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Growth Opportunities (growth + opportunity)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	86%
Life Sciences	6%
2 Other Domains	8%

Distribution within Business, Economics, Finance and Accounting

General & Introductory Finance & Investments	39%
General & Introductory Economics	11%

Selected Abstracts

Assets in Place, Growth Opportunities, and IPO Returns

FINANCIAL MANAGEMENT, Issue 3 2005
Kee H. Chung
We consider a simple model positing that initial public offering price is equal to the present value of an entity's assets in place and growth opportunities. The model predicts that initial return is positively related to both the size and risk of growth opportunities. Consistent with this prediction, we find initial return to be positively related to both the fraction of the offer price that is accounted for by the present value of growth opportunities and various proxies of issue uncertainty. We also find that IPO investors equate one dollar of growth opportunities to approximately three quarters of tangible assets. [source]

Environmentally induced migration: the importance of food

ECOLOGY LETTERS, Issue 6 2006
Ivan C. Olsson
Abstract The decision to migrate or not is regarded as genetically controlled for many invertebrate and vertebrate taxa. Here, we show that the environment influences this decision. By reciprocally transplanting brown trout (Salmo trutta L.) between two sections in a river, we show that both migratory and non-migratory behaviour can be environmentally induced; migratory behaviour developed in a river section with high brown trout densities and low specific growth rates, whereas non-migratory behaviour developed in a section with low brown trout densities and high specific growth rates. In a laboratory experiment, we tested the effect of food availability on the development of migratory and non-migratory body morphologies and found that most brown trout became migrants when food levels were low but fewer did so at high food levels. Thus, the decision to migrate seems to be a plastic response, influenced by growth opportunities. [source]

Determinants of the Size and Composition of US Corporate Boards: 1935-2000

FINANCIAL MANAGEMENT, Issue 4 2009
Kenneth M. Lehn
We examine the determinants of the size and composition of corporate boards for a sample of 82 US companies that survived during the period 1935-2000. Our hypotheses lead to predictions that firm size, growth opportunities, merger activity, and geographical expansion are important determinants of these board characteristics. We find empirical evidence that the four variables are significant determinants of the size and/or composition of boards. After controlling for these determinants of board characteristics, we find no robust relation between firm performance and either board size or composition. [source]

The Impact of Fundamentals on IPO Valuation

FINANCIAL MANAGEMENT, Issue 2 2009
Rajesh Aggarwal
We examine how initial public offering (IPO) valuation has changed over time by focusing on three time periods: 1986-1990, January 1997 to March 2000 (designated as the boom period), and April 2000 to December 2001 (designated as the crash period). Using a sample of 1,655 IPOs, we find that firms with more negative earnings have higher valuations than do firms with less negative earnings and firms with more positive earnings have higher valuations than firms with less positive earnings. Our results suggest that negative earnings are a proxy for growth opportunities for Internet firms and that such growth options are a significant component of IPO firm value. [source]

Moving from Private to Public Ownership: Selling Out to Public Firms versus Initial Public Offerings

FINANCIAL MANAGEMENT, Issue 1 2008
Annette B. Poulsen
We study two alternative means to move assets from private to public ownership: through the acquisition of private companies by firms that are public (sellouts) or through initial public share offerings (IPOs). We consider firm-specific characteristics for 1,074 IPO and 735 sellout firms to identify differences in growth, capital constraints, and asymmetric information between the two types of transactions. Our results suggest that firms move to public ownership through an IPO when they have greater growth opportunities and face more capital constraints. We provide a better understanding of the firm-specific characteristics that lead firms to go public. [source]

Stock Liquidity and Investment Opportunities: Evidence from Index Additions

FINANCIAL MANAGEMENT, Issue 3 2006
John R. Becker-Blease
We examine the relation between stock liquidity and investment opportunities in a sample of firms experiencing an exogenous liquidity shock. We find a positive relation between changes in capital expenditures and changes in stock liquidity, indicating that stock liquidity influences corporate investment decisions. This relation is robust to alternative measures of growth opportunities, and is consistent with a liquidity premium in equity returns. That is, an increase in liquidity effectively expands the set of positive NPV projects because it reduces the cost of capital. The results suggest that liquidity-enhancing events benefit shareholders by increasing the pool of viable growth opportunities. [source]

