Electronic commerce investments, the resource-based view of the firm, and firm market value

Firms have embraced electronic commerce as a means of doing business, either because they see it as a way to improve efficiency, grow market share, expand into new markets, or because they view it as essential for survival. Recent research in the United States provides some evidence that the market does value investments in electronic commerce. Following research that suggests that, in certain circumstances, the market values noninnovative investments as well as innovative investments in new products, we partition electronic commerce investment project announcements into innovative and noninnovative to determine whether there are excess returns associated with these types of announcements. Apart from our overall results being consistent with the United States findings that the market values investments in electronic commerce projects, we also find that noninnovative investments are perceived as more valuable to the firm than innovative investments. On average, the market expects innovative investments to earn a return commensurate with their risk. We conclude that innovative electronic commerce projects are most likely seen by the capital market as easily replicable, and consequently have little, if any, competitive advantage period. On the other hand, we conclude from the noninnovative investment results that these types of investments are seen as being compatible with a firm's assets-in-place, in particular, its information technology capabilities, a view consistent with the resource-based view of the firm.

The impact of negative social environmental events on the market value of supply chain partners

The present work analyzes the impact of negative social / environmental events on the market value of supply chain partners. The study offers a contextualized discussion around important concepts which are largely employed on the Operations Management and Management literature in general. Among them, the developments of the literature around supply chains, supply chain management, corporate social responsibility, sustainable development and sustainable supply chain management are particularly addressed, beyond the links they share with competitive advantage. As for the theoretical bases, the study rests on the Stakeholder Theory, on the discussion of the efficient-market hypothesis and on the discussion of the adjustment of stock prices to new information. In face of such literature review negative social / environmental events are then hypothesized as causing negative impact in the market value of supply chain partners. Through the documental analysis of publicly available information around 15 different cases (i.e. 15 events), 82 supply chain partners were identified. Event studies for seven different event windows were conducted on the variation of the stock price of each supply chain partner, valuing the market reaction to the stock price of a firm due to triggering events occurred in another. The results show that, in general, the market value of supply chain partners was not penalized in response to such announcements. In that sense, the hypothesis derived from the literature review is not confirmed. Beyond that, the study also provides a critical description of the 15 cases, identifying the companies that have originated such events and their supply chain partners involved.

The impact of R&D in firm value across Europe

In this thesis the impact of R&D expenditures on firm market value and stock returns is examined. This is performed in a sample of European listed firms for the period 2000-2009. I apply different linear and GMM econometric estimations for testing the impact of R&D on market prices and construct country portfolios based on firms’ R&D expenditure to market capitalization ratio for studying the effect of R&D on stock returns. The results confirm that more innovative firms have a better market valuation,investors consider R&D as an asset that produces long-term benefits for corporations. The impact of R&D on firm value differs across countries. It is significantly modulated by the financial and legal environment where firms operate. Other firm and industry characteristics seem to play a determinant role when investors value R&D. First, only larger firms with lower financial leverage that operate in highly innovative sectors decide to disclose their R&D investment. Second, the markets assign a premium to small firms, which operate in hi-tech sectors compared to larger enterprises for low-tech industries. On the other hand, I provide empirical evidence indicating that generally highly R&D-intensive firms may enhance mispricing problems related to firm valuation. As R&D contributes to the estimation of future stock returns, portfolios that comprise high R&D-intensive stocks may earn significant excess returns compared to the less innovative after controlling for size and book-to-market risk. Further, the most innovative firms are generally more risky in terms of stock volatility but not systematically more risky than low-tech firms. Firms that operate in Continental Europe suffer more mispricing compared to Anglo-Saxon peers but the former are less volatile, other things being equal. The sectors where firms operate are determinant even for the impact of R&D on stock returns; this effect is much stronger in hi-tech industries.

The effect of innovation on hotel market value

The purpose of this article is to analyze the effect of hotel innovations on firm value. Specifically, this study fills a research gap in the previous literature by examining this effect through market value and by distinguishing the potentially different impacts of distinct innovation types: product, process, organization and marketing. This research contributes to consolidating the empirical evidence of hotel innovation and performance by analyzing whether distinct types of innovation lead to different levels of results. The findings show that innovations are perceived to have a positive impact on the future sales of the company: in a four-day period (0,+3), there is an increase in stock exchange returns of 1.53%. In terms of innovation types, process and marketing innovations are found to have a higher positive effect on hotel market value than product and organization innovations; which is explained by potential cost differences among innovations.

The market value implications of pension asset allocation

Pension funds have been part of the private sector since the 1850's. Defined Benefit pension plans [DB], where a company promises to make regular contributions to investment accounts held for participating employees in order to pay a promised lifelong annuity, are significant capital markets participants, amounting to 2.3 trillion dollars in 2010 (Federal Reserve Board, 2013). In 2006, Statement of Financial Accounting Standards No.158 (SFAS 158), Employers' Accounting for Defined Benefit Pension and Other Postemployment Plans, shifted information concerning funding status and pension asset/liability composition from disclosure in the footnotes to recognition in the financial statements. I add to the literature by being the first to examine the effect of recent pension reform during the financial crisis of 2008-09. This dissertation is comprised of three related essays. In my first essay, I investigate whether investors assign different pricing multiples to the various classes of pension assets when valuing firms. The pricing multiples on all classes of assets are significantly different from each other, but only investments in bonds and equities were value-relevant during the recent financial crisis. Consistent with investors viewing pension liabilities as liabilities of the firm, the pricing multiples on pension liabilities are significantly larger than those on non-pension liabilities. The only pension costs significantly associated with firm value are actual rate of return and interest expense. In my second essay, I investigate the role of accruals in predicting future cash flows, extending the Barth et al. (2001a) model of the accrual process. Using market value of equity as a proxy for cash flows, the results of this study suggest that aggregate accounting amounts mask how the components of earnings affect investors' ability to predict future cash flows. Disaggregating pension earnings components and accruals results in an increase in predictive power. During the 2008-2009 financial crisis, however, investors placed a greater (and negative) weight on the incremental information contained in the individual components of accruals. The inferences are robust to alternative specifications of accruals. Finally, in my third essay I investigate how investors view under-funded plans. On average, investors: view deficits arising from under-funded plans as belonging to the firm; reward firms with fully or over-funded pension plans; and encourage those funds with unfunded pension plans to become funded. Investors also encourage conservative pension asset allocations to mitigate firm risk, and smaller firms are perceived as being better able to handle the risk associated with underfunded plans. During the financial crisis of 2008-2009 underfunded status had a lower negative association with market value. In all three models, there are significant differences in pre- and post- SFAS 158 periods. These results are robust to various scenarios of the timing of the financial crisis and an alternative measure of funding.

