The Business Review, Cambridge

Vol. 26 * Number 1 * Summer  2018

The Library of Congress, Washington, DC   *   ISSN 1553 - 5827

Online Computer Library Center, OH   *   OCLC: 920449522

National Library of Australia  *  NLA: 55269788

Peer Reviewed Scholarly Journal


All submissions are subject to a double blind review process


Main Page   *   Home   *   Scholarly Journals   *     Academic Conferences   *   Previous Issues   *   Journal Subscription


Submit Paper   *     Editorial Team   *    Tracks   *   Guideline   *   Sample Page   *   Standards for Authors / Editors

Members  *  Participating Universities   *   Editorial Policies   *   Jaabc Library   *   Publication Ethics

The primary goal of the journal will be to provide opportunities for business related academicians and professionals from various business related fields in a global realm to publish their paper in one source. The Business Review, Cambridge will bring together academicians and professionals from all areas related business fields and related fields to interact with members inside and outside their own particular disciplines. The journal will provide opportunities for publishing researcher's paper as well as providing opportunities to view other's work.  All submissions are subject to a double blind peer review process. The Business Review, Cambridge is a refereed academic journal which  publishes the  scientific research findings in its field with the ISSN 1553-5827 issued by the Library of Congress, Washington, DC.  No Manuscript Will Be Accepted Without the Required Format.  All Manuscripts Should Be Professionally Proofread Before the Submission.  You can use for professional proofreading / editing etc...The journal will meet the quality and integrity requirements of applicable accreditation agencies (AACSB, regional) and journal evaluation organizations to insure our publications provide our authors publication venues that are recognized by their institutions for academic advancement and academically qualified statue. 

The Business Review, Cambridge is published two times a year, December and Summer. The e-mail:; Journal: BRC  Requests for subscriptions, back issues, and changes of address, as well as advertising can be made via our e-mail address.. Manuscripts and other materials of an editorial nature should be directed to the Journal's e-mail address above. Address advertising inquiries to Advertising Manager.


Copyright: All rights reserved. No part of the material protected by this copyright notice may be reproduced or utilized in any form or by any means, including photocopying and recording, or by any information storage and retrieval system, without the written permission of JAABC journals.  You are hereby notified that any disclosure, copying, distribution or use of any information (text; pictures; tables. etc..) from this web site or any other linked web pages is strictly prohibited. Request permission / Purchase article (s):


Copyright 2000-2019. All Rights Reserved

The Impact of Firms’ Aggregate Risk on Long-Run Performance: IPO Versus Matched Non-IPO equities

Dr. Marie-Claude Beaulieu, Université Laval, FSA, Qc, Canada

Dr. Habiba Mrissa Bouden, Université Laval, FSA, Qc, Canada



This paper focuses on the long-run performance of issuing versus comparable non-issuing firms. While most of the previous literature only accounts for the common risk factors to compute abnormal returns, this paper investigates a new approach that also considers the firms’ aggregate volatility processes to measure the long-run performance of their calendar-time portfolios. Our findings show that the firms’ aggregate risks differently affect IPO and comparable non-IPO equities’ returns during the first three years of IPO trading. Our results also reveal that when controlling for the portfolio’s volatility risk, the apparent underperformance of IPOs with respect to non-issuing firms is a reflection of a lower response to the volatility risk of IPOs relative to their matched non-issuing peers.  Previous research on initial public offerings (IPOs) reveals a long-term anomaly of IPO underperformance (Ritter, 1991 and Loughran and Ritter, 1995), which challenges our understanding of asset pricing. These authors report that IPOs underperform the market (or/and similar non-issuing firms) in the long-run when they compare IPOs’ returns to common market index returns1 (and/or long-run returns of comparable firms2). Behavioral3, financial4, agency problems5 and IPO market timing6 are proposed explanations for this phenomenon. Meanwhile, empirical studies on IPO long-run performance present mixed evidence. Brav and Gompers (1997) and Gompers and Lerner (2003) did not find evidence of long-run IPO underperformance. Barber and Lyon (1997), Kothari and Warner (1997) and Gompers and Lerner (2003) documented that the IPO long-run performance depends on the methodology used to measure abnormal returns, which could explain the mixed evidence in the behavior of IPO performance.  We note that the previous IPO literature does not consider firm risk in the measurement of IPO abnormal returns. Previous studies, such as Ritter (1991), often use the cumulative abnormal returns7 (CARs) and the buy-and-hold abnormal returns8 (BHARs) that are used in classic event studies. They also use the method of calendar-time portfolios based on Jensen’s (1968) alpha from the capital asset pricing model (CAPM) and the intercept from the Fama and French9 (1993) (Carhart10, 1997) three (four)-factor model. Although the latter approaches account for systematic risk (through the market, size, book-to-market and momentum factors), none of them has considered the risk associated with firms in abnormal returns’ measurement. In addition, these traditional approaches do not consider the time-varying variance of returns. Since the issuing firm does not have a historical record in the stock market, the uncertainty associated with its fair value is higher than for traded firms, which increases the complexity of the IPO pricing process. To gauge the importance of risk exposure, we conduct a comparative study between IPOs and their matched peers (among non-IPOs) in terms of long-run performance and control for the risk. Engle et al. (1987) proposed the autoregressive conditional heteroskedasticity ARCH-M (in mean) model to account for a time-varying volatility term in the expected returns dynamics (mean equation). In the same vein, we use an approach in which both the level and the variance of long-run returns are modeled with a generalized autoregressive conditional heteroskedasticity GARCH-M (in mean) specification to investigate the relationship between risks and returns for IPO and matched non-IPO portfolios. The objective of this paper is to determine the impact of firms’ aggregate risk on long-run performance and reveal how risk is priced in both IPO and matched non-IPO equities.  Our results highlight the importance of pricing the risk associated with firms, which represents a part of the abnormality in the traditional measurement of abnormal returns.


