Shareholder Value Research Articles

How one company drives ownership behavior to innovate and create shareholder value: The case of Varian Medical Systems

How one company drives ownership behavior to innovate and create shareholder value: The case of Varian Medical Systems

Drivers of Merger and Acquisition Activities in Vietnam: Insights from Targets’ Perspectives and Deal Characteristics

This study empirically examines the determinants of merger and acquisition (M&A) activities in Vietnam from 2005 to 2020, which has not been examined before, using a fixed-effects model for a sample of 674 completed M&A deals. The results indicate that targets’ corporate governance and deal characteristics have mixed effects on M&A decisions. More specifically, the independent member of the board and CEO duality of the target is negatively associated with most M&A types, except for cross-border mergers. However, the impact of targets’ blockholders is consistently positive regardless of M&A types. When observing the deal characteristics, mixed evidence is also found in the case of M&A payment form, industry-relatedness between the bidder and the target, the bidder’s stake in the target, and foreign ownership in the bidder’s stake. More interesting, our study emphasizes that voluntary agreement is seemingly critical to M&A decisions regardless of different types. Our results suggest several important implications, including balancing independent directors on the board, accounting for CEOs’ and other blockholders’ interests and influence, considering the types of M&A payments, and involving foreign investors in M&A activities. By understanding these implications, firms can better navigate the complexities of M&A transactions, enhancing their decision-making processes and ultimately contributing to improved shareholder value.

Sustainable practices in business operations - Merely a moral obligation of modern companies or a strategic asset for enhancing shareholders value.

Sustainable practices are critical to the operation of businesses. The realization that operating in an ecologically and socially responsible manner is the only way for a company to be commercially successful is spreading among more and more businesses. Using econometric tools, this paper examines the complex interactions between Environmental, Social and Governance (ESG) disclosure scores and firm performance metrices, such as ROA, ROE, and Tobin's Q. The research employs GMM and panel quantile regression to address the heterogeneous impact of ESG disclosure at different levels of performance. The results indicate that ESG and its components in the environmental and governance scores have varying effects, often with a negative impact for less successful firms but mixed outcomes for more successful firms. The innovative integration of panel quantile regression in this study elucidates how asymmetric effects of ESG disclosure influence firm performance-nuances not captured by standard methods. These findings have significant implications for corporate decision-making, regulatory policies, and stakeholder engagement in the context of sustainability practices.

Does Shareholder Activism Create Value? A Meta‐Analysis

ABSTRACTResearch Question/IssueThis study identifies the determinants of shareholder value created by investor activism. It quantifies and corrects the pool of published empirical estimates for bias due to the selective reporting of empirical results. It examines how various institutional, investor, and research design characteristics affect the shareholder value created by activism.Research Findings/InsightsUsing a meta‐analysis of 1973 estimates from 67 studies published between 1983 and 2021, we document that, after adjusting for selective reporting, activism creates a positive shareholder value ranging from 0% to 1.5%, which is smaller than commonly thought. More value is created in settings with better shareholder rights protection and in smaller markets. Activism by individual investors, more confrontational approaches, and campaigns aimed at the sale of the target company enhance firm value more.Theoretical/Academic ImplicationsOur study identifies a specific channel through which the quality of institutional settings mitigates the conflict envisaged by agency theory between firm owners and managers. Our comprehensive synthesis of prior research literature also guides researchers in interpreting and comparing results reported in prior studies and helps them make more informed research design choices in future studies.Practitioner/Policy ImplicationsExploiting the heterogeneity in prior studies, our study informs investors about the value that specific forms of activism create, allowing them to better trade off the costs and benefits of alternative approaches. It also informs regulators about the relevance of institutional characteristics and offers estimates of the relative effectiveness of activism campaigns by various sponsors. These insights help in seeking optimal ways of regulating corporate governance and financial markets.

