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Corporate governance, Shari'ah governance and financial flexibility: Evidence from the MENA regionThis article investigates the relationship between corporate governance structures and financial flexibility for conventional and Islamic banks in the Middle East and North Africa (MENA) region. We construct a novel financial flexibility index (FFI) for the banking sector and examine the impact of the Shari'ah supervisory board (SSB), board size, and risk governance on financial flexibility. We find that board size and risk governance significantly affect banks' financial flexibility for Islamic and conventional banks. However, Shari'ah governance rules determine how that relationship is manifested in Islamic banks. We show that SSB size and busy SSBs enhance Islamic banks' financial flexibility. Our results show that Western corporate governance structures may lead to suboptimal financial flexibility. Banking policies should re-evaluate the impact of one-size-fits-all approaches to corporate governance while promoting ‘soft policies’ to banking regulation that are value-enhancing for the banking sector.
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The impact of ownership traits on acquisition behavior and performanceContext This doctoral thesis delves into examining ownership traits and their impact on corporate acquisition behavior, with a primary emphasis on family-owned and private equity-owned firms. The research investigates the decision-making process of these block holders when investing in firms, particularly the dilemma they face in choosing between monitoring efforts to maximize shareholder value and pursuing private motives. The studies build on the determining factors that influence each type of owner's inclination towards value maximization, considering their unique identity, correlated private motives, and the relative significance of these motives compared to potential financial gains they might forego in pursuing private benefits. Aim To investigate how shareholder identity affects the acquisition behavior and performance of firms. Studies Chapter one explores how private family firms select their targets, focusing on diversification, internationalization, and innovation in their acquisition strategies. Using Behavioral Agency Theory, the study argues that these firms tend to prioritize social and emotional wealth (SEW) over purely financial gains. The paper hypothesizes that this tendency leads family firms to approach target selection cautiously, for instance, leading towards an aversion to acquiring highly innovative or cross-border targets. In chapter two, the focus shifts to the influence of private equity (PE) investors on publicly listed firms, particularly in the context of Mergers & Acquisitions (M&A). The chapter suggests that the motivation to create value through M&A decisions depends on whether the PE firm's investment occurs before or after the firm's initial public offering (IPO). Chapter three addresses the agency cost associated with surplus capital in the PE industry and its implications for buy-and-build strategies. As the industry accumulates an increasing pool of unallocated capital, PE firms face mounting pressure to deploy it judiciously. The study contends that implementing buy-and-build strategies, which involve making add-on acquisitions in portfolio companies, can effectively channel excessive levels of unutilized capital. Findings The first chapter underscores that family-owned firms prioritize SEW over financial gains in target selection for acquisitions, resulting in a conservative approach. This preference is particularly pronounced when led by family CEOs and founders. In the second chapter, the study reveals that post-IPO PE investors enhance M&A performance, especially with greater board representation. In contrast, pre-IPO investors are associated with lower returns, particularly when they exert stronger board influence and the firm's stock liquidity is lower. Finally, the third chapter addresses the pressure faced by PE firms to efficiently deploy surplus capital, introducing the buy-and-build strategy as a response. It finds that this pressure can lead to more investments in add-on acquisitions and a larger propensity for those deals to be unrelated to the platform's core industry. Moreover, buyout returns tend to be lower for buyout targets owned by pressured PE firms.
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How to get your employer to invest in your training and developmentIf you need to ask your employer to invest in your development, our white paper explains how to go about it. Because learning new approaches doesn’t just benefit you – it benefits your employer too.
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Brand religions. Is it time to choose yours?If you’re taking your first steps into brand management, it can be challenging to even know how to start. And there can be a temptation to try to embrace all approaches to brand strategy – or switch between them as you develop your own brand identity. By thinking of branding as a religion, organisations can find focus externally and internally – which can drive business success. The big question is, which religion will be best for your organisation? This white paper gives organisations the ability to consider clearly which brand religion may work for them, and choose a principal approach that provides focus for the rest of the organisation.
