James C. Brau

Information sharing and supply chain performance: the role of connectivity and willingness

Purpose – The purpose of this paper is to understand how information technology (IT) is used to enhance supply chain performance.Design/methodology/approach – A large‐scale survey and semi‐structured interviews were used to collect industry data.Findings – Two distinct dimensions to information sharing – connectivity and willingness – are identified and analyzed. Both dimensions are found to impact operational performance and to be critical to the development of a real information sharing capability. However, many companies are found to have placed most of their emphasis on connectivity, often overlooking the willingness construct. As a result, information sharing seldom delivers on its promise to enable the creation of the cohesive supply chain team.Research limitations – Despite the extensive data collection, the research represents a snapshot of practice. Replication from a longitudinal perspective would help define how IT is evolving to enable supply chain management.Practical implications – A roadmap...

Concealing and confounding adverse signals: insider wealth-maximizing behavior in the IPO process

We study a known negative signal, the sale of insider shares in an IPO and find that insiders adopt two concealment strategies consistent with wealth-maximizing behavior. First, insiders underreport the number of personally owned shares in the prominent original prospectus and use an obscure amendment to communicate the true higher level of shares to be offered. Second, when insiders increase shares in a later amendment, they tend to either increase secondary shares disproportional to primary share increases, or to reduce primary shares to wholly or partly conceal the increase in secondary shares offered. Insiders confound the negative secondary share signal by simultaneously sending a positive lockup signal. r 2002 Elsevier Science B.V. All rights reserved.

Do Venture Capitalists Add Value to Small Manufacturing Firms? An Empirical Analysis of Venture and Nonventure Capital-Backed Initial Public Offerings

We examine a set of small, venture capital (VC)‐backed manufacturing firms and compare it to a control sample of nonVC‐backed manufacturing firms going public between 1990 and 1996. We use the degree of underpricing, three‐year sales growth, three‐year cumulative stock return, and three‐year survivability as measures of success. First, we test if the presence of VC backing results in significant differences in success between the two samples. Next, we test if certain VC and deal characteristics are discriminators within the VC‐backed sample of firms. Despite previous literature, which argues for either inferior or superior VC post‐initial public offering (IPO) performance, these tests indicate no significant differences between VC‐ and nonVC‐backed firms. Additionally, it is found that VC and deal characteristics are not discriminating factors within the VC sample.

Firm Transparency and the Costs of Going Public

We demonstrate in this study that firms that are more transparent pay less, in all components of issuance costs, to go public. We employ a sample of 334 previous leveraged buyouts and a characteristic-matched control sample to test the hypothesis that greater firm transparency before the issue decreases the flotation costs of the initial public offering. These flotation costs are divided into initial underpricing, the underwriter discount, administrative expenses, and the overallotment option required to take the firm public. Our results provide further evidence of the asymmetric information hypothesis as it applies to initial public offerings.

Do Banks Price Owner–Manager Agency Costs? An Examination of Small Business Borrowing

Ang, Cole, and Lin (2000) provide evidence that supports the theoretical work of Jensen and Meckling (1976) on agency costs. As a further examination, I conduct a test to determine the economic significance of owner–manager agency conflicts. Using the same data source and empirical framework as Ang, Cole, and Lin (2000), I test to determine if banks charge a premium when extending loans to firms with various ownership structures. In empirical tests, I find that banks do not require an owner–manager agency premium either through increased interest rates or through the requirement of collateral. Instead, I find that the interest rate is significantly affected by the length of the longest banking relationship, the number of banking relationships, firm age, and firm size. Additionally, the requirement of collateral is significantly affected by the number of banking relationships, the debt position of the firm, and firm size.

Market reaction to the expiration of IPO lockup provisions

Initial public offering (IPO) lockup agreements prevent insider sale of shares for specified periods of time (often 180 days). This study investigates share price reactions at and around the time the lockup agreements expire. Results indicate statistically significant negative abnormal returns in the event window surrounding the expiration date. The results are consistent with informational asymmetries and decreasing incentive alignment between insiders and general shareholders. In addition, multivariate analysis identifies several variables that help explain these abnormal returns.

Evaluating impacts of microfinance institutions using Guatemalan data

Purpose - The purpose of this paper is to investigate microlending outcomes among Latin American non-governmental organizations (NGOs), specifically microfinance institutions (MFIs). While there is a growing movement of non-profit ventures channeling small loans to the poor worldwide, assessments of their impacts are lacking. Thus, field interviews with clients who had various degrees of involvement in the process of receiving microloans from MFIs were conducted over a summer in Guatemala. Design/methodology/approach - Using a dataset of 393 clients from Guatemalan MFIs, microfinance impacts from two dimensions are examined and impacts measured along financial and social dimensions by surveying new clients, current clients, and graduated clients of five MFIs in Guatemala. Findings - Applying univariate and multivariate analyses shows that for Guatemala, MFIs do produce a measure of improvement in the lives of microfinance clients. This improvement is concentrated along the social dimensions of housing, health, and client empowerment. Research limitations/implications - A limitation of this paper is that it focuses on only five of several dozen MFIs in Guatemala. What is needed is further use of the survey instruments to carry out subsequent studies throughout more of Latin America, and beyond. Practical implications - This research suggests that microfinance demonstrates promising results associated with social benefits to various client populations. As such, it holds a variety of implications for government and other policymakers as they consider innovative ways to reduce poverty and human suffering around the globe. Originality/value - It is anticipated that this field study will contribute to the furtherance of literature on the effects of lending among the poor.

The Determinants of Successful Micro‐IPOs: An Analysis of Issues Made under the Small Corporate Offering Registration (SCOR) Procedure

In this article we extend the existing IPO literature to the case of micro‐IPOs by analyzing a sample of Small Corporate Offering Registration (SCOR) documents from the U.S. state of Washington. Through theory, we identified variables that should impact the probability of success or failure in a SCOR offering and then empirically tested them. Empirical support was found for the relevance of (1) marketing mechanisms and expenses; (2) ownership and governance factors; (3) business life cycle stages; and (4) signaling factors consistent with our theoretical predictions.

INSURANCE THEORY AND CHALLENGES FACING THE DEVELOPMENT OF MICROINSURANCE MARKETS

Microinsurance institutions and instruments have developed rapidly over the last decade, with policies covering tens of millions at the base of the economic pyramid. Ranging from simple policies providing life or health insurance to complex policies covering catastrophic risks for small landholders, it is a market with proven potential that demands closer attention. This paper provides a review of the nascent academic literature and then suggests some critical elements of insurance theory that may help us understand the challenges facing microinsurance markets and how these markets can better serve the needs of their customers. Although the basic theory is well known, application to microinsurance markets reveals interesting variations on known results.

Soft Strategic Information and IPO Underpricing

Using content analysis we measure the impact of soft information, derived from words in IPO registration documents, on IPO pricing efficiency. First, using 2,298 U.S. IPOs from 1996 to 2008, we find that an IPO document’s strategic tone correlates positively with the stock’s first-day return; more frequent usage of positive and/or less frequent usage of negative strategic words lead to more IPO underpricing. Second, we find that an IPO document’s strategic tone is negatively correlated with the stock’s long-run return. Together, these findings imply that investors initially misprice soft information in registration statements, which mispricing is eventually corrected. Additionally, we create new content-analysis libraries for strategic words and introduce a survey-based library creation method and word-weighting system.