Assets in Place, Growth Opportunities, and IPO Returns

A Required Yield Theory of Stock Market Valuation and Treasury Yield Determination

FINANCIAL MARKETS, INSTITUTIONS & INSTRUMENTS, Issue 1 2009
Christophe Faugère
Stock market valuation and Treasury yield determination are consistent with the Fisher effect (1896) as generalized by Darby (1975) and Feldstein (1976). The U.S. stock market (S&P 500) is priced to yield ex-ante a real after-tax return directly related to real long-term GDP/capita growth (the required yield). Elements of our theory show that: (1) real after-tax Treasury and S&P 500 forward earnings yields are stationary processes around positive means; (2) the stock market is indeed priced as the present value of expected dividends with the proviso that investors are expecting fast mean reversion of the S&P 500 nominal growth opportunities to zero. Moreover, (3) the equity premium is mostly due to business cycle risk and is a direct function of below trend expected productivity, where productivity is measured by the growth in book value of S&P 500 equity per-share. Inflation and fear-based risk premia only have a secondary impact on the premium. The premium is always positive or zero with respect to long-term Treasuries. It may be negative for short-term Treasuries when short-term productivity outpaces medium and long run trends. Consequently: (4) Treasury yields are mostly determined in reference to the required yield and the business cycle risk premium; (5) the yield spread is largely explained by the differential of long-term book value per share growth vs. near term growth, with possible yield curve inversions. Finally, (6) the Fed model is partially validated since both the S&P 500 forward earnings yield and the ten-year Treasury yield are determined by a common factor: the required yield. [source]

Hedging, Financing and Investment Decisions: A Simultaneous Equations Framework

FINANCIAL REVIEW, Issue 2 2007
Chen-Miao Lin
D84; G31; G32 Abstract We empirically investigate the interactions among hedging, financing, and investment decisions. We argue that the way in which hedging affects a firm's financing and investing decisions differs for firms with different growth opportunities. We find that high growth firms increase their investment, but not leverage, by hedging. However, we also find that firms with few investment opportunities use derivatives to increase their leverage. [source]

Dividend Initiations and Asymmetric Information: A Hazard Model

FINANCIAL REVIEW, Issue 3 2003
Sanjay Deshmukh
G35 Abstract This paper investigates the dynamics of dividend policy using a hazard model. Specifically, the paper examines dividend initiations for a sample of firms that went public between 1990 and 1997. These dividend initiations are examined in the context of an alternative explanation based on the pecking order theory. The results indicate that the probability or the hazard rate of a dividend initiation is negatively related to both the level of asymmetric information and growth opportunities and positively related to the level of cash flow. These results are consistent with a pecking order explanation but inconsistent with a signaling explanation. [source]

A spatially explicit, individual-based model to assess the role of estuarine nurseries in the early life history of North Sea herring, Clupea harengus

FISHERIES OCEANOGRAPHY, Issue 1 2005
JOACHIM MAES
Abstract Herring (Clupea harengus) enter and remain within North Sea estuaries during well-defined periods of their early life history. The costs and benefits of the migrations between offshore spawning grounds and upper, low-salinity zones of estuarine nurseries are identified using a dynamic state-variable model, in which the fitness of an individual is maximized by selecting the most profitable habitat. Spatio-temporal gradients in temperature, turbidity, food availability and predation risk simulate the environment. We modeled predation as a function of temperature, the optical properties of the ambient water, the time allocation of feeding and the abundance of whiting (Merlangius merlangus). Growth and metabolic costs were assessed using a bioenergetic model. Model runs using real input data for the Scheldt estuary (Belgium, The Netherlands) and the southern North Sea show that estuarine residence results in fitter individuals through a considerable increase in survival probability of age-0 fish. Young herring pay for their migration into safer estuarine water by foregoing growth opportunities at sea. We suggest that temperature and, in particular, the time lag between estuarine and seawater temperatures, acts as a basic cue for herring to navigate in the heterogeneous space between the offshore spawning grounds at sea and the oligohaline nursery zone in estuaries. [source]

