Large US Firms Research Articles

Do Large European, US and Japanese Firms Use Their Web Sites To Communicate Their Mission?

While many firms have developed web sites, very little is known about how these sites are being used to communicate business strategy-related information to various constituencies. The purpose of this study was to examine whether large European, Japanese, and United States firms use their web sites to communicate their mission statements to stakeholders. The study found that mission-type statements can eventually be found on 66.7 per cent of the web sites of European firms, 50 per cent of Japanese firms, and 66.3 per cent of US firms. However, fewer than 10 per cent of companies, regardless of region, include mission statements on customer, employee, investor, or supplier pages.

Multinationality, global market diversification and profitability among the largest US firms

This paper studies both geographic scale and scope of foreign operations for the largest US firms especially their strategic combinations by relating to the return performance. The test results indicate that the combination of high geographic scale and medium geographic scope of foreign operations outperformed other strategic combinations. This particularly suggests that the heavy or light geographic scope of foreign operations may possibly cause a downturn in profitability. The implication is that firms preparing themselves for overseas activities should consider the use of this strategic combination.

Incentive structure of CEO stock option pay and stock ownership: the moderating effects of firm risk

Outlines previous research on the role of executive compensation contracts in reducing conflicts of interest between ownership and control; and develops hypotheses on the effects of chief executive officer stock options and share ownership on subsequent firm performance. Suggests that since options do not create losses when share prices decline, they encourage more risk taking than share ownership. Explains the methodology used to test these ideas on 1994‐1996 data for a sample of large US firms and presents the results, which suggest that both stock options and share ownership are positively linked to later firm performance but that the link is stronger for ownership in high risk situations, but lower performance where risk is high. Considers the implications for corporate governance and consistency with other research; and calls for further research.

Employee stock options: exercise decisions by top executives

Reviews previous research on the timing of employee stock option exercise decisions and share price performance before and after insider trading. Analyses the 1992‐1993 exercise behaviour of top executives at 65 large US firms using the Black‐Scholes (1973) value (less anticipated dividends) as a benchmark to compare with the intrinsic value (market price minus exercise price) at the date of exercise. Finds options are exercised when the two values are roughly equal, i.e. that executives’ decisions are not risk‐averse or biased by private information. Also shows a tendency for the subsequent change in share prices to be lower when the intrinsic value is less than the Black‐Scholes value at the time of exercise. Considers consistency with other research and the implications of the findings.

Is Foreign Currency Denominated Debt a Hedging Instrument?

We examine the role of foreign currency denominated debt in firms' risk management activities. In a sample of large US firms, we find a strong relation between aggregate foreign exchange exposure and foreign currency denominated debt. This relationship between exposure and foreign currency denominated debt also holds at the individual currency level. Firms' choice of denominating debt in Australian Dollar, Canadian Dollar, French Franc, German Mark, Italian Lira and British Pound is related to their exposure in these currencies. However, firms' choice of denominating debt in Swiss Franc and Japanese Yen is influenced not by exposure in these currencies, but by the high liquidity offered by the debt markets in these currencies. The evidence also suggests that creditor rights and information asymmetries influence choice of currency of debt. However, we find no evidence in favor of tax arbitrage induced currency preferences in the denomination of debt.

Innovations and geographic focus: A comparison of US and Japanese firms

We investigate the relationship among R&D expenditures (corporate and industry), firm size, and sales performance, considering large US and Japanese firms in the 1980s. The elasticity of international sales with respect to corporate R&D expenditures is higher for the US firms than for the Japanese firms in the sample. In addition, the US firms in high-technology industries seem to be less internationally oriented than corresponding firms in Japan. Overall, the US firms do not appear to benefit consistently from the innovations of competitors within their own industry, while the Japanese firms in the sample appear to obtain benefits from the innovations of other firms, particularly with respect to export sales.

The CEO pay‐performance relationship: pooled vs. industry models

Summarizes previous research on the links between chief executive officer (CEO) compensation, firm performance and industry; and compares pay‐performance relationships calculated by pooling data with those based on industry segmentation. Develops a model incorporating six factors which may affect CEO cash compensation (tenure, net company income, income variance, net sales, returns to shareholders and beta) and uses 1986‐1992 data from a sample of large US firms covering eight industries to test it. Shows, using Andrew’s Sine Technique regression, that there is a wide variation between individual industries which is obscured when data is pooled. Discusses the methodology used, consistency with other research, the limitations of the study and the underlying reasons for the findings.

The change in quality practices in logistics: 1995 versus 1991

The research reported on in this article examines the status of quality management practices in logistics today in large US firms. The research also provides a comparison with quality practices in logistics in 1991. Data were collected in 1995 through use of a survey instrument. This instrument was similar to a questionnaire employed in 1991, thereby allowing for a meaningful comparison to be made. Based on the results, it is evident that a number of changes have occurred over the five years. For example, the primary obstacles encountered today are a lack of human and financial resources versus the lack of pressure to initiate such programmes in 1991. At the same time, a number of similarities across the two time periods is also evident. Both groups of managers reported being relatively satisfied with the results achieved to date, for example. In total, the results indicate that many firms are continuing to improve as their customers become more demanding.

Determinants of Executive Tenure in Large US Firms

This study examined the relationship between executive tenure and selected company characteristics for 196 US corporations. Tenure was found to be negatively related to both unrelated and related diversification strategies, and positively related to firm performance and both types of ownership structure: stock concentration and management stockholdings.

Asset Management Performance and Reputation Building for Large US Firms

SUMMARYCorporate audiences construct the reputation of firms by interpreting informational signals about the firms from various monitors. Of importance to these parties are signals about asset management. The results of our empirical study of 114 large US firms supported the general hypothesis that corporate audiences construct reputations on the basis of information about firms' asset management performance, specifically using market and accounting signals indicating size of the assets, market assessment of the value of the assets in place, asset turnover and profit margin.

Shark Repellents and Managerial Myopia: An Empirical Test

Since the proxy fights of the 1950s, commentators have debated the welfare implications of corporate takeovers. Although observers such as Manne (1965), Jensen and Meckling (1976), Fama (1980), and Jensen and Ruback (1983) argue that the market for corporate control promotes efficiency and enhances wealth, some critics, such as managers of firms subject to hostile takeover attempts, contend that takeovers destroy firm value. The critics frequently assert that takeover pressure forces managers to sacrifice profitable, but slowyielding, long-term investments in favor of less productive short-term investments that offer immediate returns. While the evidence supporting takeover-induced shortsightedness is largely anecdotal, a recent paper by Stein (1988) develops a formal

Purposive Diversification of R & D in Manufacturing

The R & D diversification in manufacturing of large US firms is found to be purposive, exploiting complementarities of various research activities and forming groups of related industry categories. Purposively diversified firms are seen to behave differently than randomly diversified or undiversified firms. Further, the behavioral differences between purposively diversified firms and others result because the former allocate relatively more R & D funds to industry categories where appropriability conditions are good and relatively fewer funds to those categories where appropriation of the returns from R&D is difficult. Finally, R&D expenditure and productivity are more closely linked at the group level than at the industry-category level, suggesting knowledge spills across industry categories are important.

International marketing strategy decisions and the growth rate of major American firms

Explores, within the framework of international research, product, distribution and price. Investigates the behaviour of large US firms with a view to identifying and difference in growth rates to their counterparts. Examines the relationship between fast growth of the corporate entity as a whole and its international marketing orientation.