Capital Structure and Firm Performance: Evidence from Turkish Manufacturing Firms

One of a company's most crucial financial management decisions is its capital structure, which, when adopted correctly and successfully, can almost ensure its objectives are met. Capital structure affects the cost of capital and is important in enhancing a company's operational performance. The capital structure decision is a cornerstone of corporate financial management, influencing both short-term performance and long-term viability. To find the best debt-to-equity ratio for sustainable growth and shareholder value, businesses must carefully consider their industry dynamics, business climate, and financial objectives. Given the importance of this issue, this study's main goal is to look into how capital structure decisions affect the financial performance of Turkish firms in the food, textile, and fabricated metal subsectors between 2011 and 2020. In this study, short-term liability (STL) and long-term liability (LTL) are used as capital structure measures, return on Assets and return on equity are used as firm performance measures, and sales growth and company size are considered control variables. The findings of this study indicate a negative association between debt and the operating performance of these companies in all three sectors. This implies that companies in the aforementioned industries will have to forfeit some of their company's worth if they raise the amount of debt in their capital mix.

The Impact of Profitability and Firm Size on Firm Value: The Mediating Role of Capital Structure

The purpose of this study is to determine the effect of profitability and company size on company value with capital structure as an intervening variable. The research method used is quantitative and uses secondary data, namely companies in the BUMN sector listed on the Indonesia Stock Exchange. The sample used was 8 companies with a time of 2017-2021 through the purposive sampling method. The data analysis method used is Descriptive Analysis, and the data analysis used is Path Analysis. The results of this study indicate that profitability has a significant effect on capital structure. Conversely, company size does not have a significant effect on capital structure. Profitability, company size and capital structure have a significant effect on company value. Capital structure cannot mediate the relationship between profitability and company size on company value. The managerial implications of this study indicate that companies need to increase profitability and manage company size optimally to drive company value. In addition, capital structure as an intervening variable can be utilized as a strategic tool to direct more effective financial management. Managers are advised to maintain a balance between the use of debt and equity to maximize shareholder value.

Determinants of dividend yield: A comparative analysis of long-run and short-run influences in ASEAN leading countries

This paper investigates the elements affecting dividend yield in developing Southeast Asian countries—more specifically, Thailand, Malaysia, and Singapore. Examined here are the roles of financial information including debt to equity ratio, free cashflows, property, plant, and equipment (PPE) and total sales with controlling factors of size, institutional ownership, and firm age using both short-run and long-run analytical frameworks including the Error Correction Model and Engle and Granger’s approach. The results reveal different trends in the three nations. Higher debt and free cashflows lower dividend yield in Thailand; institutional shareholders benefit from maintaining greater dividend payouts. Aging companies in Malaysia are more likely to pay more dividends while rising revenues are linked to smaller short-term payouts. Leveraged and asset-heavy companies are more likely to keep paying dividends in Singapore. These discoveries have important ramifications for investors and business management trying to maximize dividend policies and improve shareholder value in developing economies.

Corporate Short-Termism: A Review and Research Agenda

Corporate short-termism, defined as a managerial preference for the short term that undermines a firm’s long-term interests, has become a topic of global concern for governments, investors, and business leaders. In recent years, heightened capital market pressures to maximize shareholder value have intensified focus on the issue, raising concerns that the pursuit of short-term shareholder value may come at the expense of long-term prospects and corporate sustainability. Our review reveals that despite abundant research on short-termism, we have only a fragmented understanding of the factors driving this phenomenon and its consequences. The difficulty of operationalizing the construct and the various firm actions and outcomes examined has hindered consensus as to the specific antecedents and implications of managers’ preference for the short term. Our paper seeks to provide greater clarity on corporate short-termism and to develop a framework for understanding what motivates management to prioritize the short term over the long term and the firm-level consequences of related decisions. In doing so, we hope to advance our state of knowledge on this important issue and motivate scholars to more fully unpack the drivers and outcomes of corporate short-termism.

Capabilities and Resources for Value Creation and Sustainable Competitive Advantage: A Study of the Chinese Video Game Industry

