An agency analysis of the effect of long-term performance plans on managerial decision making

Ferris, Stephen P.; Kumar, Raman; Sant, Rajiv; Sopariwala, Parvez R.

doi:10.1016/s1062-9769(99)80105-7

Cited by 11 publications

(4 citation statements)

References 15 publications

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“…A marketing alliance could be an opportunity to increase the sale and mitigate the negative effect of high inventory buildup. We use inventory turnover ratio at the beginning of the year of announcement (TINV i,t ) to measure inventory liquidity, following Ferris et al (1998), Corbett and Harrison (1992) and Romano (1987). TINV i,t is a measure of the efficiency that shows how a firm manages its inventory.…”

Section: Cr 225mentioning

confidence: 99%

The effect of pre‐existing financial indicators on investor valuation of strategic alliances

Daneshfar

Adobor²

2012

Competitiveness Review: An International Business Journal

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Purpose -The purpose of this paper is to extend the line of research on the ex ante valuation of the economic payoff from strategic alliances. The paper links a firm's related pre-alliance situation to an alliance announcement, to predict how investors value the alliance. Design/methodology/approach -The researchers collected data on marketing alliances in the biotechnology and pharmaceutical industries. Using an empirical model, three hypotheses predicting how investors value alliances in the light of their knowledge of how the firm is doing before the alliance announcement were tested. Findings -The findings indicate that investors assign higher value to marketing alliances for firms with lower inventory liquidity and product demand. Investors, in fact, rewarded firms with weak pre-alliance positions, indicating that the alliance was perceived as a useful strategy to turnaround the weak situation. Research limitations/implications -As is common with other event study research, the study is unable to predict the long-term relationship between alliance announcements and performance of the alliance. A positive evaluation at the time of the announcement may not necessarily translate into long-term success. Practical implications -This research provides an important lesson for firms hoping to reap financial rewards from their alliance announcements. Firms may do well to time such alliance announcements to correspond with their internal situations. Originality/value -This paper is believed to be one of the first to consider an additional piece of firm information in addition to an alliance announcement to gauge investor valuation of alliances. The research therefore extends existing research and offers a more complete understanding of how investors value alliances at their formation. The findings should be of interest to firms contemplating alliances, and enhance understanding of investor decision making.

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Section: Cr 225mentioning

confidence: 99%

The effect of pre‐existing financial indicators on investor valuation of strategic alliances

Daneshfar

Adobor²

2012

Competitiveness Review: An International Business Journal

View full text Add to dashboard Cite

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“…For example, Williamson (1963) uses estimated general administrative and selling expenses as a measurement. In the manufacturing industry, Ferris et al (1998) examine the effect of long-term performance plans on managerial decision making and use labor costs, which can be significantly controlled by management as one of the variables.…”

Section: Expense Preference Theorymentioning

confidence: 99%

“…In addition, Ferris et al (1998) suggest that selling and general and administrative expenses are directly controllable by management, and therefore any profitability can be driven by a reduction in these expenses. Research and development and/or advertising expenses were also examined as essential discretionary expenses by the authors, although they found no evidence that managers reduced these expenses.…”

Section: Expense Preference Theorymentioning

confidence: 99%

An examination of cost management behavior in small restaurant firms

Kim

Dalbor

Feinstein

2007

International Journal of Hospitality Management

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“…This means that those ownership structures that prevent collusion among blockholders and/or managers to mismanage a firm should be accompanied by lower inventory levels. Ferris et al (1998) connect a firm's adoption of efficiency-increasing performance plans to inventory shirking. Institutional investors, like banks, promote the adoption of explicit performance plans as part of their monitoring discipline.…”

Section: Control Channelmentioning

confidence: 99%

Ownership structure and inventory policy

Tribó

2007

International Journal of Production Economics

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This paper makes use of a database of Spanish manufacturing firms to explore the effect of a firm's ownership structure on its inventory policy. We have argued that the presence of institutional investors reduces a firm's liquidity needs and prevents overinvestment policies. This, in turn, leads to lower equilibrium inventory levels. Also, we expect, on average, less inventory investment when bank-equity financing is compared with bank-debt financing. Finally, other components of ownership structure like the number of blockholders prevent inventory overinvestment. This may have an impact on the economic cycle as more firms are floated on the stock market hence changing their ownership structure. r

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An agency analysis of the effect of long-term performance plans on managerial decision making

Cited by 11 publications

References 15 publications

The effect of pre‐existing financial indicators on investor valuation of strategic alliances

The effect of pre‐existing financial indicators on investor valuation of strategic alliances

An examination of cost management behavior in small restaurant firms

Ownership structure and inventory policy

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