FINE 434 Lecture Notes - Lecture 7: Knowledge Acquisition, Information Source, Franchising
Document Summary
Corporate governance was not strong enough to prevent shareholder value destruction. Excellent example of good case study research; four general points: Large shareholders are mixed blessing if they suffer agency problems themselves. Managerial discretion not limited to fcf, but also proceeds from divestitures. To induce value-enhancing use of divestiture proceeds, executive compensation crucial. Networks of cross-holdings and board interlocks undermine accountability of boards. Remarkably, the authors did this case study relying only on public sources. A(cid:374)al(cid:455)sis of (cid:396)elatio(cid:374)ships should (cid:271)e do(cid:374)e (cid:449)ithi(cid:374) the (cid:272)o(cid:374)te(cid:454)t of a fi(cid:396)(cid:373)"s o(cid:448)e(cid:396)all st(cid:396)ategi(cid:272) pla(cid:374)(cid:374)i(cid:374)g. Choice to engage in these relationships should be made with shareholder interests in mind. Combination of assets from two or more firms placed into a separate business entity. Jv timing similar to m&as (correlation over 0. 95): driven by same factors affecting total investment activity. Risk reduction: expansion of activities with smaller required investment. Managers refuse to share expertise with counterparts from other firm. Participants have something of value to jv.