Working capital management in SMEs

ACCOUNTING & FINANCE, Issue 3 2010
Sonia Baños-Caballero
G30; G31; G32 Abstract This paper analyses the determinants of Cash Conversion Cycle (CCC) for small- and medium-sized firms. It has been found that these firms have a target CCC length to which they attempt to converge, and that they try to adjust to their target quickly. The results also show that it is longer for older firms and companies with greater cash flows. In contrast, firms with more growth opportunities, and firms with higher leverage, investment in fixed assets and return on assets have a more aggressive working capital policy. [source]

Agency problems and audit fees: further tests of the free cash flow hypothesis

ACCOUNTING & FINANCE, Issue 2 2010
Paul A. Griffin
G34; G35; M41; M42 Abstract This study finds that the agency problems of companies with high free cash flow (FCF) and low growth opportunities induce auditors of companies in the US to raise audit fees to compensate for the additional effort. We also find that high FCF companies with high growth prospects have higher audit fees. In both cases, higher debt levels moderate the increased fees, consistent with the role of debt as a monitoring mechanism. Other mechanisms to mitigate the agency costs of FCF such as dividend payout and share repurchase (not studied earlier) do not moderate the higher audit fees. [source]

Thermal performance of juvenile Atlantic Salmon, Salmo salar L.

FUNCTIONAL ECOLOGY, Issue 6 2001
B. JONSSON
Summary 1,Experimental data for maximum growth and food consumption of Atlantic Salmon (Salmo salar L.) parr from five Norwegian rivers situated between 59 and 70°N were analysed and modelled. The growth and feeding models were also applied to groups of Atlantic Salmon growing and feeding at rates below the maximum. The data were fitted to the Ratkowsky model, originally developed for bacterial growth. 2,The rates of growth and food consumption varied significantly among populations but the variation appeared unrelated to thermal conditions in the river of population origins. No correlation was found between the thermal conditions and limits for growth, thermal growth optima or maximum growth, and hypotheses of population-specific thermal adaptation were not supported. Estimated optimum temperatures for growth were between 16 and 20 °C. 3, Model parameter estimates differed among growth-groups in that maximum growth and the performance breadth decreased from fast to slow growing individuals. The optimum temperature for growth did not change with growth rate. 4, The model for food consumption (expressed in energy terms) peaked at 19,21 °C, which is only slightly higher than the optimal temperature for growth. Growth appeared directly related to food consumption. Consumption was initiated ,2 °C below the lower temperature for growth and terminated ,1·5 °C above the upper critical temperature for growth. Model parameter estimates for consumption differed among growth-groups in a manner similar to the growth models. 5,By combining the growth and consumption models, growth efficiencies were estimated. The maximum efficiencies were high, 42,58%, and higher in rivers offering hostile than benign feeding and growth opportunities. [source]

Private Equity, Corporate Governance, and the Reinvention of the Market for Corporate Control

JOURNAL OF APPLIED CORPORATE FINANCE, Issue 3 2008
Karen H. Wruck
In the early 1980s, during the first U.S. wave of debt-financed hostile takeovers and leveraged buyouts, finance professors Michael Jensen and Richard Ruback introduced the concept of the "market for corporate control" and defined it as "the market in which alternative management teams compete for the right to manage corporate resources." Since then, the dramatic expansion of the private equity market, and the resulting competition between corporate (or "strategic") and "financial" buyers for deals, have both reinforced and revealed the limitations of this old definition. This article explains how, over the past 25 years, the private equity market has helped reinvent the market for corporate control, particularly in the U.S. What's more, the author argues that the effects of private equity on the behavior of companies both public and private have been important enough to warrant a new definition of the market for corporate control,one that, as presented in this article, emphasizes corporate governance and the benefits of the competition for deals between private equity firms and public acquirers. Along with their more effective governance systems, top private equity firms have developed a distinctive approach to reorganizing companies for efficiency and value. The author's research on private equity, comprising over 20 years of interviews and case studies as well as large-sample analysis, has led her to identify four principles of reorganization that help explain the success of these buyout firms. Besides providing a source of competitive advantage to private equity firms, the management practices that derive from these four principles are now being adopted by many public companies. And, in the author's words, "private equity's most important and lasting contribution to the global economy may well be its effect on the world's public corporations,those companies that will continue to carry out the lion's share of the world's growth opportunities." [source]

