Which mode of entry performs better? What are the performance implications of joint venture (JV) ownership structure? These important questions face a multinational enterprise (MNE) that decides to enter a foreign market. However, few studies have been conducted on such issues, and no consistent or conclusive findings are generated, especially with respect to China. It’s composed of five chapters, providing corresponding answers to the questions given above. Specifically, Chapter One is an overall introductory chapter. Chapter Two is about the choice of entry mode of FDI in China. Chapter Three examines the relationship between four main entry modes and performance. Chapter Four explores the performance implications of JV ownership structure. Chapter Five is an overall concluding chapter. These empirical studies are based on the most recent and richest data that has never been explored in previous studies. It contains information on 11,765 foreign-invested enterprises in China in seven manufacturing industries in 2000, 10,757 in 1999, and 10,666 in 1998. The four FDI entry modes examined include wholly-owned enterprises (WOEs), equity joint ventures (EJVs), contractual joint ventures (CJVs), and joint stock companies (JSCs). In Chapter Two, a multinominal logit model is established, and techniques of multiple linear regression analysis are employed in Chapter Three and Four. It was found that MNEs, under the conditions of a good investment environment, large capital commitment and small cultural distance, prefer the WOE strategy. If these conditions are not met, the EJV mode would be of greater use. The relative propensity to pursue the CJV mode increases with a good investment environment, small capital commitment, and small cultural distance. JSCs are not favoured by MNEs when the investment environment improves and when affiliates are located in the coastal areas. MNEs have been found to have a greater preference for an EJV as a mode of entry into the Chinese market in all industries. It is also found that in terms of return on assets (ROA) and asset turnover, WOEs perform the best, followed by EJVs, CJVs, and JSCs. Finally, minority-owned EJVs or JSCs are found to outperform their majority-owned counterparts in terms of ROA and asset turnover.

Organisational slack resources, the definitions and consequences for business flexibility and performance : an empirical investigation

Slack resources are recognised to be those spare capabilities and assets of the organisation that are variable reclaimable for re-deployment. They represent under utilised and hidden spare energies within a company that may be recaptured and employed for a variety of tasks. However their positive contribution to organisational success has been a contentious claim that has provoked the intuitive argument that slack resources are inefficiency and are to be eradicated. The counter argument has been that very efficient organisations are inflexible and therefore incapable of being responsive to an increasingly dynamic environment. Therefore this work compares and contrasts three distinctive industries in a holistic manner and maps the impact of environmental flux on the firm, its subsequent disruptive ripples through the organisation and its absorption by slack resources. Through this process it is demonstrated that slack resources do positively contribute to organisational performance and subsequently the ability of slack to promote sustained competitive advantage is also identified. The major findings of this work are listed. 1. This work has developed and perfected a new research model that aids the investigation of the internal behaviours and consequences of Slack Resources. 2. Supported by argument a new variable of Soft Slack was developed. Its validity was demonstrated in its ability to capture the contribution of intangible assets, such as education, experience, spare management time and further training, to the extant levels of Organisational Hard Slack resources. 3. The validity of Soft Slack was further supported when its contribution to organisational Flexibility was also established. 4. The original argument that Slack Resources enhance organisational Performance has been further developed. It is now evidenced that Slack Resources facilitate Organisational Flexibility and by this process enhances Organisational Performance.

Reputation and performance in large law firms

Reputation is a signalling device that serves as a proxy for the quality of a firm’s products, strategies and employees relative to its competitors, when communicating with clients and other stakeholders. It is especially important for professional service firms because of the complex and intangible nature of their service and because of the advantages it confers in the market for high-quality professional staff. This paper extends and refines existing research on reputation which shows positive returns to reputation for professional service firms. We use different rankings of the top 50 law firms in the UK to measure reputation and examine their relationship with financial performance as expressed in firm revenue and profits. We find positive but diminishing returns to reputation even within this group and we find a stronger relationship between reputation and profits than fee income. We conclude that reputation may be an important source of competitive advantage for leading firms but it seems to offer little leverage for others. If these results are generalizable across other professional sectors this raises the question of how the majority of firms can differentiate themselves.

Entry, reforms complementarity and performance:a tale of two Indian manufacturing sectors

In this paper, we use plant-level data from two Indian industries, namely, electrical machinery and textiles, to examine the empirical relationship between structural reforms like abandonment of entry restrictions to the product market, competition and firm-level productivity and efficiency. These industries have faced different sets of policies since Independence but both were restricted in the adoption of technology and in the development of optimal scales of production. They also belonged to the first set of industries that benefited from the liberalization process started in the 1980s. Our results suggest that both the industries have improved their efficiency and scales of operation by the turn of the century. However, the process of adjustment seems to have been worked out more fully for electrical machinery. We also find evidence of spatial fragmentation of the market as late as 2000–2001. Gains in labour productivity were much more evident in states that either have a strong history of industrial activity or those that have experienced significant improvements in business environment since 1991.

Corporate governance, managers' independence, exporting, and performance of firms in transition economies

Using data on 157 large companies in Poland and Hungary, this paper employs Bayesian structural equation modeling to examine the relations among corporate governance, managers' independence from owners in terms of strategic decision making, exporting, and performance. Managers' independence is positively associated with firms' financial performance and exporting. In turn, the extent of managers' independence is negatively associated with ownership concentration, but positively associated with the percentage of foreign directors on the firm's board. We interpret these results as indicating that concentrated owners tend to constrain managerial autonomy at the cost of the firm's internationalization and performance, but board participation of foreign stakeholders enhances the firm's export orientation and performance by encouraging executives' decision-making autonomy.

