Browsing by Author "Hoskisson, Robert E."

Now showing 1 - 3 of 3
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    Disciplining Role of Short Sellers: Evidence From M&A Activity
    (Sage, 2021-05) Shi, Wei; Ndofor, Hermann Achidi; Hoskisson, Robert E.; Kelley School of Business
    Prior research has focused on the influence of long investors (e.g., institutional investors) on merger-and-acquisition (M&A) decisions. This study investigates the role of short sellers in shaping managerial acquisitiveness and M&A decision quality. Short sellers impose a downward pressure on stock prices by disseminating negative information to the market. Given that managerial wealth and job security hinge on stock prices, top managers respond to increased short selling by refraining from excessive M&A activities because M&As could provide opportunities for short sellers to spread negative information and dampen stock prices. Furthermore, the negative influence of short sellers on managerial acquisitiveness is enhanced by the market for corporate control as an external governance mechanism and by CEO equity ownership as an internal governance mechanism. When firms with increasing short selling do engage in M&As, they gain higher M&A announcement returns and operating performance. We test our hypotheses using firms in the S&P 1500 from 2002 to 2014 and find support for our arguments.
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    External Corporate Governance and Financial Fraud: Cognitive Evaluation Theory Insights on Agency Theory Prescriptions
    (Wiley, 2017-06) Shi, Wei; Connelly, Brian L.; Hoskisson, Robert E.; School of Business
    Agency theory suggests that external governance mechanisms (e.g., activist owners, the market for corporate control, securities analysts) can deter managers from acting opportunistically. Using cognitive evaluation theory, we argue that powerful expectations imposed by external governance can impinge on top managers' feelings of autonomy and crowd out their intrinsic motivation, potentially leading to financial fraud. Our findings indicate that external pressure from activist owners, the market for corporate control, and securities analysts increases managers' likelihood of financial fraud. Our study considers external governance from a top manager's perspective and questions one of agency theory's foundational tenets: that external pressure imposed on managers reduces the potential for moral hazard.
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    Windfalls of Emperors’ Sojourns: Stock Market Reactions to Chinese Firms Hosting High Ranking Government Officials
    (Wiley, 2017-08) Schuler, Douglas A.; Shi, Wei; Hoskisson, Robert E.; Chen, Tao; Kelley School of Business - Indianapolis
    Research summary: We contribute to the corporate political activity (CPA) literature by showing that investors value companies that host visits of high-ranking government officials (President and Premier). We argue that investors may value host official visits for two reasons: (1) the signal received about possibility of firm accessing government-controlled resources via promotion or protection; and (2) the certification effect from such high-powered visitors elevating the firm's reputation and legitimacy. Results from an event study analysis of 84 high-ranking government official visits in China from 2003 to 2011 indicate that investors responded positively to host firms as reflected by stock market performance. Furthermore, the greatest positive reactions accrued to firms experiencing weaker prior period financial performance and to firms that are privately compared to state-controlled. Managerial summary: Do visits by high-ranking government officials influence firm stock market performance? Studying a sample of Chinese public firms that hosted 84 visits by the Chinese President and the Premier from 2003 to 2011, we find that investors reacted positively to such visits compared with a group of non-host firms from the same industry and with similar financial performance and size. In addition, firms with weaker prior financial performance and private firms benefit the most from hosting such visits. Our findings imply that hosting visits of high-ranking government officials can signal future government-controlled resource inflows and boost host firms' reputation and legitimacy.