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
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.
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.
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.
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