Andy Cosh

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.

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.

EFFECTS OF PRODUCT INNOVATION AND ORGANISATIONAL CAPABILITIES ON COMPETITIVE ADVANTAGE: EVIDENCE FROM UK SMALL AND MEDIUM MANUFACTURING ENTERPRISES

We investigate the extent to which product innovation moderates the relationship between capabilities and competitive advantage among small and medium enterprises (SMEs). Using resource-based and capabilities theories, we examine capabilities as organisational routines, focusing on job rotation and multi-skilling. We examine competitive advantage by using logistic regression to assess the probability of top performance in productivity relative to most other firms in the same industry. Considering the path-dependence in developing capabilities and innovation, we use a longitudinal sample of 300 UK manufacturing SMEs in traditional and high-technology industries to evaluate the effects of innovating and using capabilities continuously over time. The results suggest that firms using job rotation or multi-skilling and introducing product innovations consistently from 2002 through 2004 are more likely to be top performers in 2004. The findings support a theoretical model according to which the association between capabilities and competitive advantage is moderated by innovation.

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.

Takeovers, institutional investment and the persistence of profits

This paper studies the impact of takeovers on the profitability of the participating companies and the influence of institutional investors on this process. It involves an original approach to assessing the profitability impact by modelling the dynamics of corporate profitability. It is shown that the standard counterfactual assumptions made in most merger effect studies are biased against finidng profit-enhancing merger effects where acquiring firms display above average profitabiltiy prior to the merger. On the other hand, acquisition is shown to reinforce the tendency amongst companies for their profitability to move towards industry norms over time.

International merger activity and the national regulation of mergers: A UK perspective

This paper traces out recent changes in the globalisation of merger activity and considers its implications for national and international regulation of mergers and joint ventures. It argues that a large proportion of mergers involve small firms which may have an important effect on the competitive process and that regulation of large mergers should be complemented by industrial and financial policies to encourage the growth of smaller independent firms.

The legacy of Ajit Singh (11 September 1940-23 June 2015)

Ajit Singh taught at Cambridge from the mid-1960s on. He was an inspiring, supportive but demanding teacher to which several contributors’ fond memories attest. Ajit was an extremely hard worker, and his output of frequently seminal articles and books, all of which exhibited innovative theoretical approaches and most careful relevant empirical work, was prodigious. This is all the more remarkable as he had to battle with the effects of Parkinson’s disease from the early 1980s on. We have gathered here together a number of tributes from his wide circle of friends, colleagues, and former pupils, mostly overlapping sets. The tributes between them show what a range of important issues Ajit worked on, how early he became aware of them and how perceptive his findings and often predictions proved to be. Before I urge readers to read on, may I add a personal note? Ajit and I were close friends from 1963 onwards and colleagues for many years. I wrote in the Foreword to the 2008 volume in his honour, edited by Philip Arestis and John Eatwell, that I wished

INNOVATION CAPABILITIES AND PERFORMANCE AMONG ESTABLISHED VERSUS YOUNG FIRMS.

Capabilities play a vital role in influencing firm performance, but a remaining question is how this role may differ between established and young firms. We find that the timing for young US servic...