Searching for managerial opportunism faint traces in French diversifying acquisitions

We are looking for traces of managerial opportunism in french diversifyingacquisitions. Indeed, following various theories, diversification is seeking by managers.Furthermore, recent empiric evidences show that corporate diversification is valuedestructive for shareholders. Using classical OLS methodology with diversification,management ownership and performance variables, we find some evidence of managerialopportunism. But classical methodology presents two shortages. First, it supposed a uniquesense of causality. In particular, firm diversification is supposed to impact firmperformance without considering the inverse relationship (from performance todiversification). This one-way analysis can create biases in the estimated results. Second,this OLS methodology doesn't permit to take simultaneously the relationship between ourvariables. Noticing that this classical methodology is not well adapted to the problem, wesubmit our data to a system of simultaneous equations. Using this system, according to usbetter adapted, the faint traces of managerial opportunism vanishes. This is the case inparticular because the negative impact of diversification on performance disappears whenwe consider a non recursive relation between the variables. We derive others surprisingresults from our simultaneaous equations framework. Management stake in the equity caninfluence or be influenced by the performance depending on wether the performance ismeasured at the firm or at the operation (acquisition) level. Together, these results suggestthat we have to be cautious when searching for managerial opportunism in sample andstatistical studies. If manager opportunist inclination can be suspected in this kind ofstudies, it has to be distinguished from manager opportunist behavior which is far moredifficult to exhibit.managerial opportunism;acquisition;corporate diversification;agence;performance

Do Private Equity Firms Foster Innovation? Evidence from French LBOs

Agency theory has historically presented buyouts as a superior governance framework that generates economic efficiencies in the short term but these transactions might have a negative impact on long-term growth and innovation. In this study, we use a strategic entrepreneurship perspective to argue that private equity firm's extensive network and relationships, and expertise and competencies help managers to innovate. Using a propensity score methodology, we provide an empirical analysis of the innovative efforts of a sample of 89 French manufacturing firms that underwent a buyout between 2001 and 2005. The matching estimates (average treatment on the treated, ATT) of the effect of LBOs on firm level of innovation expenditures in 2006 show no significant differences between LBO targets and comparable companies that did not go through an LBO. In contrast, we find significant effects of LBOs on both service innovation and marketing innovations in design and packaging and product promotion. Results suggest that private equity firms provide marketing capabilities or encourage managers of LBO targets to build new innovation strategies.Buyouts, Innovation, Private Equity Firms, Strategic Entrepreneurship

Do Artists See Their Retinas?

Our perception starts with the image that falls on our retina and on this retinal image, distant objects are small and shadowed surfaces are dark. But this is not what we see. Visual constancies correct for distance so that, for example, a person approaching us does not appear to become a larger person. Interestingly, an artist, when rendering a scene realistically, must undo all these corrections, making distant objects again small. To determine whether years of art training and practice have conferred any specialized visual expertise, we compared the perceptual abilities of artists to those of non-artists in three tasks. We first asked them to adjust either the size or the brightness of a target to match it to a standard that was presented on a perspective grid or within a cast shadow. We instructed them to ignore the context, judging size, for example, by imagining the separation between their fingers if they were to pick up the test object from the display screen. In the third task, we tested the speed with which artists access visual representations. Subjects searched for an L-shape in contact with a circle; the target was an L-shape, but because of visual completion, it appeared to be a square occluded behind a circle, camouflaging the L-shape that is explicit on the retinal image. Surprisingly, artists were as affected by context as non-artists in all three tests. Moreover, artists took, on average, significantly more time to make their judgments, implying that they were doing their best to demonstrate the special skills that we, and they, believed they had acquired. Our data therefore support the proposal from Gombrich that artists do not have special perceptual expertise to undo the effects of constancies. Instead, once the context is present in their drawing, they need only compare the drawing to the scene to match the effect of constancies in both

Diversification de l'entreprise, risque et aversion au risque des dirigeants : L'hypothèse d'Amihud et Lev (1981) revisitée

L'hypothèse initialement avancée par Amihud et Lev (1981), selon laquelle le dirigeant serait tenté de diversifier son entreprise afin de limiter son risque d'emploi, a connu un large écho et a été largement reprise depuis (Amihud et al., 1986 ; Lewellen et al., 1989 ; Norton, 1993 ; Lane et al., 1998). Néanmoins, les résultats obtenus par ces différentes recherches ne corroborent pas tous l'hypothèse originelle. Nous nous proposons dans cette étude de reconsidérer certains aspects de l'hypothèse d'Amihud et Lev (1981) et de tester sur, le marché français, les hypothèses qui en découlent quant à l'impact de l'aversion au risque du dirigeant sur la diversification de l'entreprise . Les résultats exposés éclairent la diversification et les éventuels motifs managériaux qui la guide. Ils nous conduisent à être circonspect vis-à-vis de l'hypothèse initiale. L'hypothèse initiale n'est pas corroborée. Son coté très simple et général, si séduisant qu'il soit, nuit à son caractère explicatif. Notre conclusion invite à affiner l'hypothèse d'Amihud et Lev (1981), et à étudier l'aversion au risque des dirigeants dans un cadre plus complet incluant les enseignements de la finance comportementale et l'ensemble du système de gouvernement des entreprises.fusion; acquisition; risque; aversion au risque; finance comportementale

