This article presents the dilemma faced by real investors with the emergence of a takeover bid on an existing company. The private benefits that accrue from control mean that defence mechanisms are deployed in the event of a takeover that is considered to be hostile. The article has been written with the sole intention of providing an educational case study for the teaching of Mergers and Acquisitions and Corporate Governance. The character Ricky Spanish is fictional and does not disguise the identity of any real investor. Local press articles and official documents such as company information prospectuses were examined during the preparation of the case study. The facts presented are accurate but the article is not intended to be a work of history. Theory-based analysis permits an approach to the problem of assessed value, which is contrasted with market value. Different scenarios and a...

In recent years, risk-adjusted compensation packages with stock options have increase in popularity, volume, and scope. The objective of this paper is to document the divergence between the cost to the firm and the value to the employee of compensations stock options. Simulations reaching numerical examples beyond previous work that halted at theoretical approaches achieve this goal. The cost to the firm and the valuation for a diversified investor would coincide. However, the employee that receives stock options is bearing more firm-related risk that he would under a portfolio optimization strategy. Therefore, the undiversified employee assigns a lower value to the option. The results presented in this paper may help to better understand the preferences for certain types of options over others, from the firm’s and from the holder’s perspective.

In this paper we propose a behavioral explanation for the survival of poorly performing asset managers. We argue that, in general, asset managers make use of copious amounts of correct but useless information to convince investors about their supposed superior ability to interpret the market. Their marketing skills and motivational speeches seem to be enough to maintain asset managers in business regardless of the results. We present data that show how bad a number of asset managers can be. We also show how prevalent asset managers’ underperformance is. We argue that some Wall Street professionals are able to fool almost all of their clients most of the time into believing that they add value in the services they provide while the data show that this is not true. What we cannot show with this data is whether managers actually believe they are as good as they claim they are, or are not ...

When do firms derive value from investing in environmental initiatives (CEIs)? We examine stock market responses to the announcements of 183 CEIs by 71 Fortune 500 firms during the period 2002 to 2008. We find that the stock market reacts positively to such announcements but does not react differently to CEIs concerning a firm’s inputs, throughputs, and outputs. We also find that there is an inverted U-shaped relationship between the timing of a CEI and the abnormal stock market return following its announcement. Overall, this study shows that timing is a relevant explanatory factor for the value firms derive from investing in environmental action.