A new U.S. patent legislation, called the America Invents Act, became effective in 2011. The reform strived towards facilitating the patent system. But soon it was also blamed for facilitating immoral third party profits. Urges for revision of the America Invents Act became even louder since hedge fund manager Kyle Bass had publicly outlined his questionable investment strategy: he challenges the validity of important drug patents, while shorting the owner's shares in order to eventually cash out on negative stock movements.The following questions aroused public interest the most: Does the mere filing of a patent opposition already result in negative stock returns? And is it really possible to earn money following such a strategy? The paper on hand is the first to empirically answer these questions. Event study methodology using three years of data from the United States Patent Trial and Appeal Board was employed.Findings were that the mere filing of a patent opposition in fact produces statistically significant negative returns. The result is robust with the abnormal return being -30 base points. In addition, multiple linear regression results confirm the conjecture that the higher the importance of the disputed patent, the higher the negative abnormal return on the filing date will be. However, transaction cost simulations prove that this strategy is still highly speculative and cannot be considered a real threat to patent holders or the U.S. intellectual property system. The only ones who should start worrying are the few patent owners who really rely on absolutely unjustified and tenuous patent protection.
This thesis aimed to examine to what extent Investor Relation activities contribute to acquisition performance of listed companies as they gain more acquisition experience. For this purpose, a sample of 40 Swiss frequent acquirers was analyzed. In a first step, the sample was tested with regard to the acquisition experience theory of Haleblian and Finkelstein (1999), claiming a U-shaped relationship between acquisition performance and acquisition experience. Drawing on the findings of Ahern & Sosyura (2014), this thesis then focused on evaluating how the Investor Relations activities media coverage and content strategy evolve with acquisition experience – expecting the company sample to intensify its media coverage and fine-tune its content strategy with increased acquisition experience. This study found no relationship between acquisition experience and acquisition performance and therefore could not confirm the acquisition experience theory of Haleblian and Finkelstein (1999) in the sample of the 40 Swiss frequent acquirers. However, this study found evidence that the 40 Swiss frequent acquirers had the tendency to intensify their media coverage – i.e. publishing more press releases ±15 days of an acquisition announcement as well as to fine-tune their content strategy – i.e. to increasingly use a more positive tone in the acquisition announcements, as more acquisitions were made. As a result, this master thesis argues that a case can be made that media coverage and content strategy – as two key measures of Investor Relations activities – form part of acquisition experience. However, this thesis could not show that those measures had a significant positive impact on acquisition performance.
In this paper we examine how investor relation practices of acquisitive firms evolve as firms gain increasing acquisition experience. While prior research has found that investor relations units of acquiring firms try to proactively manage investor reactions to acquisition announcements, there is no prior research that would have examined whether serial acquirers over time become more sophisticated in their ability to manage stock price reactions to acquisition announcements. In order to fill this gap, we examined 9’950 press releases of 40 publicly listed serial acquirers that conducted more than 600 acquisitions during a time period from 2003 to 2011. Based on our analysis, we find that firms’ investor relations units indeed adapt their stock-market communication as acquisition experience accumulates. This happens in two ways: First, they increase the number of press releases published 15 days prior to the acquisition announcement. Second, they increase the ratio of positive to negative words in acquisition announcement texts. Yet, despite these clearly detectable learning effects, there is no increase in cumulative abnormal returns on acquisition announcements. Our findings provide an important extension to behavioral learning theory by exemplifying a situation where firms develop increasingly sophisticated practices despite prompt and unambiguous performance feedback against the effectiveness of these practices.
Das Auftreten neuer Information beeinflusst den Aktienkurs am Kapitalmarkt. Derjenige, der die Informationen als Erster hat, kann diese zu seinem Vorteil nutzen. Privatanleger erhalten die meisten ihrer Aktieninformationen aus zweiter Hand durch die Finanzmedien.In dieser Arbeit soll untersucht werden wie Finanzmedien durch ihr Wirken Aktienkurse beeinflussen können. Weiterhin soll geklärt werden, ob durch deren Aktienempfehlungen eine Überrendite erzielt werden kann. Zunächst wird dafür auf die Theorie effizienter Märkte eingegangen, denn durch diese lässt sich auf die Informationseffizienz des Kapitalmarktes schließen. Anschließend wird in dieser Arbeit das Konzept der Ereignisstudie erläutert mit welcher sich die Werthaltigkeit dieser Informationen überprüfen lässt. Im Anschluss daran werden die Ergebnisse der Literatur zu diesem Thema analysiert und ausgewertet.