Full text


The Value of Creativity: Creativity as a Valuable Form of Symbolic Capital in Organizations

Dr. Frederik Hertel, Aalborg University, Aalborg, Denmark

Dr. Irina A. Weisblat, Ashford University, San Diego, CA



 Previous analysis (Hertel, 2015) indicates that workers doing industrial cleaning in the food industry are forced to be creative in their everyday organizational life. Hertel and Wicmandy (2017) show that everyday creativity becomes a tool for reducing time consumption and, thereby, enables the workers to solve additional cleaning tasks that were not initially included in their work load. According to Richards (2010), there is a lack of scientific methods for assessing everyday creativity. We conducted a case analysis in order to clarify whether such creativity can be compared to and understood as a new kind of symbolic capital originally explored by Bourdieu (1990, 2002) and Portes (1998). It is our hypothesis that a method for valuing everyday creativity must be based on a three-dimensional model involving: the economic contribution, the social impact, and the character of the creativity involved. The first dimension is economic and it aims to rate the contribution to the production of surplus. The second dimension intends to rate the social impact of the everyday creativity produced. The third dimension is the character of the creativity and it rates the complexity of the everyday creativity involved.  The aim of this article is to contribute to the development of a method for valuing everyday creativity. Before addressing this question, we would like to illustrate why it is of interest to deal with valuing creativity. Our interest in the subject started when we were working on the case study (Hertel & Wicmandy, 2017) conducted in a company specialized in industrial cleaning in the food industry. We realized that industrial cleaners must be considered creative. However, it was not a big “C” (Richards, 2007) but a small “c”, also known as everyday creativity. We studied the team of cleaners composed of a mix of ethnic Danes with traditional attitudes and migrants from the Eastern European countries. The study began three years ago and the purpose of it was to understand the management style and methods used in developing strong teams of industrial cleaners. We observed the team manager who faced several challenges of daily operations. The case study provided a wealth of ethnographic material about the everyday work environment and team management. Before conducting the case study, we had an expectation that the team members received on-the-job-training and followed some specific instructions when performing their job duties. What we actually saw was a management style that allowed each individual team member to plan their work, execute the work activities, and evaluate the work performed. The team manager was responsible for the quality of work and ensured that his team did not apply fixed cleaning schemes or routines. Industrial cleaning is a complex process, and each team member must be creative in completing the assigned tasks.  The team of workers cleans at night and finishes before the production starts in the morning. Industrial cleaning is a four-stage process. First, the articles are flushed in water; then, soap (chemical substance) is applied; after that, the articles are flushed in water once again; and finally, another chemical compound is applied to ensure disinfection. Cleaning the production area and appropriate articles makes everything appear visibly nice and spotless. Yet, the cleaning process must also meet the invisible, bacteriological standards established by regulatory agencies and, sometimes, by retailers. At first glance, industrial cleaning seemed to be a repetitive process of eliminating all visible and invisible dirt. But these routines, or what we call mental schemes, immediately produced a number of problematic blind spots threatening the production. A blind spot is any article or part of the production area that are not noticed by the worker during cleaning and, therefore, not being properly handled. Blind spots can be unavoidable when the workers keep on following their cleaning routine. However, if workers do not strictly follow the fixed cleaning schemes prescribed by their instructions, the blind spots may be minimized or completely avoided due to a smaller chance of repeating the identical and highly problematic mistakes. Workers must frequently change their cleaning techniques, strategies, and methods in order to avoid reproducing the blind spots. The situation is associated with the everyday pressure of developing new cleaning processes.  Working under pressure of these constantly changing techniques, industrial cleaners must be creative in order to solve the occurring problems and complete their tasks. A continuous need for efficiency and reduced time consumption creates another pressure for creativity.