Désengagements et recentrages en France : 1986-1992

Dans un premier temps, la spécificité des trajectoires de recentrage par désengagements est mise en évidence par une mesure quantitative de la diversité des activités de grandes firmes industrielles françaises. La performance de ces opérations est ensuite étudiée à travers deux perspectives complémentaires : l'amélioration de la profitabilité et l'instauration de nouveaux rapports entre actionnaires et dirigeants.recentrage ; restructurations ; désengagements ; synergies ; performance

Plural Form and Franchisors Performance : Early Empirical Findings From Europe

This paper deals with the relationships between plural form and performance in franchising networks in Europe. It is proposed that a franchisor's life cycle stage and human capital assets influence the relationship between plural form and performance. The model has been estimated using panel data on 41 publicly listed European franchising networks in the 1998-2007 period. The proportion of network-franchised units to the total number of its units in its distribution system is used as the indicator of its plural form (franchise proportion). Following an instrumental approach, the network performance is measured at the franchisor level by its industry-adjusted Return on Assets (ROA) and a relative stock market valuation measure of intangible human capital is used. The early results show that the impact of franchise proportion on performance is greater for franchisors with high intangible human capital compared to franchisors with low intangible human capital. Overall, results provide support for the contention that the franchisors' performance is contingent on the ‘fit' between governance structure (franchise proportion) and resources (critical human assets). In contrast, strong evidence that the governance/performance relationship is contingent on life cycle stage or franchisor's age is not found. But, our results suggest that franchisor's age could weaken the relationship between franchise proportion and performance. These results might suggest that younger franchisors with high human capital should increase their franchise proportion to enhance their financial performance.franchising; human capital; governance; performance

Financial Profile of Leveraged Buyout Targets: Some French Evidence

International audienceThis paper investigates whether firms, which are taken over on the French market through Leveraged Buyouts (LBOs), possess characteristics prior to the change which differentiate them from firms which are not acquired through LBOs. Contrasting 175 LBO targets on the French market with an industry-matched comparison group, we first run univariate analysis and then multivariate analysis (logit regression). Beyond the underscoring of the LBO targets' financial features, we conclude that subdividing our sample according to the vendor and bidder type is beneficial. We thus notice that the so-called outperformance of LBO targets prior to the deal hides in fact different cases

Architecture financière des réseaux de franchise : apports de la théorie des ressources et de la théorie des contrats incomplets

This article aims to enrich the explanatory framework of franchise networks through integration of resource-based view and incomplete contracts theory. In this framework, we analyze franchising as the foundation for a financial architecture and two explanatory variables appear to be essential: the importance of « animate assets » in the network and the life cycle stage. Plural form allows the development of trust and cooperation, a specific governance implementation, and the emergence of information resources. If the resources' characteristics fit the governance system then the franchising network will be efficient.L'objectif de cet article est d'enrichir le cadre explicatif de la franchise en intégrant la théorie fondée sur les ressources et la théorie des contrats incomplets. Dans ce cadre, le recours à la franchise se conçoit comme le fondement d'une « architecture financière » et deux variables explicatives apparaissent essentielles : l'importance des actifs incorporels « animés » dans le réseau et la phase du cycle de vie. Les réseaux mixtes permettent le développement de la confiance et de la coopération, la mise en place d'une gouvernance particulière, et l'émergence d'une ressource informationnelle. La concordance entre les caractéristiques des ressources et le système de gouvernance va déterminer la performance du réseau de franchise

LBOs and innovation: the French case

A long-standing controversy is whether LBOs generate economic efficiencies through a superior governance framework, or whether LBO funds are driven by short-term profit motives and sacrifice long-term growth to boost short-term performance. Using a propensity score methodology, this paper provides an empirical analysis of the innovative efforts of a sample of 89 French manufacturing firms that underwent a buyout between 2001 and 2005. The matching estimates (average treatment on the treated, ATT) of the effect of LBOs on firm level of innovation expenditures in 2006 show no significant differences between LBO targets and comparable companies that did not go through an LBO. In contrast, we find significant effects of LBOs on both service innovation and marketing innovations in design and packaging and product promotion.Buyouts, Innovation, Private Equity Firms.