L’objectif de ce mémoire est une étude d’événement qui analyse l’impact des annonces faites par la Troïka (FMI et UE) sur les secteurs bancaire, financier et réel irlandais lorsque le pays était en récession. Les manifestations, les annonces du gouvernement irlandais et celles des agences de notation sont également analysées. Nous nous basons sur l’article de Gogstad et al. (2014) qui s’est intéressé au cas de la Grèce mais nous nous en différencions dans le choix du modèle et des tests statistiques. Nous utilisons deux mo-dèles statistiques, à savoir le modèle de rendement moyen et le modèle de marché ainsi que trois tests statistiques. Ces derniers ont été choisis sur base des caractéristiques de nos données financières : hétéroscédasticité, autocorrélation, effet ARCH, queues de distribu-tion plus épaisses que la normale et corrélation des rendements entre les différents sec-teurs. Le premier test est le test de Patell (1978) qui permet une analyse chronologique, les deux autres tests proposent une analyse par type d’annonces et sont le test de Boehmer et al. (1991) et le test de signe. Les résultats montrent que le secteur réel est le plus réactif aux différentes annonces. Les manifestations influencent le secteur réel mais il n’est pas possible de tirer une conclusion sur le signe attendu des rendements excédentaires. Les agences de notation ont tendance à influencer négativement les secteurs bancaire et financier. L’impact est également négatif sur le secteur technologique. En ce qui concerne les autres annonces, les résultats sont difficiles à interpréter car le modèle de marché et de rendement moyen donne des résultats contradictoires.
El documento realiza un analisis, desde la perspectiva historica, de la situacion actual del mercado mundial de petroleo, enfocandose en el estado de las reservas mundiales y vericando su evolucion posible. Se utilizan las propuestas cuantitativas de Hubbert (1956) y el modelo de choque hibrido propuesto por Foucher (2008), para generar estimaciones sobre la oferta de crudo. Ademas, se analiza el impacto ananciero de eventos historicos que se podran extrapolar a posibles escenarios futuros tras el agotamiento del petroleo. Este impacto se mide en tres direcciones: (i) impacto de choques estructurales del stock de inventario en la oferta, la demanda y los precios reales del mercado, a partir de un VAR estructural propuesto por Killian (2008); (ii) el impacto enterminos de volatilidad en series de precios y cotizaciones de empresas, siguiendo a Blanco (2000) quien utiliza modelos GARCH asimetricos (GJR-GARCH); y (iii) el estudio de eventos, para analizar el impacto de las publicaciones de descubrimientos, en la cotizaciones bursatiles deempresas petroleras en dos mercados distintos.
In studying today’s fastest growing firms, we realized that growth strategies have changed. Firms nowadays foray into markets that are different from their home markets more often than they did only one decade ago. Production and customer acquisition technologies have progressed rampantly over recent years and now allow firms to profitably tap into ever smaller and more dispersed demand pockets across various markets. Growth champions, such as Amazon, have jumped at this opportunity early on and grew into large multi-business firms within very short time. Since these technology-enabled growth strategies undermine the market segments of the industrial age, we label them as “market fracking”. As the digital age dawns and technological progress further flourishes, market fracking strategies become the new norm and dirve the renaissance of the diversified firm. Article exclusively available at Harvard Business Manager (www.harvardbusinessmanager.de - German).
Empirical research on the performance effects of firm innovation speed has remained inconclusive. We argue that prior research has perceived higher innovation speeds overly beneficial as it missed out to consider industry clockspeed as the critical threshold speed firms need to surpass to successfully compete with their rivals. Our longitudinal analysis of 243 S&P 500 firms and their respective industries between 2003 and 2012 supports this argument and establishes industry clockspeed as the critical threshold for the performance effects of firm innovation speed. Our finding of an inverted U-shaped performance relationship suggests that innovation speeds below or above industry clockspeed are characterized by inferior performance levels. Also counter to conventional beliefs, firms’ ability to dynamically de- or accelerate their innovation speed is not associated with linear positive performance effects, but characterized by declining marginal returns.
This paper investigates performance implications of appointing a new Chief Strategy Officer (CSO) with regard to stock market reactions using an event study methodology. Thereby, thispaper uses a dataset of 153 CSO appointment announcements between 2003 and 2013. In line with existing top management team (TMT) research and qualitative studies on the CSO, thispaper incorporates structural factors of organizations as well as certain characteristics of the CSO appointees. This study’s presents the following findings: i) There is no support for theproposition that announcements of CSO appointments provoke on average abnormal stock market reactions; ii) CSO appointments in firms characterized through structural complexityis not rewarded by stockholders; iii) There is partial, but limited support on the notion that specific CSO characteristics seem to be responsible for different stock market reactions andeventually drive the relationship between the CSO appointments. These variables apply to female appointees as well as to appointees entering formerly existing CSO positions. OtherCSO characteristics such as the source of the CSO (internal vs. external), the appointees’ functional background and educational background appear to be of no relevance tostockholders. Overall these findings lead to the conclusion that the stock market response on the event a CSO appointment is rather insignificant.