Corporate Cash Policy and How to Manage it with Stock Repurchases

JOURNAL OF APPLIED CORPORATE FINANCE, Issue 3 2008
Amy Dittmar
At the end of 2004 total U.S. corporate cash holdings reached an all-time high of just under $2 trillion,an amount equal to roughly 15% of the total U.S. GDP. And during the past 25 years, average cash holdings have jumped from 10% to 23% of total corporate assets. But at the same time their levels of cash have risen, U.S. companies have paid out dramatically increasing amounts of cash to buy back shares. This article addresses the following questions: What accounts for the dramatic increase in the average level of corporate cash holdings since 1980? And why do some companies keep so much cash (with one fourth of U.S. firms holding cash amounting to at least 36% of total assets) while others have so little (with another quarter having less than 3%)? Why do companies pay out excess cash in the form of stock repurchases (rather than, say, dividends), and what explains the significant increase in repurchases (both in absolute terms and relative to dividends) over time? The author begins by arguing that cash reserves provide companies with a buffer against possible shortfalls in operating profits,one that, especially during periods of financial trouble, can be used to avoid financial distress or provide funding for promising projects that might otherwise have to be put off. Such buffers are particularly valuable in the case of smaller, riskier companies with lots of growth opportunities and limited access to capital markets. And the dramatic increase in corporate cash holdings between 1980 and the present can be attributed mainly to an increase in the risk of publicly traded companies,an increase in risk that reflects in part a general increase in competition, but also a notable change over time in the kinds of companies (smaller, newer, less profitable, non-dividend paying firms) that have chosen to go public. At the other end of the corporate spectrum are large, relatively mature companies with limited growth opportunities. Although such companies tend to produce considerable free cash flow, they also tend to retain relatively small amounts of cash (as a percentage of total assets), in part because of shareholder concern about the corporate "free cash flow problem",the well-documented tendency of such companies to destroy value through overpriced (often diversifying) acquisitions and other misguided attempts to pursue growth at the expense of profitability. For companies with highly predictable earnings and investment plans, dividends provide one means of addressing the free cash flow problem. But for companies with more variable earnings and less predictable reinvestment, open-market stock repurchases provide a more flexible means of distributing cash to shareholders. Unlike the corporate "commitment" implied by dividend payments, an open market stock repurchase program creates what amounts to an option but not an obligation to distribute funds. The value of such flexibility, which increases during periods of increased risk and uncertainty, explains much of the apparent substitution of repurchases for dividends in recent years. [source]

Making Financial Goals and Reporting Policies Serve

JOURNAL OF APPLIED CORPORATE FINANCE, Issue 4 2004
Corporate Strategy: The Case of Progressive Insurance
The main. nancial goal of Progressive Insurance, the third largest underwriter of auto insurance in the U.S., has remained the same since the late 1960s. Expressed in three words, "96 and grow," the goal tells the company's managers to pursue all growth opportunities while maintaining a "combined ratio" no higher than 96, or what amounts to a minimum 4% spread between revenues (premiums) and costs (including expected losses). Thanks in part to the clarity of mission provided by this goal, the company has produced an average 15% rate of growth in revenues and earnings, along with a remarkably stable 15% return for its shareholders, since going public in 1971. Progressive's simplicity and clarity of mission is also partly responsible for another of the company's distinctive policies: product pricing that, while disciplined, is aggressive and highly decentralized. Having invested some $500 million per year developing statistical models for pricing individual customer risks and acquisition costs, the company was among the. rst in its industry to underwrite "non-standard" risks. And aided by sophisticated pricing models, each of Progressive's 100 or so local product managers are charged with adapting those models to come up with premiums for their own regions. To go along with its strategic and organizational innovations, Progressive also has an innovative disclosure policy. Apart from SEC reports, the company's communications seldom mention earnings or earnings per share, and the company has never provided earnings guidance. With the passage of Reg. FD in late 2000, the company brie. y considered offering guidance. But in the spring of 2001, the board decided instead to provide monthly releases of its realized combined ratio. Since adoption of this new disclosure policy, Progressive has seen a 50% drop in the volatility of its stock price. [source]

DISAPPEARING DIVIDENDS: CHANGING FIRM CHARACTERISTICS OR LOWER PROPENSITY TO PAY?