Full text


Is Corporate Social Responsibility a Guarantee of Financial Performance?– With the Multi-faceted Analysis on FTSE Global Index as an Example

Dr. Ming-Jian Shen, Takming University of Science and Technology, Taiwan



 Is there an inevitable contradiction between the pursuance of shareholder’s profit maximization and corporate social responsibility behaviour? This study uses the panel data model to analyse the FTSE Global Index of constituent stocks, based on various aspects such as industry characteristics, scale, country difference, and taxation; explores, in detail, the relationship between the CSR practised by the corporation, its levels, and financial performance as well as validates whether or not the implementation of CSR results in a tax-saving effect for the business and a time lag effect on financial performance. The results of the empirical analysis aid in the clarification of the perceived shortfall between CSR and performance in the past; for example, research showed that there is a variation in the performance of the return on assets and return on equity in financial industries, and verified that CSR indeed has a tax-saving and lag effect on financial aspects. Overall, the empirical results tend to support the hypothesis on the influence brought about by society and the implementation of CSR results in a positive influence on financial performance.  The subprime mortgage crisis in the United States in late 2007 and the filing of a formal request for bankruptcy protection in September 2008 by Lehman Brothers, an American investment company, led to a financial tsunami, the need to rebuild the global economy and a significant decline in economic growth. This was mainly due to the real estate bubble and high financial leverage on financial engineering operations, affecting the economy all over the world. Significant losses were experienced by investors which led them to conduct protests in the streets and accuse the banks of violating the role of a virtuous keeper.  As a channel for trading financial commodities, the banks aimed to achieve optimal profits but neglected risks and the obligation to provide honest information to its investors, thus creating a lose-lose situation for both the investors and the banks in a time when the economy was declining, which shows the importance of social responsibility between financial credits and investor protection. Moreover, when the contaminated milk powder incident broke out in 2008 in Mainland China – due to factors such as price competition, the Sanlu Group, a state-owned food company, added an industrial ingredient called “melamine” to the milk powder they produced, thereby causing serious harm to consumers’ physical health and life – further investigation discovered that “melamine” was also contained in the products of a lot of manufacturers and their related products were sold all over the world. This neglect in quality control by the corporations and government triggered the attention of the World Health Organization. In an example of an environmental protection issue, the British Petroleum Company, the world’s third largest energy resource company, encountered an oil spill incident in 2010. The spill stemmed from a sea-floor oil gusher that resulted in the explosion of Deepwater Horizon, which drilled on the British Petroleum-operated Macondo Prospect, causing a huge amount of crude oil to flow into the Gulf of Mexico. The oil spill caused extensive damage to marine life, which led to a high level of awareness and a call for improved safety precautions on oil extraction by the biological and environmental protection organizations. Furthermore, people all over the world started to attach more importance to the sustainability of the environment. In 2011, the tsunami that was formed due to the earthquake-damaged cooling system of a nuclear power plant in Fukushima, Japan, caused a radiation leak affecting surrounding residents living 30 km from the power plant.


