Dr Christos Mavrovitis (Mavis)

This study examines factors influencing full (FP) versus partial (PP) privatization and how markets respond to government control in PP and FP firms. Exploiting China's 2005 NTS reform as a natural experiment, we find that treated PP firms experienced significantly lower post-reform performance, driven by persistent private benefits of control, failure to adopt value-maximizing behaviour, and unchanged liquidity and information asymmetry. In contrast, FP firms eliminated all NTS, maximized value; showed higher stock market liquidity and lower information asymmetry, improved market performance; and gained market confidence in the post-reform period. These findings challenge the effectiveness of China's authoritarian approach to private sector development.

In line with increased liquidity offered by asset sales, our findings show that firms selling large assets prior to acquisitions are more likely to use cash as payment method. Additionally, we find that in subsequent cash acquisitions firms using cash stemming from asset sales experience higher announcement abnormal returns compared to firms using cash from other sources of funds such as internally generated cash flows, debt financing, and equity issuance which are linked to agency costs and information asymmetry effects. The higher wealth effects suggest that funds from asset sales are inflicted with relatively lower adverse valuation effects that are associated with other sources of funds.

This study investigates the factors driving full privatization versus partial privatization and examines how markets respond differently to government control in partially (PP) and fully (FP) privatized firms. Using China’s 2005 Non-Tradeable Shares (NTS) reform as a natural experiment, the analysis leverages the timing of NTS conversion, determined by an administrative lock-up rule beyond firms’ control. Results indicate that Tobin’s Q was significantly lower for treated PP firms retaining some NTS, reflecting weak market confidence due to persistent private benefits of control and absence of firm value maximization. Conversely, FP firms eliminated all NTS, minimising government interference and gaining market trust – consequently their market value did not fall after 2005. These findings challenge the effectiveness of China's authoritarian approach to private sector development.

This study proposes a new direct method of measuring managerial overconfidence using an acquisition setting. CEOs with significantly higher synergies forecast error (SFE), measured as the deviation between acquisition forecasted operating synergies and actual realized operating synergies, are more likely to exhibit traits of overconfidence. In support of this view, we find that synergies forecast error is positively related to takeover premium and negatively related to acquirer returns. Additionally, validation tests confirm that high SFE firms conduct more diversifying acquisitions. Reflecting, as well, the ex-ante power of the overconfidence measure in other settings, high SFE firms have a positive relation with capital expenditures, leverage, and innovation, and negative relation with equity issues.

We examine the impact of firm-specific investor sentiment (FSIS) on stock returns for negative and positive earnings surprises. Using a measure constructed from firm-specific tweets, we find that FSIS has a greater impact on stock returns for negative relative to positive earnings surprises. We further show that the impact of FSIS is greater for firms whose valuation is uncertain and difficult to arbitrage. Moreover, we provide evidence of return reversals over post-announcement periods. Our results highlight the importance of firm-specific investor sentiment around earnings announcements.

Literature on the “power of words” has emphasized the importance of a firm’s corporate communication as a source of legitimacy and reputation in the eyes of its stakeholders. We argue that it is not just the content or style of a firm’s communication about its strategy, but also the alignment between this communication and its subsequent strategic actions that help building legitimacy amongst stakeholders and creating firm performance. We introduce the organizationlevel construct of “strategic integrity” to capture the notion of alignment between a firm’s strategy communication and its subsequent strategic actions. We investigate the importance of strategic integrity using the case of the German pharmaceuticals firm Bayer AG in the context of its portfolio restructuring. The results of an event study of 98 acquisitions/divestments indicate that stock markets react positively to strategic integrity.

An involuntary CEO change is a significant event in a firm’s lifetime. This study examines whether forced CEO replacements improve firm performance through new acquisitions and auxiliary corporate strategies. We find CEO successors’ acquisitions to be associated with significantly higher shareholder gains relative to their predecessors and the average CEO. The post-turnover acquisition performance turnaround is more pronounced in the presence of greater board independence, hedge fund investors, and CEO experience. CEO successors also create sizeable shareholder value by reversing prior investments through asset disposals and discontinuing operations. Our evidence suggests that CEOs should be dismissed when they underperform.

Research and development (R&D) investments are strategic choices that firms make to create and sustain competitive advantage. Extant literature proposes that firms’ R&D investments and their profitability and capital market performance are reciprocally related. However, the direction of these relationships and their temporal nature are unclear. We take a real options perspective to argue that the long-run firm performance effects of R&D investments are better than their short-term ones, and that the initial level of R&D intensity influences the nature of these relationships. We apply panel vector autoregression (P-VAR) to a sample of 6623 U.S. firms over the 1990–2020 period in order to test our hypotheses. Our results indicate that increases in R&D intensity have negative effects on profitability in the short term, yet these effects diminish relatively quickly. The effects of increases in R&D intensity on capital market performance are positive and persist over time. Consistent with our predictions, they are contingent on the initial levels of R&D intensity and performance. The findings are fundamentally in line with the real options perspective employed here, yet they add important nuance to our understanding of when, how, and under which conditions R&D investments and firm performance affect one another.

We examine whether involuntary CEO replacements pay off by improving firm prospects. We find CEO successors’ acquisition investments to be associated with significantly higher shareholder gains relative to their predecessors and the average CEO. This improvement in post-turnover acquisition performance appears to be a function of board independence, hedge fund ownership, and the new CEO’s relative experience. CEO successors also create sizeable shareholder value by reversing prior investments through asset disposals and discontinuing operations and by employing more efficient investment strategies. Our evidence suggests that firing a CEO pays off.

This study explores the impact of joint corporate asset restructuring decisions where firms sell an asset in order to fund a subsequent acquisition (selling-to-buy). We find that firms with asset sales are associated with increased acquisition probability. The effect is more pronounced for financially constrained firms. We also show that, in addition to the established improved firm efficiency from focus-increasing asset sales, financially constrained firms obtain the necessary funds to conduct focus-increasing acquisitions, improving further their efficiency. This translates into both higher long-run operating performance and stock abnormal returns at the asset sale announcement.