JOURNAL OF APPLIED CORPORATE FINANCE, Issue 1 2001
Eugene F. Fama
The proportion of U.S. firms paying dividends drops sharply during the 1980s and 1990s. Among NYSE, AMEX, and Nasdaq firms, the proportion of dividend payers falls from 66.5% in 1978 to only 20.8% in 1999. The decline is due in part to an avalanche of new listings that tilts the population of publicly traded firms toward small firms with low profitability and strong growth opportunities,the timeworn characteristics of firms that typically do not pay dividends. But this is not the whole story. The authors' more striking finding is that, no matter what their characteristics, firms in general have become less likely to pay dividends. The authors use two different methods to disentangle the effects of changing firm characteristics and changing propensity to pay on the percent of dividend payers. They find that, of the total decline in the proportion of dividend payers since 1978, roughly one-third is due to the changing characteristics of publicly traded firms and two-thirds is due to a reduced propensity to pay dividends. This lower propensity to pay is quite general,dividends have become less common among even large, profitable firms. Share repurchases jump in the 1980s, and the authors investigate whether repurchases contribute to the declining incidence of dividend payments. It turns out that repurchases are mainly the province of dividend payers, thus leaving the decline in the percent of payers largely unexplained. Instead, the primary effect of repurchases is to increase the already high payouts of cash dividend payers. [source]

THE CEO: A VISIBLE HAND IN WEALTH CREATION?

JOURNAL OF APPLIED CORPORATE FINANCE, Issue 3 2000
C. K. Prahalad
Commensurate with the growth of their pay packages and public visibility, the role of the CEO in the corporate value creation process has increased significantly in recent years. This article argues that sustained wealth creation in a corporation has three distinct elements. The first and most basic is the selection of the lines of business in which to operate; this element is probably the most visible manifestation of CEO action in large corporations today. The second element is the value creation model, which answers the question: How is this particular set of businesses expected to add value over and above the sum of the values of each business or asset category standing alone? The third element is the internal governance system, which establishes the corporate structure and administrative processes of the firm and, perhaps even more important, defines the corporate values that drive the strategic and operational priorities of the different business units. The authors suggest that the essence of the work of the CEO is to develop and maintain a balanced relationship among these three elements of wealth creation and to ensure that the relationship evolves in the face of changing circumstances. CEOs are inevitably faced with dilemmas in managing this process,in particular, the need to balance continuity and change and to maintain the integrity of short-term performance disciplines while encouraging not only investment in growth opportunities (which can hurt near term performance), but also experimentation and collaboration among business units (which are difficult to measure and reward with most performance measurement and incentive schemes). Adding to the difficulties of managing such dilemmas, visibility and a strong public image are often thrust upon (if not sought by) CEOs, who must then determine how they can use that image to strengthen the commitment of their employees and investors. [source]

Factors Associated with Differences in the Magnitude of Abnormal Returns Around NYSE Versus Nasdaq Firms' Earnings Announcements

JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 9-10 2001
Youngsoon Susan Cheon
This study provides an explanation for the ,exchange effect' puzzle documented in prior accounting research. Grant (1980) finds that the magnitude of earnings announcement week abnormal returns is higher, on average, for firms traded over-the-counter than for NYSE firms. Atiase (1987) shows that this incremental ,exchange effect' persists even after controlling for firm size. We investigate potential explanations for this incremental exchange effect. We first show that even after controlling for differences in firm size, Nasdaq firms have less rich information environments and enjoy greater growth opportunities than NYSE firms. We then investigate whether differential predisclosure information environments and/or growth opportunities can explain the incremental exchange effect. The results indicate that although the absolute magnitude of the earnings announcement-related abnormal returns is inversely related to proxies for the amount of predisclosure information, the incremental exchange effect cannot be explained by differences in the predisclosure information environment. In contrast, after controlling for differences in growth opportunities across NYSE versus Nasdaq firms, and investors' heightened sensitivity to Nasdaq firms' growth opportunities in particular, there is no significant incremental exchange effect (whether or not we control for predisclosure information). These results suggest that the incremental exchange effect puzzle documented in prior research is more likely to reflect growth-related phenomena than differences in the predisclosure information environment. [source]