Amidst rapid technological progress and increasing regulatory demands, the Chinese video game industry has undergone rapid changes that have provided a fruitful context for examining corporate competencies. Drawing on the Resource-Based View (RBV) and Dynamic Capability View (DCV) theories, this study investigates how firm capabilities (FC) and firm resources (FR) contribute to value creation (VC), which subsequently influences firm performance (FP) and sustainable competitive advantage (SCA). A quantitative research approach was employed, utilizing the data collected from a questionnaire survey of 241 video game firms. The data analysis was conducted using SmartPLS4 software, revealing that FC/FR has a significant effect on VC, which, in turn, mediates the relationship between FC/FR and FP. This study identifies three dimensions of VC—customer value (CV), employee value (EV), and shareholder value (SV)—with EV showing stronger mediating effects than CV and SV. It then uses the BSC framework to assess FP’s intermediary role in bridging VC with SCA through the integration of both financial and non-financial performance indicators relevant to the dynamic video game industry. These results have strong theoretical and practical implications, offering valuable guidance for fostering sustainable development. Specifically, they provide actionable insights for managers to enhance value creation and firm performance while also offering policy recommendations to support regulatory compliance and promote sustainable practices in China’s dynamic video game industry.

Firm Value Impact of Global Oil and Gas Mergers and Acquisitions: The Role of Environmental Policy Framework

The oil and gas (O&G) industry is under increasing pressure to decarbonize and adopt sustainable practices. While some firms are transitioning toward renewable energy, many continue to expand their traditional O&G operations. This study examines how financial markets perceive the value creation potential of business-as-usual mergers and acquisitions (M&As) by the world’s largest O&G companies from 2000 to 2021. Using an event study methodology, we focus on the role of home-country environmental policy stringency (EPS) in shaping market reactions. Our findings reveal that higher EPS in the acquirer’s home country is associated with a greater perceived loss in shareholder value upon the announcement of traditional O&G M&A deals, suggesting that EPS signals significant operational and financial risks related to hydrocarbon investments. However, when these deals are cross-border, the adverse impact of the acquirer’s home-market EPS diminishes, indicating that expanding beyond domestic markets may help O&G firms mitigate the financial consequences of stricter environmental regulations. JEL Classification: G11, G14, G34, Q40, Q58

Creating Shareholder Value by Improving Training and Health and Safety

Creating Shareholder Value by Improving Training and Health and Safety

Business Model and Economic Sustainability of SMEs in Post COVID 19 Era in Enugu State, Nigeria

The study focuses on business model and economic sustainability of SMES in Post Covid 19 Era in Enugu State. The study sought to determine the extent to which value creation affects the business growth of small and medium-scale enterprises., and ascertain the extent to which value preposition affects customer satisfaction of small and medium scale,. The study had a population size of 378 in which the study adopted census sampling using the population as a sample size because of the nature of the work. Instrument used for data collection was primarily questionnaire and interview. Out of 378 copies of the questionnaire that were distributed, 354 copies were returned while 24 were not returned. The descriptive survey research design was adopted for the study. The hypotheses were tested using simple linear regression statistical tool was used to test hypotheses. The findings indicate that to an extent, value creation has a significant positive effect on the business growth of small and medium-scale enterprises (r = 0.856; F = 99.104; t = 31.072; p< 0.05). To an extent, value preposition has a significant positive effect on customer satisfaction of small and medium scale enterprise (r = 0.765; F = 495.563; t = 22.261; p< 0.05). The study concluded that Business models create value by enhancing the customers’ willingness to pay or by decreasing suppliers’ and partners’ opportunity costs, for example, through improved transaction efficiency. The study recommended among others that Small and medium scale enterprises are encourage to embark on creating value for employees which results in higher efficiency and creating value for shareholders translates into increase in stock price, future guarantee of investment capital.

BASEL III LIQUIDITY REQUIREMENTS AND BANK PROFITABILITY

This paper examines the impact of Basel III liquidity requirements, specifically the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR), on the profitability of banks in Nigeria, using regression discontinuity design (RDD) to analyze data from 14 banks over the period from 2009 to 2020. The study provides empirical insights into how these regulations influence bank performance, focusing on return on assets (ROA) and return on equity (ROE). The results reveal that the LCR has a significant positive impact on ROA, indicating that holding adequate high-quality liquid assets improves asset efficiency. However, its effect on ROE is insignificant, suggesting that enhanced liquidity does not necessarily translate into higher returns for shareholders. Similarly, the NSFR shows a significant positive impact on ROA but an insignificant effect on ROE, highlighting the benefits of long-term funding stability for asset profitability without significantly boosting shareholder returns. These findings suggest that while Basel III liquidity requirements contribute to enhancing bank stability and operational performance, they may not immediately result in higher equity returns in the Nigerian context. The study recommends that banks optimize their capital allocation and liquidity management strategies to achieve a balance between regulatory compliance and shareholder value. Additionally, regulators, particularly the Central Bank of Nigeria (CBN), should periodically review liquidity requirements to reflect the unique challenges of the Nigerian banking environment. This study contributes to the existing literature by providing empirical evidence on the impact of Basel III liquidity requirements on bank profitability in the Nigerian context. The use of Regression Discontinuity Design offers a robust approach to identifying causal effects, enriching the understanding of how liquidity management practices affect financial performance, particularly in emerging markets where liquidity risks are more pronounced.

