Valuable Companies Research Articles

Privatization and the Rise of Global Capital Markets

This study has two objectives: to estimate the impact of share issue privatisations on the growth of world capital markets (especially stock markets), and to examine the effect privatisation has had on the pattern of share ownership by individuals and institutional investors. We begin by documenting the increasing importance of capital markets, and the declining role of commercial banks, in corporate financial systems around the world. We then show that privatisation programmes have had a dramatic impact both on the development of non-U.S. stock markets and on the participation of individual and institutional investors in those markets. Our research documents the following key points: (1) the fraction of total domestic credit provided by the banking sector, as a percent of GDP, remained virtually constant (125 percent) between 1990 and 1998 for the world as a whole, as well as for most major country groupings. (2) During that same time period, stock market capitalisation as a percent of GDP increased from 52 to 82 percent for the world as a whole, and from 56 to 95 percent for high income countries. Market capitalisation is now over $39 trillion, which almost certainly exceeds world capitalisation. (3) Share trading volume (value of shares traded) increased even more dramatically, from 29.0 percent of world GDP in 1980 to 79.3 percent in 1998, when it reached $22.9 trillion. (4) The total market value of privatised firms grew from less than $50 billion in 1983 to almost $2.5 trillion in 1999-roughly 10 percent of the world's aggregate market capitalisation, and 21 percent of the non-U.S. total. (5) Privatised firms are the most valuable companies in seven of the ten largest non-U.S. stock markets, including the four largest, as well as in most developing countries. (6) Share issue privatisations (SIPs) have transformed international equity issuance and investment banking practices. The 25 largest - and 35 of the 39 largest - common stock issues in history have all been privatisations, and governments have raised over $700 billion through some 750 SIPs since 1977 - and over $1 trillion through all privatisation methods. (7) Academic research has now clearly established that, in most countries, SIP investors earn significantly positive excess (market-adjusted) returns on the shares they purchase - over both short and long term holding periods. (6) Privatisations have dramatically increased the number of shareholders in many countries. Almost two-thirds of the 54 non-U.S. firms (67 including US companies) with over 500,000 shareholders are privatised companies, and roughly a dozen SIPs have more than 1,000,000 initial shareholders. SIPs generally have a far larger number of stockholders than do capitalisation-matched private firms in the same country. (7) However, we also find that the extremely large numbers of shareholders created by many SIPs are not a stable ownership structure. For the 47 offers that initially yield over 250,000 shareholders, the total number of shareholders declines by one-third within five years.

The Leadership Principles Used by Jack Welch as he Re-energized, Revolutionized, and Reshaped General Electric

Starting in the early 1980s till now, Jack Welch, Chief Executive Officer (CEO) of the General Electric Corporation (GE), has led his company through one of the most revolutionary and far-reaching changes ever witnessed in modern business history. Under Welch's leadership, GE rose to be ranked No. 1 among the world's most valuable companies based on a combination of revenues, profits, market value, and assets. This article will discuss some of the leadership principles that Welch used to cause such a major revolution in the social, political, and economic climate at GE.

Strategic leadership at general electric

In the April 28, 1997 issue of Fortune, the General Electric Company was announced as the most valuable company in the world with market capitalization of $169.4 billion. 1. This record was achieved not by one but by four generations of superb chief executive officers: Messrs Cordiner, Borch, Jones, and Welch; each standing on the shoulders of their predecessors. 2. To review the role played by the strategic planning concept and its adaptation to 50 years of changing domestics and global market conditions in this success. 3. Finally, to show that the major criticism about strategic planning models does not apply to the General Electric model. One of the best kept secrets about the General Electric version of strategic planning is that it is based on the marketing management concept which has enabled each generation of chief executives to adapt the concept successfully to changing marketing conditions, customer needs and competition. This consistency of purpose was achieved with special regard to deploying resources and effective implementation under proactive and inspiring leadership beginning with entrepreneurial leadership in the 1950s; strategic planning in the 1960s; strategic management in the 1970s; strategic thinking in the 1980s; and visionary leadership for the 1990s.

The importance of company breeding in the U.S. and Japanese managerial labor markets: A statistical comparison

This paper compares the prevalence of company-bred chief executives between the U.S. and Japan by using a large new data set, containing information on chief executives of each nation's 1000 most valuable (measured by market equity value) companies, that we have developed over the years. The paper provides the first systematic evidence on the relative importance of company breeding of executives in Japanese corporations and offers a new insight into a recent controversy over the causes of Japanese economic success.

The “secret” response to kidnapping

O ver a year ago newspapers were filled with accounts of the Annie Laurie Hearin kidnapping in Jackson, Mississippi. As of this writing, the 72-year-old victim is still missing, and her husband, attempting to comply with the demands of the perpetrators, has paid more than $1,000,000 to parties presumably unrelated to the crime. We are used to hearing about such incidents from places like Colombia and Lebanon, but most Americans do not realize that kidnappings occur in the U.S. with some frequency. Many are abductions involving child-custody cases or situations involving sex crimes, but many others do center on demands for money. In addition to kidnapping per se, all of us are familiar with the existence of product-tampering extortion threats. One private worldwide security firm indicates that over the past ten years it has been directly involved in 245 kidnapping or extortion cases. Fourteen of their assignments were in the U.S. Clearly, this is only the tip of the iceberg, because the FBI and local police handle most situations on their own. According to the same source, kidnappings in which there is a money demand have increased over the past five or six years. In 1987 alone there were 14 such cases reported after virtually no activity during the two preceding years. Last year, the U.S. ranked sixth in the world in the number of money-demand kidnappings, according to the available statistics (after Colombia, Italy, Lebanon, Peru, and the Philippines). Although experts do not believe there will be an upsurge in the number of kidnappings or extortion threats in the U.S. from international political terrorists, the evidence does point to an increase in criminal activity. Interestingly, sources indicate that terrorist kidnappings are less of a problem here because of the reputation of the FBI, the excellence of our telephone system (which aids in the tracking of malefactors and communications among law-enforcement agencies), and society's hostile attitude toward terrorism. The insurance industry, mostly through the CassidyDavis and Burt Stratton syndicates at Lloyd's, does provide a product that can represent a valuable Companies can ease their responsibilities in the event of kidnapping or extortion by purchasing kidnap/ ransom insurance.