Ownership Concentration, 'Private Benefits of Control' and Debt Financing

Building on the ‘law and economics’ literature, this paper analyses corporate governance implications of debt financing in an environment where a dominant owner is able to extract ex ante ‘private benefits of control’. Ownership concentration may result in lower efficiency, measured as a ratio of a firm’s debt to investment, and this effect depends on the identity of the largest shareholder. Moreover, entrenched dominant shareholder(s) may be colluding with fixed-claim holders in extracting ‘control premium’. One of possible outcomes is a ‘crowding out’ of entrepreneurial firms from the debt market, and this is supported by evidence from the transition economies

Keynes and the cotton industry: a reappraisal

The paper reinterprets Keynes’s analysis of the crisis in the Lancashire cotton industry in the 1920s. It presents empirical evidence showing that syndicates of local shareholders, but not the banks, were an important brake on firms exiting, at a time when exit barriers were otherwise unproblematic in this competitive industry. Moreover, syndicates milked firms of any profits through dividends, thereby limiting reinvestment and re-equipment possibilities. The case shows that where laissez-faire fails in response to a crisis, the associated response may need to assess both ownership structure and its relationship to competitive industry structure

Size and Diversity in VC syndicates and their impact on IPO performance

This paper investigates the impact of venture capital (VC) syndicate size and composition on the IPO and post IPO performances of investee companies in an attempt to shed some light on the extent to which larger and more diverse syndicates are more likely to suffer from internal agency problems which might hinder the decision making process and lead to less value added for their portfolio companies. The question is of great relevance because, while the vast majority of the empirical literature compares VC backed IPOs with non VC backed ones, most VC funding is provided by syndicates of two or more financiers. We construct alternative measures of size as well as diversity based on several VC characteristics such as age, geographic location, type and affiliation of VC firms and find that larger and more diverse syndicates are associated with higher underpricing and lower valuation at the IPO date. Furthermore we provide evidence that that diversity and size are negatively correlated to the long term performance of the IPO firms and this finding is robust to several alternative measures of long term performance

Towards transnational CSR. Corporate social responsibility approaches and governance solutions for multinational corporations

The global environment in which multinational corporations (MNCs) operate dramatically increases the complexity of the governance challenges and ethical dilemmas confronting MNCs and their leaders, as well as the diversity of stakeholders whose interests must be considered. In this context, MNCs face a perennial dilemma: how to balance the need for global consistency in CSR approaches and ethical standards across the organization with the need to be sensitive to the demands and expectations of a diverse set of stakeholders spread across the globe? Building on the framework of “transnational CSR”, we provide a systematic mapping of CSR approaches in MNCs, high¬light the tensions and possible trade-offs between globally integrated and locally adapted CSR strategies, and discuss the constraints that they impose on MNC activities at both headquarters and subsidiary levels. We also highlight the impli¬cations for corporate governance, stakeholder management and corporate social performance. Based on in-depth case studies of 18 MNCs, we conclude that a transnational CSR approach that attempts to strike an appropriate balance between global consistency and local adaptation seems best able to guide managerial decision making and help executives address the CSR challenges in the global arena

Mitigating the dual liability of newness and foreignness in capital markets: The role of returnee independent directors

Foreign firms undergoing an initial public offering in developed economies face a dual liability of newness and foreignness that can negatively impact the firm's ability to access capital. In this study, we examine the ability of returnee independent directors to overcome such a liability among 232 foreign listings in the U.S. We find that returnee independent directors positively impact the price premium of the foreign IPO. We also find that this relationship is contingent on the level of ownership retained by non-independent directors, the level of ownership retained by venture capitalists, and investor protection in the firm's country of origin

Market Orientation and Export Performance: The Moderation of Channel and Institutional Distance

Purpose: Market orientation (MO) has been shown to provide a valuable resource-based advantage in domestic markets. How internationalizing firms from emerging markets can benefit from this capability is more complex while facing institutional distance. This research develops and tests theory to suggest that although MO capabilities can enhance export performance, the structure where they are deployed, namely the export channel a firm uses and the market in terms of institutional distance from home, can affect the benefits derived from MO. Design/methodology/approach: With a sample of Chinese exporters and data collected via questionnaire survey, this research uses a multiple regression model to test the hypotheses. Findings: It finds that firms with stronger MO capabilities can improve export performance by using hierarchical channels and by exporting to more institutionally distant markets where MO provide greater value. Originality/value: This research claims to make several important contributions to the literature by providing a better understanding of how firms can successfully deploy MO capabilities when exporting

The effects of intra-industry and extra-industry networks on performance: A case of venture capital portfolio firms

This study examines the influence of intra-industry and extra-industry networks on firm performance by using data on 1264 UK venture-capital-backed start-up companies. The venture's network was operationalized by connecting together the various portfolio companies sharing the same investor. Regression results show that the venture's network has a strong impact on firm's success. Yet, whereas extra-industry ties are directly and positively linked to the likelihood of the venture to reach a successful exit, intra-industry ties exert a negative impact on companies' performances. However, interaction effects show that once a firm establishes a sufficient number of extra-industry ties, it is able to profit from the network in its industry of operation. Overall, these findings show that an optimal balance of ties is achieved through a diverse set of connections incorporating both intra-industry and extra-industry ties

Liability of Foreignness in Global Stock Markets: Liquidity Dynamics of Foreign IPOs in the US

Using a unique dataset of foreign and domestic IPOs listings in the US from 1990 to 2012, we study how foreignness affects IPO liquidity. We find that foreign IPOs enjoy higher liquidity than IPOs in their home countries, but do not fully gain the same liquidity benefits as for IPOs of domestic US issuers. In contrast to prior evidence for mature cross-listed firms, we show that liquidity differentials between foreign and domestic IPOs in the US are determined by information asymmetry related to foreignness rather than to home-country institutional environment characteristics. Thus, our results extend prior findings to reveal salient differences in liquidity and liquidity determinants between IPOs offerings by foreign and domestic firms in the US.postprin

Globalization of Capital Markets: Implications for Firm Strategies

© 2016 Elsevier Inc. The integration of international capital markets makes it easier for firms to access capital outside of their home countries. To date international business (IB) scholars have developed a rich tradition of research on how globalization of product markets may affect a firm's organizational form and business strategy. Unfortunately, there is a paucity of studies that explore the challenges firms face in capital markets beyond their domestic boundaries, be it equity, debt, or venture capital markets. The objective of this Special Issue is to address these theoretical and empirical gaps in prior IB studies. This paper outlines the main differences between product and capital markets, and explores theoretical and empirical challenges these differences present for international management scholars. We also provide a brief summary of papers in the Special Issue and outline promising avenues for future research