This master’s thesis explores the acquisition activity of Apple, Facebook, Google and Amazon, which are four technology companies active in platform markets, competing and cooperating with each other in various ways. Building on literature on mergers and acquisition, the network economy and platforms markets, a set of distinct M&A motives is proposed that is presumed to drive the acquisition behavior of the focal firms. Based on a qualitative assessment of a sample containing 230 deals, each target is coded according to it’s relatedness to the acquirer, the type of acquired capabilities and post-deal autonomy. Based on configurations of rated characteristics, the sample is clustered according to the proposed deal motives revealing acquirer specific differences in acquisition behavior. Furthermore, the capital market reactions upon deal announcement were investigated using event study methodology. The results suggest that on average the acquisition announcement were accompanied by slightly positive market reactions. Performance differences between the acquirers have been identified, revealing that Amazon’s acquisition announcements have on average triggered positive abnormal returns. Subsequently, deals were categorized according to their perceived performance, based on the cumulated abnormal returns during the event window. Using fsQCA, deal-specific factor configurations driving perceived deal performance are derived. Results suggest the presence of equifinality and conjunctural asymmetry. Based on the obtained configurations, several conclusions are drawn explaining the relationship between the tested conditions and perceived deal performance inherent in the investigated sample.
The practice of simultaneously competing and cooperating with competitors (co-opetition) has been very prevalent for high technology firms in recent years. Nevertheless, academia has yet to come to a consensus on how to explain the formation of this paradoxical behavior. This research applies the event study approach to examine announcement effects of co-opetition on firms’ valuation with the intention of providing insight to the paradox. Based on the sample 96 firm announcements involving 35 firms listed on the US stock market during 2002-2012, the results suggest that co-opetition generally does not produce any significant effect on the value of the firm. However, smaller subsample estimations suggest that joint research & development and patent licensing announcements increase firms’ value by 0.90% and 1.67% respectively, while the announcements of collaboration decrease the value by 1.70% to 1.82%.
This paper introduces the concept of dynamic ambidexterity, which arises from a firm’s ability to balance exploration and exploitation and to adapt this balance over time. Building on the strategy-environment coalignment literature, we argue that dynamic ambidexterity leads to higher firm performance than the more static forms of ambidexterity described in previous studies. While we introduce the concept of dynamic ambidexterity, we highlight a novel paradox for ambidextrous firms. We show that static ambidexterity has a self-reinforcing effect: while firms become more persistent in balancing exploitation and exploration, their ability to adapt this balance declines. Ultimately, static ambidexterity crowds out dynamic ambidexterity, which harms firm performance. Based on a longitudinal sample of insurance companies, we find empirical support for our arguments.
Expectations regarding the economic and political changes affect directly dollar selling prices. In the finance literature, many studies reveal the relationship between unexpected events and stock prices. However a few studies investigate such a relationship between unexpected events and dollar selling prices in Turkey. This study aims to explain the effect of unexpected events on dollar selling prices in Turkey, for the period 1990-2012 which starts with the “The invasion of Kuwait 2/8/1990”and ends with “Upgrading of Turkey’s credit rate by Fitch-6/11/2012”. In order to explain the relationship, event study methodology proposed by MacKinley (1997) is used. The data has been analyzed by two different normal return calculation methods: Constant mean return model (CMR), Mean adjusted return model (MAR). According to both calculation methods, in the most of the post-period days the results are statistically significant. The importance of this study is to show whether significant abnormal returns exist around unexpected events which may lead for the position of the investors.
The objective of this study is to research the impact of cash dividend announcement on the stock price of the U.S. To achieve this goal, we collect the daily prices of 31 randomly chosen stocks in the U.S., and employ the Market Model to test whether the null hypotheses, AAR=0 and ACAR=0, hold. The results suggest that the average abnormal return and the average cumulative abnormal return, which are surrounding the event date, are not significantly equal to zero. This means that we cannot reject the possibility that one can gain abnormal return from the cash dividend announcement. This implies that the market is likely to be not efficient with the semi-strong from.
The purpose of this paper is to examine whether or not the Merger and Acquisition (M&A) announcements affect the stock prices of Canadian real estate sector and if investors can obtain abnormal return based on these M&A announcements. A sample of 39 M&A announcements released by 25 publicly traded real estate firms during 2011 and 2012 are selected in the sample. By applying the market model, Average Abnormal Return Model (AAR) and Average Cumulative Abnormal Return Model (ACAR), the outputs show that the Canadian real estate sector is efficient in semi-strong form and investors cannot obtain abnormal returns from the M&A announcements released by these firms. Also, the M&A activities have no impact on Canadian real estate firms based on the selected sample.