Full text


Creating Synergies in Cross-Border M&A – Case Studies of Japanese Outbound Acquisitions

Dr. Shigeru Matsumoto, Professor, Kyoto University, Japan



 The success or failure of mergers and acquisitions (M&A) is determined by the synergies the company generates after the acquisition. In this paper, we explore the mechanism of synergy creation from overseas M&A. After investigating horizontal acquisitions from existing research and their relationship with synergies, we examine, in the form of case studies, three Japanese companies that have successfully realized synergies from their acquisitions of European businesses. We find that these companies achieved sustainable growth and used economies of scope, rather than of scale, by expanding their products and regional coverages in cross-border operations.  In 2016, the number of overseas acquisitions by Japanese companies reached 635, which was a record high for the third consecutive year; moreover, the amount spent on them exceeded 10 trillion yen, a record high for the second consecutive year. Due to the maturity of the domestic market, an increasing number of Japanese corporate managers are seeking growth overseas. Internal reserves of Japanese companies exceeding 400 trillion yen (Ministry of Finance, 2017) combined with a historically unprecedented monetary easing policy meant that the acquisition activity has continued. On the other hand, the management of several companies became deadlocked after acquisition. Even recently, reviewing synergies and profit plans, leading companies such as Japan Post, Toshiba, and Kirin have reported significant impairment losses in relation to overseas acquisitions.  An acquisition starts with negotiations in which the buyer offers the target company a price that includes a premium on the standalone value of the business. If the sellers, or in other words, the shareholders of the target company are not satisfied with this premium amount, they will not agree to the acquisition, and it will not proceed. For the buyer, this premium is a payment for control and, partly, a prepayment for the value that will be created after the acquisition. As the acquiring company expects to add greater value to the target, it incorporates these synergies and justifies the premium. Accordingly, an impairment loss after an acquisition can be considered a recognition of an overly optimistic outlook in relation to synergies. How can overseas acquisition lead to sustainable growth in profits? This is a major challenge for the management of Japanese companies that have embarked on M&As in earnest. In this paper, we will present case studies of three Japanese companies, whose business sites we visited, and outline their process of synergy creation. Finally, the sources of synergies and the management approaches after the acquisition that elicited them will be shown. This paper seeks to answer the question: How are synergies generated in outbound acquisitions? The objectives of acquisitions are different in each case; however, achieving profit growth by creating synergies remains the ultimate goal. Referring to the synergistic effect that one plus one is greater than two, Ansoff (1965) introduced the concept of value creation through acquisition. Sirower (1997) defined synergies as the excess profits earned by the integrated company after the acquisition over the sum of the individual profits of the acquiring and acquired companies. For evaluating enterprise value, Shaver (2006) defined synergies as the difference between the present value of future profits earned by the acquired company through integration after an acquisition, and the present value of future profits it would be expected to earn if there was no acquisition.  Regarding outbound acquisitions by Japanese companies, Matsumoto (2014) surveyed 116 cases from 1985 to 2001 with acquisition prices of at least 10 billion yen and found that nearly 70% were cases of horizontal integration in the form of the acquisition of a similar business. These were acquisitions with the objectives of increasing global market share, establishing local production, and adding to the distribution network. On the other hand, horizontal-type integration accounted for more than half of the 51 failure cases (out of 116), in which the acquiring company ended up withdrawing from or selling the business it acquired at a loss. It appears that in these cases, synergies have not been realized from horizontal integration conducted overseas. Here, we shall briefly explore the current hypotheses on the management after an acquisition.  The management of the acquiring company examines whether to grant autonomy to the management of the acquired company or absorb it fully. Research in the United States has established that with highly similar businesses, integration by absorption is more common (Larsson & Finkelstein, 1999), and less autonomy is granted to the acquired company (Datta & Grant, 1990).


Full text


The Relationship Among Research Quotient, Firm Performance, and Biotechnology Industry

Dr. Han-Ching Huang, Chung Yuan Christian University, Taiwan R.O.C.

Calista Amelia Irawan, Chung Yuan Christian University, Taiwan R.O.C.



