Anant K. Sundaram

Cross-Border Acquisitions of U.S. Technology Assets:

During the 1990s, non-U.S. companies acquired nearly

The Emergence of Shareholder Value in the German Corporation

250 billion worth of technology assets in the United States. Acquirers include such major firms as British Telecom, Cable & Wireless, Dassault, L M Ericsson, Nokia, Reed Elsevier, Siebe, and SGS-Thomson. This article identifies the factors involved in the successful acquisition and integration of technology-based companies in the U.S., and it examines these factors with a specific focus on California9s Silicon Valley. European (and by implication, other similar non-U.S.) firms face some unique challenges with their acquisitions and, in particular, with the integration and governance of the acquired firms.

Cross-Border Liability of Multinational Enterprises, Border Taxes, and Capital Structure

We analyze the effects of changes in the purpose of large German corporations from stakeholder-oriented organizations to shareholder-oriented organizations during the decade of the 1990s. We document this transformation by first examining the annual reports of large firms at strategic points in time relative to significant changes in German corporate law. We find that changes in the law over this period both reflected and facilitated a fundamental shift in the operations of German corporations as evidenced by their adoption of stock- and option-based incentive compensation plans, adoption of US GAAP-based (or related) accounting systems, ADR listings, and restructuring activity. We also document the emergence and adoption of the rhetoric of shareholder value among German managers, the public, and the media. Detailed empirical analysis shows that German firms that embraced shareholder value as their corporate purpose and operating strategy realized a slight gain in equity values over the decade of the 1990s, as well as a significant increase in their Betas relative to the S&P 500, when compared to less shareholder-oriented firms. We interpret the Beta shifts as evidence that focusing on shareholder value leads firms to adopt entrepreneurial risk-taking strategies that reflect shareholder, rather than stakeholder, concerns. We conjecture that the increase in Betas might also be due to the adoption by some German firms of a similar operating philosophy to that of the traditionally shareholder-oriented US corporation. Finally, we show that German firms that embraced shareholder value-orientation during the 1990s realized significantly greater growth in their Market-to-Book ratios and market capitalizations relative to their less shareholder-oriented counterparts.

Signaling Models and Product Market Games in Finance: Do We Know What We Know?

Under incomplete contracting, limited liability creates differential valuations of investments from private and government perspectives. Managers in the private sector tend to over-invest in risky technologies, compared to levels of investment that are optimal from the standpoint of the society as a whole. This problem is exacerbated from the point of view of the host government when a multinational enterprise (MNE) engages in cross-border investments but faces incomplete cross-border liability, since there is the likelihood of localization of costs and globalization of benefits. This paper explores financial management implications of policies for the MNE and derives some empirically testable predictions.

The Environment and Internal Organization of Multinational Enterprises

Important results in a large class of financial models of signaling and product market games hinge on assumptions about the second order complementarities or substitutabilities between arguments in the maximand. Such second order relationships are determined by the technology of the firm in signaling models, and market structure in product market games. To the extent that the underlying economics (in theoretical specifications) or the data (in empirical tests) cannot distinguish between such complementarities and substitutabilities, the theoretical robustness and the empirical tests of many models are rendered questionable. Based on three well-known models from finance literature, we discuss the role that these assumptions play in theory development and provide empirical evidence that is consistent with the arguments advanced here.