Residual income, non-earnings information, and information content

JOURNAL OF FORECASTING, Issue 6 2009
Ruey S. Tsay
Abstract We extend Ohlson's (1995) model and examine the relationship between returns and residual income that incorporate analysts' earnings forecasts and other non-earnings information variables in the balance sheet, namely default probability and agency cost of a debt covenant contract. We further divide the sample based on bankruptcy (agency) costs, earnings components and growth opportunities of a firm to explore how these factors affect the returns,residual income link. We find that the relative predictive ability for contemporaneous stock price by considering other earnings and non-earnings information is better than that of models without non-earnings information. If the bankruptcy (agency) cost of a firm is higher, its information role in the firm's equity valuation becomes more important and the accuracy of price prediction is therefore higher. As for non-earnings information, if bankruptcy (agency) cost is lower, the information role becomes more relevant, and the earnings response coefficient is hence higher. Moreover, the decomposition of unexpected residual income into permanent and transitory components induces more information than that of the unexpected residual income alone. The permanent component has a larger impact than the transitory component in explaining abnormal returns. The market and industry properties and growth opportunity also have incremental explanatory power in valuation. Copyright © 2008 John Wiley & Sons, Ltd. [source]

Price-Earnings Ratios in Japan: Recent Evidence and Further Results

JOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 1 2001
Shashi Kumar
We analyse the disparity between Japanese and US price-earnings ratios between 1975 and 1995 with a view to find if the accounting differences between two countries can explain this disparity. Our results indicate that the accounting differences can explain a significant part but not all differences between Japanese and US price-earnings ratios. We further investigate the effect of other possible economic factors on the behaviour of Japanese price-earnings ratios and find that changing expectations about growth opportunities, changes in the real returns and differing inflation also do not fully explain the behaviour of the price-earnings ratios. Therefore, the possibility of the existence of the speculative bubble needs to be explored to fully explain the behaviour of Japanese share price-earnings ratios during this period. [source]

Managers as Monitors: An Analysis of the Non-executive Role of Senior Executives in UK Companies

BRITISH JOURNAL OF MANAGEMENT, Issue 1 2000
Noel O'Sullivan
An important aspect of current governance practice is the use of non-executive directors to monitor the behaviour of company management. This paper examines the extent to which senior executives are utilized as non-executives in large UK companies. The results suggest that executive directors are not an important source of non-executive directors. The average number of non-executive directorships held by each executive is 0.22. Indeed, 85% of executives hold no additional directorships. The holding of non-executive directorships is positively related to the strength of board monitoring in the executive's company, executive tenure and company size. Executives in companies with greater growth opportunities and operating in regulated industries are less likely to hold non-executive directorships. [source]

Residual income, non-earnings information, and information content

Dynamics of Capital Structure: The Case of Korean Listed Manufacturing Companies,

ASIAN ECONOMIC JOURNAL, Issue 3 2006
Hyesung Kim
C33; D21; G32 In this paper, we develop a model of dynamic capital structure choice based on a sample of Korean manufacturing firms and estimate the unobservable optimal capital structure using a wide range of observable determinants. Unbalanced panel data of Korean listed firms for the period 1985,2002 is used. In addition to identifying and estimating the effects of the determinants of capital structure, we take into consideration some Korea-specific features, such as the structural break before and after the financial crisis and firms' affiliation to chaebol business groups. Our results indicate that the optimal capital structure has been affected by the financial crisis. Although the results suggest that chaebol-affiliated firms have higher optimal level of leverage and adjust their capital structure faster than non-chaebol firms, firms' leverage might be associated with factors other than chaebol-affiliation, such as size, profitability and growth opportunity. [source]

Sustainability marketing for the poorest of the poor

BUSINESS STRATEGY AND THE ENVIRONMENT, Issue 3 2006
Manfred Kirchgeorg
Abstract Recent work is reconceptualizing global poverty as an attractive growth opportunity for firms, that can simultaneously alleviate the problem of poverty. This notion has major implications for the sustainability of global society in general, and for the concepts and practice of marketing in particular. It is the purpose of this paper to explore, and bring attention to, these important implications, and to offer conceptual and practical suggestions for a sustainability marketing for the poor. Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment. [source]