EXAMINING BOARD CHARACTERISTICS AND INTEGRATED REPORTING QUALITY: INSIGHT FROM ESG-FOCUSED FIRMS IN INDONESIA

This research aims to look at Indonesian firms and see whether there's a connection between board traits and the quality of their integrated reporting. This study analyzes 52 listed firms from the environmental, social, and governance (ESG) index between 2019 and 2022 using linear regression with panel data to test its assumptions. The data was acquired from annual reports of Indonesian corporations. The acquired empirical data clearly shows that gender diversity appears to significantly improve the integrated reporting quality. Also noteworthy is that board size, independence, and CEO duality are not significantly related. This study has several practical implications in addition to its theoretical implications. Managers, shareholders, and policymakers should take note of these findings, as they are particularly relevant. Therefore, stakeholders should evaluate the precision of disclosure when deciding on the best reporting approach. A more accurate assessment of risk, less stock volatility, more long-term value for shareholders, and an improved company reputation are all outcomes of this. Corporate social responsibility and sustainability literature is lacking, which this article seeks to remedy. It fills a gap in the literature by providing more information about ESG company-specific integrated reporting and corporate governance. This study has important implications for professionals and practitioners who want to raise the bar on the quality of their integrated reports.

Local mutual funds, corporate community investment and shareholder value

PurposeThis paper shows that local mutual funds lead firms to engage in corporate social activities locally – corporate community investment (CCI).Design/methodology/approachUsing an extensive US sample of 3,691 firms for the period of 2005–2018, we find that mutual funds investing in local firms tend to increase CCI. To address endogeneity concerns, we employ an instrumental variable (IV) approach with the S&P 500 Index and Russell 1000/2000 Indexes, which suggests a causal effect of local mutual funds on CCI. Our robustness tests include alternative measures of CCI and local ownership as well as different samples using sole-HQ firms, time lags and a matching sample analysis. In addition, we employ alternative approaches for causality tests.FindingsWe find that mutual funds investing in local firms tend to increase CCI. In addition, our results indicate that CCI tends to increase firm performance measured with Tobin’s Q and operating cash flow, especially in the consumer-oriented industries where customer relations are critical. The findings imply that CCI is considered as building reputational and relationship capital in communities (i.e. strategic intangibles related to stakeholders). Local mutual funds can help firms develop such strategic intangibles that promote shareholder value.Originality/valueOur study is the first to investigate the role of local institutional shareholders as a driving force of a firm’s community investments.

A Critical Analysis of Associated British Foods PLC Shareholder Wealth Creation in the Five-Year Period From 2017 to 2021

This study examines Associated British Foods PLC's (ABF) performance in maximizing shareholder wealth over a five-year period from 2017 to 2021. Utilizing a mixed-method approach combining quantitative financial analysis with qualitative assessment of strategic factors, the research investigates ABF's share price performance, dividend policies, and key financial ratios. The study also compares ABF's performance with its industry peer, J Sainsbury PLC, to provide context within the competitive landscape. Findings reveal that despite initial underperformance against the FTSE 350 index, ABF demonstrated significant recovery, particularly in 2021/22, with improved share price performance and dividend payouts. The company consistently maintained higher net profit margins and lower debt ratios compared to its competitor, indicating effective cost management and a conservative financial structure. ABF's diversified portfolio and focus on innovation and sustainability appear to have contributed to its resilience and ability to create shareholder value. However, areas for improvement, such as asset utilization efficiency, were identified. This research contributes to the understanding of shareholder value creation strategies in the food and retail sectors, offering insights for both academics and practitioners in the field of corporate finance and strategic management.