 Innovation is one of the drivers of economic growth since innovation can increase the market value by producing new products with competitive advantage. Traditionally, innovation is proxied by patent. Nonetheless, patent is not universal, since more than 50% companies in COMPUSTAT do not patent their new products (Cooper, Knott, and Yang, 2017). Therefore, we use Research Quotient (RQ) provided by Cooper, Knott, and Yang (2017) as an indicator of innovation to avoid the above flaws since RQ is not based on patent or citation data. Specifically, the RQ measure is better at capturing the value creation of a firm owing to innovation. In this paper, we explore the differences between biotechnology industry with higher level of R&D intensity and other industries with lower level of R&D intensity. We find RQ has a positive impact on firm value, proxy by Market-to-Book Value. Contrary to our hypothesis, we find that the relation between RQ and future stock return (or firm value) is lower in biotechnology industry than in other industries.  Firm innovation are important to firm growth and performance. Nevertheless, Lev and Zarowin (1999) document that a firm must allocate some budget for R&D spending, which is calculated as incurred expense, to commit to research-based innovation. Because R&D may have negative effect on earnings in short term period, some managers are not prone to invest in R&D. MacKenzie (2005) argues that there is an uncertain time lag between initial research spending and product revenue, which could result in unprofitability for that firm.  Patents have traditionally been associated with innovation of countries and firms (Van der Eerden and Saelens, 1991). Patents can be defined as indicators of important technology positions and innovative activity, which can help policy makers and analysts to measure weak and strong areas in national or firm innovation systems. Hirshleifer, Hsu, and Li (2013) argue that patent information enables a firm to estimate other characteristics, such as R&D efficiency and stock market value. Therefore, we can use the number of patents controlled by a firm to value a firm’s intangible assets. The higher patent grant is associated with a higher probability of future profit since patent grant is usually represented potential a new product in the future. Nonetheless, the marketability of a patent is still uncertain. Usually, the patent grants do not directly produce future profitable products, and they just bring a small effect on market value. However, Patel and Ward (2011) find that the patent system provides some information to indicate which patents are more likely to generate future profits. To assess the patent importance, we can use the citations of a patent to value the profitability of invention (Trajtenberg, 1990; Hall and Bagchi-Sen, 2005). Patel and Ward (2011) argue that using citations to patents could be a measure of patent value. Thus, patents and citations are measures of innovative output. Moreover, Hirshleifer, Hsu, and Li (2013) document that approved patents are usually the way to officially introduce the innovations to the public. Prior literature generally uses patent to measure innovation of firms. Nevertheless, patent as an indicator also has some shortcomings. Cooper, Knott, and Yang (2017) document that patents are not universal, because more than 50% of companies in COMPUSTAT don’t patent their new products.  However, it does not mean that firms that do not patent their products do not innovate.  Firms decide not to patent their products for different reasons; for instance, to file and defense for patents requires high cost, and patents also expose the innovative products in the risk of being copied by other parties. To overcome the unreliability of patent as an innovation indicator, there is another way of measuring firm innovation, called Research Quotient (RQ). RQ may explain the optimal budget for research because RQ is defined as the ability of firm to generate revenues from its budget that is allocated for R&D investment (Cooper, Knott, and Yang, 2017). Using RQ as an indicator of firm innovation is better than other indicators because RQ measures the productivity of R&D department. That is, RQ can describe how much fund a firm allocated for R&D department to exploit their capabilities to produce a new innovative product that can be the firm’s competitive advantage and be transformed into revenues.  Hirshleifer, Hsu, and Li (2013) investigate the impact of firm innovation on stock market return or firm value. They explain the innovation in association with the innovative efficiency (IE). RQ can help a firm decide the effectiveness of R&D investment relative to the other investments and observe how R&D expenditure can affect a firms market value. Cooper, Knott, and Yang (2017) use RQ to investigate the impact of firm innovation on firm’s stock market returns and its firm market value.  Biotechnology industry has special characteristic, such as high cost and long-time research to develop a new product. After passing through many stages, a new product could be failed. Considering the above risk, some managers even cut their investment on R&D to achieve short-term orientation and better number of earnings on financial report (Sood and Tellis, 2009). Biotechnology, as a firm with relatively higher level of R&D intensity, is expected to have higher productivity in creating new products, compared to other industries with the same size. Higher productivity in creating new product is associated with higher revenues. Thus, we explore the Relationship among Research Quotient, Firm Performance, and Biotechnology Industry. 


Full text



Copyright: All rights reserved. No part of the material protected by this copyright notice may be reproduced or utilized in any form or by any means, including photocopying and recording, or by any information storage and retrieval system, without the written permission of JAABC journals.  You are hereby notified that any disclosure, copying, distribution or use of any information (text; pictures; tables. etc..) from this web site or any other linked web pages is strictly prohibited. Request permission / Purchase article (s):


Member: Association of American Publishers (AAP), Professional / Scholarly Publishing, New York

Member: Chamber of Commerce of Beverly Hills, Los Angeles, California.

Index: The Library of Congress, Washington, DC:    ISSN: 1540 – 7780

Index: Online Computer Library Center, OH:   OCLC: 805078765 

Index: National Library of Australia: NLA: 42709473

Index: Cambridge Social Science Citation Index, CSSCI.

Contact us   *   Site Index   *   Copyright Issues   *   About us

Copyright 2000-2019. All Rights Reserved