Determinants Of Firm Terminal Value: The Perspective Of North American And European Financial Analysts

Company valuation models attempt to estimate the value of a company in two stages: (1) comprising of a period of explicit analysis and (2) based on unlimited production period of cash flows obtained through a mathematical approach of perpetuity, which is the terminal value. In general, these models, whether they belong to the Dividend Discount Model (DDM), the Discount Cash Flow (DCF), or RIM (Residual Income Models) group, discount one attribute (dividends, free cash flow, or results) to a given discount rate. This discount rate, obtained in most cases by the CAPM (Capital asset pricing model) or APT (Arbitrage pricing theory) allows including in the analysis the cost of invested capital based on the risk taking of the attributes. However, one cannot ignore that the second stage of valuation that is usually 53-80% of the company value (Berkman et al., 1998) and is loaded with uncertainties. In this context, particular attention is needed to estimate the value of this portion of the company, under penalty of the assessment producing a high level of error. Mindful of this concern, this study sought to collect the perception of European and North American financial analysts on the key features of the company that they believe contribute most to its value. For this feat, we used a survey with closed answers. From the analysis of 123 valid responses using factor analysis, the authors conclude that there is great importance attached (1) to the life expectancy of the company, (2) to liquidity and operating performance, (3) to innovation and ability to allocate resources to R&D, and (4) to management capacity and capital structure, in determining the value of a company or business in long term. These results contribute to our belief that we can formulate a model for valuating companies and businesses where the results to be obtained in the evaluations are as close as possible to those found in the stock market

Market value of corruption

This paper studies the impact of the Brazilian anticorruption legislation, PL 6826/2010, on stock returns. I show that, around the law approval date, the greater the link between the corporate and political worlds, the worse is the companies’ performance. Companies awarded with public contracts in 2012 suffer more with the new legislation approval. Firms with above median contract values have 2.9% lower returns than its peers. The negative effect is more pronounced for bigger and more complex entities, associated with higher levels of Corporate Responsibility and Governance and not subject to the US FCPA.

Addressing Compensation Rates Below Market Value

Strategies for Recruiting and Retaining Faculty and Staff (Business Affairs Forum, attached): Many institutions face limitations on the salary rates they can offer faculty and staff due to decreases in state funding, which can create challenges in recruitment and retention of qualified employees. This brief explores strategies institutions use to lessen the impact of budget limitations on faculty and staff salaries and to recruit and retain faculty in spite of limited salary offerings.

A prospective study on the dimensions of global brands, brand equity and brand value

This doctoral thesis is about global brands under several perspectives, starting this study with and overview on the matter, followed by a "step ahead" in the conceptualization of brand equity and brand value. As the global marketplace dynamically increases, there are theoretical and empirical challenges concerning the global brands that ask for more branding researches, trying to tune and to contextualize meanings and attributes. Thereafter, the thesis intends to provide a discussion about the industry and country-of-origin effects (and their interactions) on the brand value and the firm market value. Finally, the thesis offers an interesting comparison about the practitioners’ perspectives on the dimensions of global brands, the brand equity and the brand value, branding and marketing, including highlights on the brand internationalization process. The thesis offers a general approach on the extant literature in the first chapter, and a specific literature review for each other chapter.

Firm Market Performance and Volatility in a National Real Estate Sector

We present empirical evidence using daily data for stock prices for 17 real estate companies traded in the Sao Paulo, Brazil stock exchange. from August 26, 2006 to March 31, 2010. We use the U.S. house price bubble, financial crisis and risk measures to instrument for momentums and reversals in the domestic real estate sector. We find evidence of conditional premium persistence and conditional volatility persistence in the market. We find that the conditional risk-return relationship in the sector is consistent with the prospect theory of risk attitudes in this period. Certain companies seem to be operating on a perceived potential industry return above the target, while most others are below the target, and the whole sector is below target on average. (C) 2011 Elsevier Inc. All rights reserved.

Parametric & nonparametric approaches to event studies: an application to a hotel’s market value

The main objective of this paper is twofold: on the one hand, to analyse the impact that the announcement of the opening of a new hotel has on the performance of its chain by carrying out an event study, and on the other hand, to compare the results of two different approaches to this method: a parametric specification based on the autoregressive conditional heteroskedasticity models to estimate the market model, and a nonparametric approach, which implies employing Theil’s nonparametric regression technique, which in turn, leads to the so-called complete nonparametric approach to event studies. The results that the empirical application arrives at are noteworthy as, on average, the reaction to such news releases is highly positive, both approaches reaching the same level of significance. However, a word of caution must be said when one is not only interested in detecting whether the market reacts, but also in obtaining an exhaustive calculation of the abnormal returns to further examine its determining factors.