Alan Hughes

Age, Size, Growth and Survival: UK Companies in the 1980s

This paper examines growth and survival amongst quoted and unquoted U.K. companies in the period 1975-85 and compares the results with earlier U.K. and U.S. studies. An examination of death rates shows that smaller companies had higher death rates but the largest and smallest companies were least vulnerable to takeover. Careful attention is, therefore, paid to problems of sample selection bias. It is shown that smaller companies grew faster than larger companies, that Gibrats law does not hold amongst smaller firms, that age is negatively related to growth, and that these results are not an artifact of sample-selection bias. Copyright 1994 by Blackwell Publishing Ltd.

Outside Enterpreneurial Capital

This article investigates factors that affect rejection rates in applications for outside finance among different types of investors (banks, venture capital funds, leasing firms, factoring firms, trade customers and suppliers, partners and working shareholders, private individuals and other sources), taking into account the non-randomness in a firms decision to seek outside finance. The data support the traditional pecking order theory. Further, the data indicate that firms seeking capital are typically able to secure their requisite financing from at least one of the different available sources. However, external finance is often not available in the form that a firm would like. Copyright

Executive remuneration, executive dismissal and institutional shareholdings

Abstract This paper examines the links between executive pay, executive dismissals and company characteristics. Specific attention is paid to the role of institutional investors and non-executive directors in influencing pay/performance relationships. The analysis shows that in the UK electrical engineering industry in the period 1989–94 pay was positively related to both shareholder welfare measures (profitability and share returns) and to size but that the latter was the most significant influence. The probability of executive dismissal was higher the smaller was company size and the lower was profitability. The presence or absence of institutions as major shareholders made no appreciable difference to either the level of pay or the likelihood of dismissal, or the sensitivity of either to shareholder performance or size.

A Collaboratively-Derived Science-Policy Research Agenda

The need for policy makers to understand science and for scientists to understand policy processes is widely recognised. However, the science-policy relationship is sometimes difficult and occasionally dysfunctional; it is also increasingly visible, because it must deal with contentious issues, or itself becomes a matter of public controversy, or both. We suggest that identifying key unanswered questions on the relationship between science and policy will catalyse and focus research in this field. To identify these questions, a collaborative procedure was employed with 52 participants selected to cover a wide range of experience in both science and policy, including people from government, non-governmental organisations, academia and industry. These participants consulted with colleagues and submitted 239 questions. An initial round of voting was followed by a workshop in which 40 of the most important questions were identified by further discussion and voting. The resulting list includes questions about the effectiveness of science-based decision-making structures; the nature and legitimacy of expertise; the consequences of changes such as increasing transparency; choices among different sources of evidence; the implications of new means of characterising and representing uncertainties; and ways in which policy and political processes affect what counts as authoritative evidence. We expect this exercise to identify important theoretical questions and to help improve the mutual understanding and effectiveness of those working at the interface of science and policy.

Finance for SMEs: A U.K. Perspective

This paper provide an overview of recent trends in the financing of smaller businesses in the U.K. It refers in particular to the findings of a major recent programme of work in this area funded by the Economic and Social Research Council, in which the author participated. This programme included the first national survey to address these issues since the Bolton Report of 1971, as well as a range of projects covering the finance of ethnic businesses and hi-tech firms as well as the market for informal venture capital. On the basis of this work and of the results of more recent follow up surveyors it is concluded that the evidence for general equity or debt gaps in the U.K. is weak. If anything SME funding was too easy in the boom of the late 1980s. It is argued that consideration could be given to the promotion through seedcorn funding of SME co-operative or mutual guarantee schemes to reduce information asymmetry in U.K. credit markets.

Institutional investment, mergers and the market for corporate control

The increasing importance of institutional investors as shareholders in individual companies has led to an important debate on their impact on corporate performance. In this paper we focus on their role in the market for corporate control. This has so far been the subject of very little systematic investigation, despite its theoretical and practical significance. We consider the impact of financial institutions using two U.K. merger samples, and employing both univariate and multivariate techniques of analysis. In the first sample drawn from the low merger period 1981–1983 pre- and post-merger differences are found between merging companies with, and without a significant institutional presence. However, in the takeover boom year of 1986, from which the second sample is drawn, all such distinctions become blurred.

Open innovation, the Haldane principle and the new production of knowledge: science policy and university–industry links in the UK after the financial crisis

The paper looks at the system of knowledge production and innovation in the UK from a Mode 2 perspective. It is critical of policy that focuses on science and engineering, on distinctions between basic and applied research, and that looks to notions of the entrepreneurial university. Extensive survey work of individual academics and UK firms reveals an extensive range of linkages between academics and industry, many personal rather than institutional. Formal mechanisms to link the university with the firm are rarely key initiators of connections. As key policy challenge is to design institutions and incentives that enhance the reflexive interplay between universities and external organisations and which build on the full range of interactions and disciplines.

Innovation Policy as Cargo Cult: Myth and Reality in Knowledge-Led Productivity Growth

In the immediate post-Second World War years a series of millenarian movements known as “cargo cults”3 swept through Melanesia. They emerged in the aftermath of intensive US contact in the course of the Second World War. These contacts led to a substantial increase in the material goods available to Melanesian islanders, but the end of the war meant that such material goods became less available as military withdrawal occurred. In these circumstances cargo cults emerged in which prophets would promise the return of cargoes of material goods by their ancestors (often expected to take the form of the Americans) with cargo typically shipped in the airplanes that had been such a common feature of the war experience. The means by which the return of the cargo was to be encouraged varied between different cults in different islands, but frequently involved the ritual preparation and construction of a variety of structures such as airfields, storage facilities, landing strips and associated paraphernalia. Cult members were encouraged to abandon previous cultural practices and often mimicked the behavioural characteristics of Americans (Worsley, 1957; Jarvie, 1964). The emergence of these cults did not lead to the return of material cargo.

Mutuality and Corporate Governance: The Evolution of UK Building Societies Following Deregulation

This article is a case study in the evolution of corporate governance forms. It focuses on the UK Building Societies Act 1986, which opened the way for competition between building societies and commercial banks and introduced a procedure for the demutualisation of a building society. We show that the Act brought about a rearrangement of property rights which destabilised the building society form. A wave of demutualisations followed in the 1990s. The main beneficiaries of change were corporate managers who used conversion to boost their earnings and status, and speculative investors (“carpetbaggers”) who profited from windfall gains. In return, there were losses to borrowers, in the form of higher costs of loans, and to communities, in the form of the closure of local branches. Far from exhibiting “evolution to efficiency”, the recent trajectory of the sector illustrates the welfare losses which can ensue when established corporate governance forms are undermined by “deregulatory” interventions.

UK Corporate Governance and Takeover Performance

This chapter addresses the changing nature of corporate governance in the United Kingdom over recent decades and examines whether these changes have had an impact on the UK market for corporate control. The disappointing outcomes for acquiring company shareholders in the majority of corporate acquisitions, public discontent with some pay deals for top executives and some high profile corporate scandals led in the early 1990s to a call for governance reform. The scrutiny of governance in UK companies has intensified since the publication of the Cadbury Report in 1992 and has resulted in calls for changes in the size, composition and role of boards of directors, in the role of institutional shareholders, the remuneration and appointment of executives, and in legal and accounting regulations. We review the background to these changes and the consequences of the changes since 1990 for governance structures. Finally, we examine whether these changes have affected takeover performance in recent years. Our analysis is specific to the institutional circumstances of the UK although we refer where appropriate to takeover studies in other countries.