Emanuele Teti

Market value and corporate debt: the 2006-2010 international evidence

We analyse the differences in the financial debt level of firms both in market-oriented systems (the US, the UK) and bank-oriented systems (Germany, France and Italy) on a sample of 3360 listed companies between the period 2006 and 2010. Results indicate that the debt level is significantly higher in market-oriented systems when compared to the book value of equity. We find confirmation that Book-to-Market (BTM) cannot explain the debt level in bank-oriented systems but, contrary to reference literature, we observe that the BTM ratio has a negative influence on the debt level in market-oriented systems, especially in the United States. We claim different reasons to explain the evidence: (i) the financing standards of market-oriented countries, with an inflationary effect of market values on debt; (ii) an underlying activity for ownership protection and (iii) the unfavourable conditions of stock market over the years of the financial crisis that reduced the convenience of equity issuance.

Does the market reward for going green

Purpose – The purpose of this paper is to investigate the effects of the application of green standards on the companies’ financial returns. It aims at answering the following question: does the market reward or penalize the players that carry out responsible management policies toward environment? Design/methodology/approach – Using US data from 2009 to mid-2014 and employing two financial models, that is Capital Asset Pricing Model and Fama-French three-factor model, the authors first estimate the extra remuneration provided to investors. Then, the authors link this extra return to a green-based factor. The green-factor data are taken from Newsweek Green Rankings, which annually publishes an environmental ranking of the 500 biggest publicly traded companies in the USA. Findings – The analysis demonstrates that there exists no linear relationship between the adoption of green standards and financial returns, i.e. the “green-behavior” does not affect the remuneration required by investors. These results c...

Competitive strategies and value creation: a twofold perspective analysis

Purpose – The purpose of this paper is to investigate whether the implementation of a defined competitive strategy – differentiation or cost leadership – brings about different value creation levels, where “value” is defined in a twofold perspective as “shareholder value” vs “stakeholder value” and “social capital”. Design/methodology/approach – A sample of 169 European companies is investigated. Simple linear regressions and t-tests for the equality of means are conducted. Findings – While no significant differences are found in the creation of value for the shareholders, firms following differentiation strategies generate considerably higher value for all the stakeholder groups than companies pursing cost leadership strategies. Results also show that size and reputational considerations play a significant role in explaining the different stakeholder value performances. Research limitations/implications – Some data such as off-balance sheet items could have influenced the calculation of the discriminant ...

The dark side of the movie. The difficult balance between risk and return

Purpose – This paper aims to analyse the risk and return trade‐off in the film industry, and to explain the managerial decisions justifying significant investments in such a risky and uncertain sector.Design/methodology/approach – An extensive dataset of movies released in US theatres over a period of 12 years along with descriptive statistics, frequency analysis and scatter plot methodology are used.Findings – The findings highlight: a positive relationship, although with high levels of variance, between production budgets and revenues; and a random association between costs and rates of return.Practical implications – Differently from other commodities, whose demand can be quite accurately estimated, the success of a new film production is extremely uncertain. Therefore, the reason why major film companies have been successful over the last decades, in spite of the extreme variance that is characteristic of the industry, must be found in the management decision approach that they employ to deal with thi...

The role of institutional investors on the governance of SMEs: evidence from an Italian perspective

This paper contributes towards the investigation of the dynamism of corporate governance of Italian small and medium enterprises in the light of the growing role of private equity funds. Results of a survey, conducted on companies acquired by financial investors during a defined time window, suggest the key role of institutional investors in governance procedures of Italian small enterprises. When the investors enter the equity structure of a company, they play an active and valuable monitoring role that safeguards companies against the risk that the interests of ownership will prevail over their own. To guide possible research follow-up in this field, we discuss the most interesting results of the analysis and develop some considerations on the main issues that could be approached in any following studies.

