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The first essay, "Why do firms issue convertible securities? New evidence on sequential financing" investigates the sequential-financing hypothesis on the use of convertible securities (Schultz, 1993a; Mayers, 1998). Examination of conversion-forcing calls of warrants reveals significant increases in investment and financing activity for the calling firms around the time of the call. While evidence of investment and financing increases subsequent to the call is consistent with the hypothesis, there is also evidence of increases prior to the call. Furthermore, the call signals a subsequent decline in firm performance. Calling firms experience significantly higher sales growth than industry medians prior to year of the call but become indistinguishable from them subsequent to the call. Similar findings have been reported for calls of convertible debt. Multivariate analysis does not provide evidence that investment growth in the year of the call is related to existing investment opportunities, controlling for call proceeds. Overall, our findings raise questions on the validity of the sequential-financing hypothesis. The second essay, "Corporate investment, market value, and book-to-market: An empirical investigation," examines the association between market value, book-to-market (B/M), and corporate investment. Firms assigned to big and low-B/M (B/L) portfolios significantly increase investment prior to the portfolio formation year. Their market values rise and their leverage levels diminish. Small and high-B/M (S/H) firms reduce investment and increase their market leverage. When we form portfolios based on investment growth (i.e., exercise of investment opportunities), average returns are significantly lower for high investment stocks. Within investment growth groups, there is weak evidence of a value premium. Furthermore, corporate investment growth is highly significant in cross-sectional and time-series regressions and contains information similar to that of B/M. This evidence is consistent with the model of Berk, Green, and Naik (1999), who relate exercise of growth options to firm-specific fundamentals and observed returns.
A practical approach to business transformation Fit for Growth* is a unique approach to business transformation that explicitly connects growth strategy with cost management and organization restructuring. Drawing on 70-plus years of strategy consulting experience and in-depth research, the experts at PwC’s Strategy& lay out a winning framework that helps CEOs and senior executives transform their organizations for sustainable, profitable growth. This approach gives structure to strategy while promoting lasting change. Examples from Strategy&’s hundreds of clients illustrate successful transformation on the ground, and illuminate how senior and middle managers are able to take ownership and even thrive during difficult periods of transition. Throughout the Fit for Growth process, the focus is on maintaining consistent high-value performance while enabling fundamental change. Strategy& has helped major clients around the globe achieve significant and sustained results with its research-backed approach to restructuring and cost reduction. This book provides practical guidance for leveraging that expertise to make the choices that allow companies to: Achieve growth while reducing costs Manage transformation and transition productively Create lasting competitive advantage Deliver reliable, high-value performance Sustainable success is founded on efficiency and high performance. Companies are always looking to do more with less, but their efforts often work against them in the long run. Total business transformation requires total buy-in, and it entails a series of decisions that must not be made lightly. The Fit for Growth approach provides a clear strategy and practical framework for growth-oriented change, with expert guidance on getting it right. *Fit for Growth is a registered service mark of PwC Strategy& Inc. in the United States
We document that firms decrease their leverage when they convert growth options into tangible assets. We argue that the act of growth option exercise decreases information asymmetry about the firm, which in turn reduces the relative cost of issuing information-sensitive securities such as equity. We show that leverage is negatively correlated with unexpected capital expenditure, our proxy for growth option conversion. The negative relationship becomes stronger when the information environment of a firm deteriorates following a reduction in analyst coverage after a brokerage house merger. Overall, our findings are contrary to standard trade-off and pecking order theories, but are consistent with recent work on signaling and growth options.
This compilation integrates various new contributions to the growing real options literature. Recent developments in the valuation of capital investment opportunities seen as real options (e.g. to defer, expand, abandon, or switch) have provided the tools and unlocked the possibilities to revolutionize the field of capital budgeting. The resulting insights, strategies, and techniques enable quantifying the thus far elusive elements of managerial operating flexibility and strategic interactions. These are vital to successfully capitalize on favorable future investment opportunities or limit losses from adverse market developments. This book presents various models and operating strategies, and a variety of applications ranging from acquisitions and divestitures, to natural resource development and pollution compliance. It is intended for both the academic and the professional market. The book's contributions are divided into five parts, covering sections on real options and alternative valuation paradigms for capital investment analysis; on the analysis of general exchange or switching options, and interdependencies among multiple such options; on strategic acquisitions, infrastructure, and foreign investment options; on mean reversion/ alternative formulations in natural resource investments, shipping, and start-up ventures; and on other applications in pollution compliance, land development, flexible manufacturing, and financial default options. Both academic and practitioner interest in these developments is unusually high. The book can serve as supplementary material for the academic market, e.g., in advanced finance courses in option pricing or capital budgeting, in doctoral seminars, and as a library resource. It may also be of interest to the professional market (e.g. corporate planners and finance executives in the oil, pharmaceutical, auto and a variety of other industries), academics from related areas (e.g. decision analysts or economists), as well as to international readers (academics, doctoral students, and professionals).
