We evaluate the link between chief executive officer (CEO) industry tournament incentives (ITIs) and the product-market benefits of corporate liquidity. We find that ITIs increase the level and marginal value of cash holdings. Furthermore, ITIs strengthen the relation between excess cash and market-share gains, especially for firms that face significant competitive threats. Additionally, for firms with excess cash, higher ITIs lead to increased research and development (R&D) expenses, capital expenditures, and spending on focused acquisitions as well as reduced payouts. Overall, our findings suggest that ITIs increase the value of cash by incentivizing CEOs to deploy cash strategically to capture its product-market benefits.

Purpose: In recent years, hotels in China have been interested in leveraging social media platforms to facilitate interactions with and among consumers. Such brand engagement efforts on social media networks are believed to promote brands through co-creation of consumer experiences and values. This study was conducted in the context of Chinese hotels. The paper aims to identify two forms of brand engagement via social media platforms – consumer-initiated engagement and firm-initiated engagement – and to examine their effects on hotels’ display advertising effectiveness. Design/methodology/approach: This study collected a comprehensive data set. First, the authors collected display advertisement data from two hotel chains in China. Second, the authors gathered the two hotels’ engagement data from Weibo. A generalized linear mixed model was used in data analysis. Findings: The findings of the study indicate that both forms of brand engagement on social media network sites positively influence display advertising effectiveness. Moreover, for a strong brand, consumer-initiated engagement is more influential in increasing display advertising effectiveness; however, for a weak brand, firm-initiated engagement gains more clicks and conversions from advertisements. Practical implications: As hotels in China continue to leverage online media platforms to reach, engage with and co-create value with potential and existing consumers, this study provides managers with insight as to how they can achieve higher advertising effectiveness by engaging with consumers on a consistent basis on social media. Originality/value: This study mainly contributes to recent increasing research on engagement and value co-creation by providing a lens through which to assess the relationship between brand engagement via social media networks and online display advertising effectiveness.

Mergers and Acquisitions (M&A) advisors add value by overcoming the information asymmetries between acquirers and targets, but may also push bad deals through due to incentive misalignment stemming from contingent fees. In-house deals are those acquisitions with in-house advisors. We examine the wealth effect of M&A deals advised by in-house advisors versus outside advisors. About 15% of acquisitions are done via in-house advisors. In-house deals result in higher CARs to targets, insignificant wealth effects to acquirers, but lower cumulative abnormal combined returns. This finding is consistent with the view that the information asymmetry problem is more severe than the agency conflict in non-financial acquisitions. Thus, targets are more likely to extract wealth away from the acquirers, or the overall deal quality is lower. Also, consistent with the view that investment banks have an incentive to see deals completed, the completion rate is higher for deals with an outside advisor

In this study, we examine the intra-industry effect of proxy contests. Proxy contests convey the information of common industrial risks or expected competitive relationship change. We find significant negative abnormal returns in the group of competitors of target firms with negative abnormal returns, and such negative abnormal returns become larger for similar-size competitors. In contrast, there are no significant abnormal returns for competitors of target firms with positive abnormal returns. These findings are consistent with the information-based theory but not the competitive theory.

This study analyzes the wealth impact on M&A deals when the acquirers in the financial industry utilize external versus in-house advising services. A quasi-natural observatory setting is applied to investigate the costs and benefits of retaining a financial advisor. Based on agency theory, information asymmetry and conflict of interest both exist in the setting of M&A deals when acquirers use advisory services. We first find that almost 40% of financial acquirers are more likely to use in-house advising services, the frequency of which is significantly higher than that of non-financial acquisitions previously documented. Further, we find that in certain complex deals of greater information asymmetry, the frequency of retaining advisory services in-house is even higher. This finding suggests that for financial acquirers who possess expertise in the M&A market, the concern of conflict of interests (i.e., misaligned incentives) between the acquirers and their advisors are more salient than the concern of information asymmetry. More importantly, using the two-stage regressions method controlling the endogeneity of the choice between in-house versus external advisory services, this study finds that the three-day abnormal returns around the acquisition announcements are 4.5% higher for the acquirers retaining in-house advisory services, 18.7% higher for the corresponding target, and the combined merger gains are 2.2% higher. Overall, our findings provide direct evidence of the agency cost when an external advisor is hired and document the incremental values that the financial acquirers’ in-house advisory services may create.