Impact of Liquidity and Risk on Dividend Policy: A Mediating Role of Investment

Purpose: The aim of this study is to analyze the influence of liquidity and risk on dividend policy in the nepalese banking sector, with a specific focus on examining the mediating role of investment in the relationship between liquidity and risk and the dividend policy. Methods/Design: The study uses a questionnaire survey, gathering 356 responses from bank managers in Nepal representing various banking categories. It adopts a descriptive and correlational research design, incorporating regression analysis and structural equation modeling (SEM) using AMOS to achieve its objectives. Findings: The results indicate that investment significantly mediates the relationship between liquidity, risk, and dividend policy. Specifically, firms with higher liquidity and greater risk are more likely to invest in profitable projects, which are expected to lead to increased profit distribution within the banking sector in the future. Implications/Limitations: These insights are valuable for both financial managers and policymakers in the Nepalese banking sector. However, the study is limited to the banking sector in Nepal and may not generalize to banks in other regions or financial systems. Originality: This study provides a unique perspective on the interaction between company risk and dividend policy in Nepalese banks, filling a gap in the literature on risk management and shareholder value within the context of emerging economies.

Event study analysis of immoral incidents and social activism in athlete endorsement

Purpose While studies have highlighted the benefits of athlete endorsement as a means of strategic marketing communication and public relations, there are risk factors associated with the practice, especially when a celebrity endorser is involved in immoral incidents or social activism. This study examined the impacts of athlete endorsers’ controversial behavior on sponsors. It scrutinized the change in publicly traded corporations’ shareholder value when their athlete endorsers were implicated in either immoral conduct or social activism.Design/methodology/approachUsing the event study analysis, this study investigated the sponsored corporations’ abnormal returns around athlete endorsers’ involvement in immoral incidents and social activism. Total 34 cases (18 immoral scandals and 16 social activism) were collected from 2009 to 2019.Findings The data analysis revealed a significant difference in abnormal returns between the two different types of incidents for the four different windows (2, 4, 8 and 15 days) after the date of the focal event. While scandals of immoral conduct did not cause significant loss in shareholder value, cases of social activism showed negative abnormal returns for sponsoring corporations.Originality/value This study presented the first comparative analysis of how endorsers’ immoral behavior and social activism impacted on the shareholders’ value of sponsoring firms. Using stock performance data, the findings provided the empirical evidence in stock markets’ different reactions regarding scandals and social activism. The study contributes to the relevant body of literature by comparing the different contexts in celebrity endorsement.

Corporate Value Creation and the Award of Procurement Contracts

ABSTRACTThis study explores how federal procurement contracts influence shareholder value, revealing a consistent positive correlation between the size of the initial award and investor reactions. We uncover a significant impact of the contract's Sweetheart Index on investor responses, with no‐bid (sole source) contracts, defense contracts, service contracts, and contracts exempt from cost or price reporting requirements attracting stronger investor interest. Notably, we observe significant information leakage around award announcements that affects investor behavior. Through difference‐in‐difference analysis, our findings show that long‐term defense contracts lead to a greater increase in return on equity compared to other large government contracts, as assessed against a matched sample of firms. Additionally, our study highlights that contracts in industries with high concentration and those involving unique goods and services tend to be more lucrative, providing critical insights for investors and policymakers engaged in federal procurement strategies.

Anheuser-Busch (Ab) Competitive Marketing Strategies In The Global Beer Market

Through their astute and effective marketing strategies, Anheuser-Busch (AB) has established a commanding presence in the global beer market with over 27% share and dominates the U.S. market with a staggering 40% share (Aswani, 2021), and is now one of the most recognizable trademarks worldwide. AB remains steadfast in maximizing shareholder value through operational efficiencies and its strategic focus is outlined in the 2022 Annual Report and revolves around the following key objectives (AB-inbev. n.d.-a): Increase per barrel profitability while maintaining or improving market share growth to endure long-term earnings; Expanding its international beer operations by leveraging its key brand names and investing strategically in its growth worldwide; Support profit growth in packaging, which drives efficiency and quality that contributes to the company’s image and social responsibility endeavors. AB’s Commitment to these critical objectives benefits the company and its shareholders by promising continued value creation and sustainable growth. Utilizing a balanced approach, AB will continue its success as the market leader.