Over the past decade the market has witnessed the emergence of a new "branch" of private equity (PE), namely publicly listed private equity (LPE). PE as an industry is notorious for the high level of secrecy surrounding the changes made to portfolio companies, including very little transparency in financial reporting. With the listing of vehicles comes the availability of market prices, more comprehensive rules for disclosure, as well as increased scrutiny from investors, analysts and media. From an academic point of view, the listing of vehicles presents an excellent opportunity to investigate this enigmatic industry, and to explore how investors value this new asset class. It is well known that listed private equity vehicles (LPEVs) commonly trade at a discount to their net asset value. Further, one recent study has found that this gap between market price and true value can be reduced at the time a vehicle announces that it will exit on of its portfolio companies. Yet, the close relationship between these two price aspects has never been explored, leaving an evident gap in literature. A main aim of this study is to thoroughly investigate this relationship, and we do this by considering how factors pertaining to the reduction of information asymmetry between managers of LPEVs and investors affect the variation in returns at exit announcements. Based on a sound theoretical foundation and an explorative review of the previous literature on the pricing of LPE, we develop seven hypotheses, and test them using a sample comprising 24 LPEVS and 188 exit announcements from January 1, 2000 to May 23, 2013. The first hypothesis concerns the existence of abnormal returns at exit announcements, and is tested through an event study. The results of the event study show a significant (at a 10% level) CAAR [0, +1] of 0.428% to the announcement of an exit, supporting our initial hypothesis. The event study is accompanied by a multiple regression analysis, where the CAR [0, +1] of each exit announcement is regressed on 11 explanatory variables reflecting the reputational effects of information sharing. These factors are divided into two distinct categories, where one represents a vehicle’s past performance and the other represents its responsible behaviour. We find support for three out of seven hypotheses. Overall, past performance does not seem to have a sizable effect in our sample, whereas all variables reflecting responsible behaviour are either statistically or economically significant (or both). The results are quite convincing and enable us to present some specific recommendations for the main participants of the LPE industry with the aim of reducing their price discount; (i) keep the inside ownership level below 3%, (ii) pay dividends on a regular basis, (iii) improve openness surrounding portfolio companies, and (iv) join an industry association with the purpose of improving transparency and investor relations at an general industry level.
This study adds to the action-response stream in competitive dynamics research and complements recent efforts to develop an action-based theory of interfirm rivalry that goes beyond the firm-dyad and thus remains valid in markets that are characterized by a larger number of competitors. Utilizing theories of imitation/herding, the study examines how market shocks affect a firm’s general tendency to respond to rival actions and a firm’s particular inclination to imitate rival actions. Empirical results based on an event history analysis of 2,467 competitive actions in the propoerty and casualty insurance industry suggest that punctuated market shocks do not significantly dampen a firm’s general inclination to respond to rival actions. However, empirical findings indicate that market shocks disrupt patterns of response imitation. Market shocks thus seem to lead to a temporary breakdown of herding behavior in interfirm rivalry. Our findings demonstrate the importance of environmental shocks in explaining changes in patterns of competitive response and imitation.
This teaching case compares how Apple, Microsoft and Google have tried to achieve dominant market positions within a converging Internet industry over the last decade. The case starts in 2000, when the three companies found themselves as survivors of the dot-com bubble. Knowing that there would soon be a renaissance of Internet business, the three companies devised strategies that set out to shape the development of the Internet in the following years. Starting from very different market positions in the year 2000, the unequal players forged a new digital economy that combines an expanding scope of services, such as communications, information, entertainment and media. Within this market, Apple, Microsoft and Google became fierce competitors in becoming dominant service integrators. The case was compiled to (a) illustrate and discuss the most recent phases of Internet evolution as competitive arenas, (b) analyze the key economics of converging Internet markets, and (c) illustrate successful and less successful competitive strategies of the major players. It targets MBA students and is intended to be part of the strategic management curriculum. A detailed teaching note is available.
The paper aims at extending extant research on sources of divestiture gains by suggesting a novel program-based perspective on divestitures and analyzing the performance of program divestitures in comparison to single “stand-alone” divestitures. Based on event study methodology, the authors analyze the abnormal returns of 160 divestiture announcements within the global insurance industry between 1998 and 2007. In contrast to prior research which relied on ex post statistical clustering to identify transaction programs, ad hoc corporate press releases issued with the divestiture announcements are used to categorize program divestitures. Empirical results suggest that program divestitures generate higher abnormal returns than stand-alone divestitures. Further analyses into the sources for these higher gains, however, do not provide support for experience effects as significant explanatory factors. Instead, results suggest that the scheduling of divestitures significantly impacts announcement returns.