Corporate governance, managers' independence, exporting and performance of firms in transition economies

Using data on 157 large companies in Poland and Hungary this paper employs Bayesian structural equation modeling to examine interrelationships between corporate governance, managers' independence from owners in terms of strategic decision-making, exporting and performance. It is found that managers' independence is positively associated with firms' financial performance and exporting. In turn, the extent of managers' independence is contingent on the firm's corporate governance parameters: it is negatively associated with ownership concentration, but positively associated with the percentage of foreign directors on the firm's board. We interpret these results as an indication that (i) risk averse, concentrated owners tend to constrain managerial autonomy at the cost of the firm's internationalization and performance, (ii) board participation of foreign stakeholders, on the other hand, enhances the firm's export orientation and performance by encouraging executives' decision-making autonomy.

Real options in management and organizational strategy:a review of decision-making and performance implications

This paper contributes to the debate on the role of real options theory in business strategy and organizational decision-making. It analyses and critiques the decision-making and performance implications of real options within the management theories of the (multinational) firm, reviews and categorizes the organizational, strategic and operational facets of real options management in large business settings. It also presents the views of scholars and practitioners regarding the incorporation and validity of real options in strategy, international management and business processes. The focus is particularly on the decision-making and performance attributes of the real options logic concerning strategic investments, governance modes and multinational operations management. These attributes are examined from both strategic and operating perspectives of decision-making in organizations, also with an overview of the empirical evidence on real options decision-making and performance.

HRM, organizational capacity for change, and performance:a global perspective

This special issue brings together a variety of articles, each one enriching understanding about whether and how human resource management (HRM) influences organizational performance (however defined) against a backdrop of complex change. We present a preliminary framework that enables us to integrate the diverse themes explored in the special issue, proposing a mediating role for organizational change capacity (OCC). OCC represents a particular subset within the resource-based literature labeled as “dynamic capabilities.” Although not well researched, there is evidence that OCC is positively associated with firm performance and that this relationship is stronger given conditions of high uncertainty. Our framework reflects on external and internal parameters, which we suggest moderate the relationship between human resource management (HRM), OCC, and organizational performance. Our intention is to provide compelling insight for both practitioners and researchers, especially those whose remit extends beyond national boundaries, with reference to areas of the globe as disparate as Greece, Ireland, Pakistan, Switzerland, and the United Kingdom. © 2012 Wiley Periodicals, Inc.

Antecedents of strategic flexibility:management cognition, firm resources and strategic options

Purpose: Current conceptualisations of strategic flexibility and its antecedents are theory-driven, which has resulted in a lack of consensus. To summarise this domain the paper aims to develop and present an a priori conceptual model of the antecedents and outcomes of strategic flexibility. Discussion and insights into the conceptual model, and the relationships specified, are made through a novel qualitative empirical approach. The implications for further research and a framework for further theoretical development are presented. Design/methodology/approach: An exploratory qualitative research design is used applying multiple data collection techniques in a branch network of a large regional retailer in the UK. The development of strategic options and the complex relationship to strategic flexibility is investigated. Findings: The number and type of strategic options developed by managers impact on the degree of strategic flexibility and also on the ability of the firm to achieve competitive differentiation. Additionally, the type of strategic option implemented by managers is dependent on the competitive situation faced at a local level. Evidence of managers' limited perception of competition was identified based on their spatial embeddedness. Research limitations/implications: A single, in-depth case study was used. The data gathered is rich and appropriate for the exploratory approach adopted here. However, generalisability of the findings is limited. Practical implications: Strategic flexibility is rooted in the ability of front-line mangers to develop and implement strategic options; this in turn facilitates competitive differentiation. Originality/value: The research presented is unique in this domain on two accounts. First, theory is developed by presenting an a priori conceptual model, and testing through in-depth qualitative data gathering. Second, insights into strategic flexibility are presented through an examination of managerial cognition, resources and strategic option generation using cognitive mapping and laddering technique. © Emerald Group Publishing Limited.

Quality management and performance:a comparison between the UK and Turkey

Purpose: The aim of this article is to detail the correlation between quality management, specifically its tools and critical success factors, and performance in terms of primary operational and secondary organisational performances. Design/methodology/approach: Survey data from the UK and Turkey were analysed using exploratory factor analyses, structural equation modelling and regression analysis. Findings: The results show that quality management has a significant and positive impact on both primary and secondary performances; that Turkish and UK attitudes to quality management are similar; and that quality management is widely practised in manufacturing and service industries but has more statistical emphasis in the manufacturing sector. The main challenge for making quality management practice more effective lies in an appropriate balanced use of the different sorts of the tools and critical success factors. Originality/value: This study takes a novel approach by: (i) exploring the relationship between primary operational and secondary organisational performances, (ii) using service and manufacturing data and (iii) making a cross-country comparison between the UK (a developed economy) and Turkey (a developing economy). Limitations: Detailed contrast provided between only two countries. © 2013 Copyright Taylor and Francis Group, LLC.