Corporate social performance and portfolio management

Purpose – The purpose of this paper is to assess the existence of a relationship between socially responsible behavior of companies and price trends of their stocks. Design/methodology/approach – The analysis is conducted by empirically testing data of environmental, social and governance ratings of a sample of European firms between December 2005 and December 2010. A disaggregate analysis is also performed to infer whether a specific contribution of all the different factors that make a business socially responsible can be observed in the value generation process. Findings – The results show that the application of a sustainable approach are successful in creating value, both to the investor and the issuer companies. Research limitations/implications – Findings of this work are significant with respect to portfolio management, because they suggest, on one hand, the myopia of a short-term approach (short-termism), and on the other hand, the importance of sustainable investing. Originality/value – This pap...

An offer they couldn't refuse (but probably should have): the ineffectiveness of Italian state subsidies to movie-making

Public financial support to national movie (film) production is typically conditional on very subjective artistic and socio-cultural criteria and objectives. Yet the question remains as to whether state subsidies actually help films at the box office. This paper shows the public grant regime in Italy did not develop the industry as intended, since in an overwhelming number of cases, production losses exceeded subsidy. The subsidy regime was ineffective and wasteful. Specific institutional and political features characterizing the Italian system are important components in this story. The conclusions will be of interest to all countries making commercial films.

Effectiveness of employee welfare schemes: differences of specific professional profiles

Corporate social responsibility studies prove that an employee is increasingly a key stakeholder for companies. Firms are starting to think about their workforce as a real opportunity to manage and improve their human and economic capital. Employee welfare and benefit schemes are particularly important in this perspective and top companies are investing significantly in this direction. On the basis of an empirical cross-analysis, conducted on a questionnaire addressed to its own employees, by one of the worlds biggest multinational groups, and in which the level of satisfaction of benefits and welfare schemes is investigated, significant results emerged: the utility of benefits is marginally higher in women than in men; an evident direct linear relationship exists between job standing and benefit satisfaction, with the exception of factory workers; seniority and age variance of employees do not imply different marginal utility in benefits. Furthermore, the implementation of some limited cost benefits would generate higher marginal utility in employees than of other, more expensive and exclusive, benefits.

Top corporate brands and the global structure of country brand positioning

We develop an ANN-based approach to the analysis of country and top corporate brands.We find that Germany is the hub in the global MST positioning of country brands.We find that the USA is marginally positioned in the same global MST.We reconstruct the global topology of MST country positioning. Working on the top 100 Interbrand world corporate brands dataset over the 10-years period 2001-10, we analyze the relative positioning of country brands as derived from the structural characteristics of the corresponding portfolios of top corporate brands. We find that the structural complexity of both sector and country variables are not correlated with brand equity. Moreover, we apply an innovative ANN methodology, AutoCM, to build the Minimum Spanning Tree (MST) of the multi-dimensional similarities among the top corporate brands structures at country level, and carry out a further related analysis in terms of the so called Maximum Regular Graph (MRG). We find that while the USA dominates the ranking of top brands at a global level, it does not have a central positioning in the MST and MRG, whereas Germany and other European and Far-Eastern countries do. We show how these results may have significant implications for the strategic intelligence analysis of country and corporate brands, and of their inter-relatedness. Moreover, we illustrate how AutoCM qualifies as a new computational approach that usefully expands the toolbox of scholars and analysts in corporate and country branding in a relevant, as yet unexplored direction.

Ephemeral Estimation of the Value of Art

We investigated whether the sale price of artworks can be estimated, a priori, based on objective key factors, and whether the estimation prices by auction houses are representative of the final hammer price. The hypothesis that the price of works of art can be explained exclusively by a number of pre-established variables is rejected. A positive correlation is observed between estimated and final prices, but the latter is usually underestimated. Financial models are not always fully effective in assessing prices, since products are often represented by “unique pieces” and their markets work differently than the standard markets represented in the financial model. The research suggests that non-financial factors such as aesthetics can prevail over economic factors in forecasting the prices of artworks.