Debt and Corporate Performance: Evidence from Unsuccessful Takeovers

This paper examines how debt affects firms following failed takeovers. Using a sample of 573 unsuccessful takeovers, we find that, on average, targets significantly increase their debt levels. Targets that increase their debt levels more than the median amount reduce their levels of capital expenditures, sell off assets, reduce employment, increase focus and increase their operating cash flows. These leverage-increasing targets also realize superior stock price performance over the five years following the failed takeover. In contrast, those firms that increase their leverage the least show insignificant changes in their level of investment and their operating cash flows and realize stock price performance that is no different than their benchmarks. Those failed targets that increase their leverage the least, and fail to get taken over in the future, realize significant negative stock returns following their initial failed takeovers. The evidence is consistent with the hypothesis that debt helps firms remain independent not because it entrenches managers, but because it commits the manager to making the improvements that would be made by potential raiders.

Regulation and information asymmetry: Evidence from the performance of industrial and utility firms issuing seasoned equity in the USA

Purpose – This paper seeks to examine the potential for regulation to reduce information asymmetries between firm insiders and outside investors. Design/methodology/approach – Extensive prior research has established that there are substantial effects of information asymmetry in seasoned equity offers (SEOs). The paper tests for a mitigating effect of regulation on such information asymmetries by examining differences in long-run operating performance, changes in that performance, and announcement-period stock returns between unregulated industrial firms and regulated utilities that issue seasoned equity. The authors also segment the samples by firm size, since smaller firms are likely to have greater asymmetries. Findings – Consistent with regulated utility firms having lower levels of information asymmetry, they have superior changes in abnormal operating performance than industrial firms pre- to post-issue and their announcement period returns are significantly less negative. These findings are most pronounced for the smallest firms, firms likely to have the greatest information asymmetries and where regulation could have its greatest effect. Research limitations/implications – The paper does not examine costs of regulation. Thus, future research could seek to measure the cost/benefit trade-off of regulation in reducing information asymmetry. Also, future research could examine cross-sectional differences between different industries and regulated utilities. Practical implications – Regulation reduces information asymmetry. Thus, regulation or mandated disclosure may be appropriate in industries/markets where information asymmetry is severe. Originality/value – This paper is the first to compare the operating performance of regulated and unregulated SEO firms.Equity issuance, Information asymmetry, Performance, Regulation, Utilities

Constraints facing working women in Lebanon: an insider view

Purpose: the ascendancy of women to top management positions is a perennial problem plaguing organizations worldwide. The purpose of this paper is to present some insights relating to this pervasive phenomenon from a Middle Eastern context by exploring the constraints reported by Lebanese women managers throughout their careers. Design/methodology/approach: literature review and qualitative research methodology consisting of interviews with 62 Lebanese women managers in different fields of occupation. Findings: the findings suggest that the constraints reported by Lebanese women managers are similar to those reported worldwide. The main differences revolve around the strongly felt salience of cultural values and expectations constraining women to traditional roles and a more accentuated sense of patriarchy. Originality/value: the value added of this research is to present an insider view and fresh perspective into career constraints facing women from a non-traditional context, namely Lebanon. In view of the Western-centric nature of academic publication on the topic, there is a real need and added value in empirical research stemming from an Arab-Middle Eastern contex

Corporate governance and intellectual capital: evidence from an academic institution

Purpose: the purpose of this paper is to examine the relationship between intellectual capital(IC)and corporate governance(CG)in a university setting. In particular, the aim is to argue that the lack of good CG can lead to an inability to attract and retain IC. Design/methodology/approach - The article tests the CG/IC relationship at the American University of Beirut (AUB) by surveying the perceptions of full-time faculty members. The survey addresses, in particular, the factors that attract IC to AUB and their perception of several aspects of CG at the institution. Findings: the results suggest that CG and IC are indeed related and that faculty members view CG as a major factor for IC attraction. Respondents also consider that existing IC enhances the institution's ability to attract more IC. However, the mixed perceptions of the governance structure in place at AUB, as revealed by faculty responses, weaken the support for a strong relation between CG and IC at the university. The results also unveil some areas to be improved in the way resources are run.Research limitations/implications - The response rate for the survey was limited. The findings may be more substantive and conclusive if the sample was larger. As the study was done for one organization only, more research is needed to further explore the relationship between CG and IC.Originality/value: the paper is the first to provide empirical evidence on the influence of CG practices on attracting and retaining IC from a general as well as from an academic institution perspective. <br/

An Empirical Investigation of Short-Selling Activity Prior to Seasoned Equity Offerings.

The authors investigate the nature and magnitude of short-selling activity around seasoned equity offerings, the relation between short-selling activity and issue discounts, and the consequences of the Securities and Exchange Commission adoption of Rule 10b-21 in response to concerns about manipulative short-selling practices. Seasoned offerings are characterized by abnormally high levels of short selling and option open interest. Higher levels of such activity are related to lower expected proceeds from the issuance of new shares. Where it could not be circumvented, Rule 10b-21 appears to have curbed short-selling activity and reduced issue discounts. Copyright 1996 by American Finance Association.