Session Details: Session 1067

The Upside of Financial Investments

Track E

Date: Monday, October 13, 2008

 

Time: 11:15 – 12:30

Paper

Room: Salon 18


Session Chair:
Aya Chacar, Florida International University

Title: An Integrated view of Strategic Investment: Linking the Resource Allocation Process, Real Options, and Risk

Authors

  • Todd Alessandri, Northeastern University
  • Catherine Maritan, Syracuse University

Abstract: Some of the most critical decisions firms make involve allocating resources to strategic investments and management researchers have long been interested in the topic. However, scholars have approached it from different theoretical perspectives and focused on different aspects of the investment decision, leading to the development of separate literatures. Yet, an integrated perspective would generate a richer and more complete picture of strategic investments and their relationship to firm strategy and performance. In this paper, we review and synthesize work from three major bodies of research that are concerned with strategic investments: studies of the resource allocation process, research that applies real options valuation techniques or reasoning and work that examines risk and return relationships, to develop richer and more complex picture of strategic investments.

Title: Capturing the Right Audience: Exclusivity and Community Effect In Security Analysts’ Recommendations

Authors

  • Matteo Prato, IESE Business School
  • Fabrizio Ferraro, IESE Business School

Abstract: In mediated markets, critics intervene in the relationship between demand and supply by providing recommendations. Under conditions of extreme uncertainty, to form their judgments, critics search for available value signals differentiating the objects they evaluate. Concurrently, they send out signals differentiating themselves that third parties can make use of. Focusing our analysis on the stock market, we show that both signals affect analysts’ recommendations. More specifically, we show that firms covered by analysts that share more experiences of other stocks coverage (community effect), and those that attract fewer reviewers (exclusivity effect), receive better analysts’ recommendations. These findings suggest that firms might be better off by building a selective community of critics rather than attracting an indiscriminate and large attention.

Title: Investors’ Reactions to Competitive Actions Among Rivals: A Step Towards Strategic Asset Pricing Theory

Authors

  • Margaret Hughes-Morgan, Marquette University
  • Walter Ferrier, University of Kentucky

Abstract: Drawing from information theory, decision making, behavioral finance, and competitive dynamics, we develop (and propose to test) a conceptual model that explains how investors perceive, interpret, and react to the sequence of competitive actions carried out by a given firm on stock returns and the proportion of shares "sold short." As our model is an extension of recent research in behavioral finance, we call this an emergent strategic asset pricing theory.

Title: Speed and Tobin's Q

Authors

  • Gonçalo Pacheco de Almeida, HEC-Paris
  • Ashton Hawk, Ohio State University
  • Bernard Yeung, National University of Singapore

Abstract: Firms that are slow in the execution of investment projects often incur substantial revenue losses. However, accelerating investments generally results in higher investment costs. We examine how deviations from industry-average speed in the execution of large investments in oil and gas facilities worldwide from 1996 to 2005 impact firm value, as measured by Tobin’s q. We show that faster firms have higher firm value when speed results from firms’ dynamic capabilities. On average, accelerating a firm’s investments by 5% (or 1 month) below the industry norm due to dynamic capabilities increases market value by $214.3 million. Additionally, we show that the effect of speed on firm value is amplified by good corporate governance but mitigated by firms’ debt.

All Sessions in Track E...

Sun: 10:00 – 11:30
Session 1501: Exploration Strategies: Current Research and Future Content and Methodological Challenges
Sun: 13:00 – 14:30
Session 1601: Organizational Capabilities and Competitive Advantage: Where Do We Go From Here?
Sun: 15:00 – 16:30
Session 1701: Using Research Centers to Foster ABC Collaboration
Mon: 11:15 – 12:30
Session 1067: The Upside of Financial Investments
Session 1072: Lessons from Industry Cases
Mon: 15:30 – 16:45
Session 1073: Learning and Competitive Dynamics
Session 1074: Configurations and Performance
Session 1076: The Knowledge-Based View in New Arenas
Mon: 17:00 – 18:15
Session 1060: Value Creation and Appropriation: Perspectives From the Resource-Based View, Property Rights and Incomplete Contracting
Session 1062: Mastering Alliance Capability
Session 1069: Leveraging and Repositioning Resources
Tue: 11:15 – 12:30
Session 1059: Networks and Social Capital
Session 1070: Performance and the Competitive Arena
Tue: 14:30 – 15:45
Session 1063: Topics on Competitive Dynamics
Session 1066: Managing and Environmental Stewardship
Session 1075: Strategic Decision Making
Wed: 10:00 – 11:15
Session 1065: Managing Stakeholder Networks and External Communication
Session 1071: Technology, Innovation and Competitive Advantage
Wed: 11:30 – 12:45
Session 1064: Exploring Dynamic Capabilities
Session 1068: Signals and Firm Reputation


Strategic Management Society

Cologne Conference