London Business School

About: London Business School is a education organization based out in London, England, United Kingdom. It is known for research contribution in the topics: Portfolio & Equity (finance). The organization has 1138 authors who have published 5118 publications receiving 437980 citations. The organization is also known as: LBS.

Strategic Groups: Theory, Research and Taxonomy

Abstract: This paper discusses the concept of strategic groups, focusing upon the importance of intra-industry strategic groupings in understanding differences across firms within an industry. The problems involved in identifying strategic groups within industries are examined through a comprehensive review of recent studies. It is demonstrated that much of the research has used surrogates for elements of a firm's strategic direction, e.g. vertical integration, product range, R & D expenditure, to suggest bases by which creative and sustainable groups are formed. The authors argue that certain theoretical concepts such as mobility barriers, isolating mechanisms and controllable variablesprovide much firmer bases for identifying strategic groups within industries. Thus, taxonomies for understanding the nature of strategic group formulation can be developed. Implications of the strategic group concept for such strategic issues as the structure-performance linkage, firm mobility, patterns of rivalry, industry evolutionand firm growthare then examined. The paper concludes by indicating fruitful directions for strategic group research in the context of the strategic management field.

The Paradox of Success: An Archival and a Laboratory Study of Strategic Persistence Following Radical Environmental Change

Abstract: An archival study of the airline and trucking industries over a ten-year period and a laboratory study revealed that greater past success led to greater strategic persistence after a radical environmental change, and such persistence induced performance declines. The laboratory study also demonstrated that dysfunctional persistence is due to greater satisfaction with past performance, more confidence in the correctness of current strategies, higher goals and self-efficacy, and less seeking of information ixom critics.

The Role of Accruals in Asymmetrically Timely Gain and Loss Recognition

Abstract: We investigate the role of accrual accounting in the asymmetrically timely recognition of unrealized gains and losses (i.e., prior to the actual realization of those losses in cash). This role of accrual accounting has not been directly recognized in the literature. We show that non-linear accruals models are a substantial specification improvement, explaining up to three times the amount of variation in accruals as conventional linear specifications such as Jones (1991). Conversely, we conclude that conventional linear accruals models, by omitting the role of accruals in asymmetrically timely loss recognition, offer a comparatively poor specification of the accounting accrual process. We also conclude that linear specifications of the relation between earnings and future cash flows, ignoring the implications of asymmetrically timely loss recognition (conditional conservatism), substantially understate the ability of current earnings to predict future cash flows. These findings have important implications for our understanding of accrual accounting, and for researchers using estimates of discretionary accruals, earnings management and earnings quality from misspecified linear accruals models.

Portfolio Choice in the Presence of Housing

Abstract: I show that investment in housing plays a crucial role in explaining the patterns of cross sectional variation in the composition of wealth and the level of stockholdings observed in portfolio composition data. Due to investment in housing, younger and poorer investors have limited financial wealth to invest in stocks, which reduces the benefits of equity market participation. House price risk crowds out stockholdings, but this crowding out effect is larger for low financial net-worth. Transaction costs of changing houses reduce the frequency of house trades and also lead investors to reduce their exposure to stocks. In the model as in the data leverage is positively correlated with stockholdings.