82 research outputs found
The effects of private equity investors on the governance of firms
Companies that receive external equity typically experience a separation of ownership and control, where owners who are not involved in the company (principals) have to rely on the management team (agents) for achieving expected goals and target levels. Theoretical literature argues that when ownership and control are separated, principals develop governance structures to reduce agency costs and align agents’ incentives (Berle and Means, 1932; Jensen and Meckling, 1976; Grossman and Hart, 1986; Zingales, 1995). Likewise, optimal financial structure design by financial intermediaries can effectively help to mitigate agency problems by identifying self-enforcing equilibria (Diamond, 1984; Fama and Jensen, 1985; Stiglitz, 1985; Bhattacharya and Thakor, 1993; Barry, 1994).
In general terms, governance and financial devices can be thought of as either internal control mechanisms (such as the board) or external control mechanisms (such as the market for corporate control). An increasingly important external control mechanism affecting the governance of young and fast-growing companies worldwide is the emergence of institutional and private equity investors, as equity owners. Institutional investors have the potential to influence management’s activities directly through their ownership, and indirectly by trading their shares (Gillan and Starks, 2003). In this respect private equity investors are differentiated from institutional ones in the longer-term view and in the significantly more hands-on approach that they pursue when investing in a portfolio company. As a result, companies backed by private equity investors represent a fruitful environment to investigate the use and efficiency of a multitude of control mechanisms.
The surge over the last 30 years in investment activity by private equity investors at large has given rise to an increased specialization of this class of investors conditional on the risk return profiles associated with different investment and firm life cycle stages. For instance, business angels supporting the archetypical ‘paper company’ start-up face a risk exposure that in terms of both magnitude and characteristics is significantly different from that incurred by a private equity investor acquiring control of a mature company. Yet, investors in this market share common traits such as a value maximization approach, risk‒return informed decisions, and a deep knowledge of governance mechanisms. As such their influence on portfolio company governance mechanisms is largely similar in terms of depth and breadth. In this chapter we aim at presenting an up-to-date review of the main theoretical contributions and empirical results in this active and growing field of research
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Knowledge Transfer and Accomodation Effects in Multinational Corporations: Evidence from European Subsidiaries
Foreign subsidiaries in multinational corporations (MNCs) possess knowledge that has different sources (e.g., the firm itself or various sources in the environment). How such sources influence knowledge transfer is not well understood. Drawing on the “accommodation effect” from cognitive psychology, the authors argue that accumulation of externally sourced knowledge in a subsidiary may reduce the value of transferring that subsidiary’s knowledge to other parts of the MNC. The authors develop a parsimonious model of intrafirm knowledge transfer and test its predictions against a unique data set on subsidiary knowledge development that includes the sources of subsidiary knowledge and the extent of knowledge transfer to other MNC units. The authors show that a high level of externally sourced knowledge in a subsidiary is associated with a high level of knowledge transfer from that subsidiary only if a certain tipping point of internally sourced knowledge has been surpassed. This suggests that subsidiary knowledge stocks that are balanced in terms of their origins tend to be more valuable, congruous, and fungible, and therefore more likely to be transferred to other MNC units
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Religious transformations in the Middle Ages: towards a new archaeological agenda
The study of religious change in Europe between the collapse of the Roman Empire and the Reformation forms one of the cornerstones of medieval archaeology but has been riven by period, denominational and geographical divisions. This paper lays the groundwork for a fundamental rethink of archaeological approaches to medieval religions, by adopting a holistic framework that places Christian, pagan, Islamic and Jewish case studies of religious transformation in a long-term, comparative perspective. Focused around the analytical themes of ‘hybridity and resilience’ and ‘tempo and trajectories’, our approach shifts attention away from the singularities of national narratives of religious conversion towards a deeper understanding of how religious beliefs, practices and identity were renegotiated by medieval people in their daily lives
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