How should you grow your organization? Its one of the most challenging questions an executive team faces and the wrong answer can break your firm. So where do you start? By asking the right questions, argue INSEADs Laurence Capron and coauthor Will Mitchell, of Duke Universitys Fuqua School of Business and the Rotman School of Management at the University of Toronto. Drawing on more than two decades of research and teaching, Capron and Mitchell have found that a firms aptitude for determining the best resource pathways for its growth has a defining impact on its success. Theyve come up with a helpful framework, reflecting practices of a variety of successful global organizations, to help you determine which path is best for yours.
Gold Medal Winner for Best Leadership Book in the 2021 Axiom Business Book Awards Named one of the "Top Ten Technology Books Of 2020" — Forbes Named one of the "10 Best New Business Books of 2020" by Inc. magazine "Johnson and Suskewicz have raised a battle cry for the kind of leadership we need in these uncertain times." -- Sandi Peterson, Member, Board of Directors, Microsoft We all know a visionary leader when we see one. They're bold and prophetic and at the same time pragmatic. They don't just promote change--they drive it, while inspiring and mobilizing others to do the same. Visionaries like Steve Jobs and Jeff Bezos possess a host of innate qualities that make them extraordinary, but what truly sets them apart is their ability to turn vision into action. In Lead from the Future, Innosight's Mark W. Johnson and Josh Suskewicz introduce a new way of thinking and managing, called "future-back," that enables any manager to become a practical visionary. Addressing the many barriers to change that exist in established organizations, they present a systematic approach to overcoming them that includes: The principles and mind-set that allow leadership teams to look beyond typical short-term planning horizons A method for turning emerging challenges into the growth opportunities that can define an organization's future A step-by-step approach for translating a vision into a strategic plan that teams can align around and commit to Ways to ensure that visionary thinking becomes a repeatable organizational capability As practical as it is inspiring, Lead from the Future is the guide you and your team need to develop a vision and translate it into transformative growth.
Explores real option theory applied in practice Real options are quickly becoming the valuation and decision-making method of choice for many companies, including oil and gas companies, utilities and natural resource companies, pharmaceutical and biotech companies, Internet companies, and many others. Real Options in Practice allows readers to view the world of real options from the vantage point of a corporate practitioner applying real option valuation techniques on a regular basis. Expert Marion Brach describes the challenges of implementing a real option framework in practice within a corporate setting. Touching on the real options most firms care about, Real Options in Practice identifies the classic types of real options-deferral, abandonment, switching, expansion, and compound-and explores the main concepts critical to understanding real option theory. Through Brach's own three-step real option valuation method readers will learn how the theory of real options is now being applied to drive better, more profitable corporate decision-making. Marion A. Brach, MD, MBA (Hagen, Germany), has undertaken financial valuation of business opportunities and acquisitions using scenario and real option valuation in the biotech industry. A recognized expert on real option theory and practice, Brach received her MBA from the Manchester Business School and frequently speaks at real option seminars.
Stephen Tallman has put together an excellent tome by high-quality emerging scholars that provides cutting edge knowledge on the field of international strategy. The coverage is thorough, including more traditional topics such as the outcomes of internationalization (e.g., performance, innovation, risk reduction) and market entry modes of cross-border M&As and alliances, while also exploring unique and important topics such as investment in global cities and the development of new organizational forms. It is a must read for graduate students and scholars interested in international strategy. Michael A. Hitt, Texas A&M University, US This book comprises eighteen cutting edge chapters by emerging scholars in international strategy, offering a variety of fresh perspectives on critical issues that the field will face in the near future. These young scholars have unique and innovative thoughts about international strategy, which are well ahead of the mainstream of international business academics. Various topics are addressed, including the rise of outsourcing and the global spread of research and development activities; structural innovations by multinational firms, with particular attention to organizing for the efficient transfer of knowledge resources within networks of alliances; and new ways of considering the effects of location, focusing on the relative importance of regional clusters and countries and the impact of geographical and cultural distance on international strategies. Stephen Tallman has geared the book to an academic audience, specifically faculty and graduate students in international business, international management, and global strategy. Sophisticated international business practitioners will also find it an interesting read.
Examines the ways in which real options theory can contribute to strategic management. This volume offers conceptual pieces that trace out pathways for the theory to move forward and presents research on the implications of real options for strategic investment, organization, and firm performance.