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Building purpose-driven organisations. The new frontierPurpose can provide a North Star for an organisation – a consistent point of reference in an otherwise changeable business environment. It also creates certainty about what an organisation stands for and wants to achieve. In this white paper you'll learn how to become a purpose-built organisation that measurably improves business outcomes.
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Decision-making on ESG criteria in executive remuneration: Board perspectivesThis white paper investigates how boards decide on the inclusion of ESG (environmental – social – governance) criteria in executive incentive systems. ESG-driven incentives relate executive remuneration to a firm’s societal responsibilities and towards a broader set of stakeholders such as local communities, employees, customers, and the environment. Listed firms are increasingly adopting these criteria, but several important questions still remain regarding the reasons why boards adopt them and the challenges they face.
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Walking on the dark side of the moon. A day in the life of DEI managerIn recent years (especially after the rise of the Black Lives Matter movement in the wake of George Floyd’s murder in 2020), companies have stepped up their Diversity, Equity and Inclusion (DEI) awareness and practices. We see more and more job openings for DEI managers. When we talk to DEI professionals, we see that the DEI team has often moved from a voluntary entity to an integral part of the organigram – with KPIs, strategy, budget and paid workload for its members. At the same time, in the wake of new economic crises, we read more and more in the news of DEI functions being reduced or axed altogether. Earlier in 2023, Ellen McGirt reported on the findings from Revelio Labs that “a 33% churn rate for DEI-related roles at more than 600 companies engaged in layoffs, compared to 21% for non-DEI roles”. No wonder then that on 15 May 2023, when we met 22 members of the Diversity Managers Association of Belgium (DMAB), from 20 companies across over 12 different sectors (from public transport and finance to distribution and pharma, including DEI managers for non-profits) on our Brussels campus, to talk about the wellbeing and career sustainability of the DEI manager, naming the workshop “the dark side of the moon” turned out to be very appropriate. Most DEI professionals are doing what they do because there is a personal story fuelling the passion. Often enough, they have the experience of ‘difference’ and ‘otherness’ - either relating to themselves or their family. Which means that what we do is not a job; it has real stakes. On the bright side, this brings passion and resilience. On the dark side, it brings disappointment when change is slow, pain when you can’t make the difference you set out to make, and guilt when you are too tired to carry on. Social justice is not an empty noun. It is personal. With this white paper we invite you to take a walk on the ‘dark side’ of DEI implementation challenges, and explore together with us the challenges of such projects, and identify specific actions that DEI managers and organisations can take to address the complexities of DEI strategy execution.
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Strategy implementation - Leveraging people in adaptive strategyStrategy is about making fundamental choices on where to play and how to win to realise an organisation’s goals, and to deliver results within the context of those choices. This identifies two elements of the strategy process: Formulation (thinking) and implementation (doing)
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Digital twins in the supply chainLaunched on 11 April 1970, the Apollo 13 was nearly 56 hours into its flight to the Moon when an oxygen tank in the spacecraft’s service module exploded, forcing the crew to abandon their planned lunar landing and focus instead on finding a way to return safely to Earth. Thanks to the combined efforts of the astronauts on board and the Mission Control team at NASA, they made it: the proposed workarounds and recovery solutions were all first validated on the ground using simulators – copies, or twins, of the actual spacecraft and its components. But these twins were physical twins. Today, with the advancement and proliferation of digital technologies, digital twins are all the rage. What are they and how can they be used? These and other questions were answered in the webinar ‘Beyond the traditional supply chain: exploring the potential of digital twins’, organised by the Vlerick Centre for Smart People in the Smart Supply Chain.
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Understanding change in public organizations: A systematic review and research agendaPublic organizations are continuously required to change in part due to shifting political and societal preferences. While there is extant research demonstrating how change can be managed in public organizations, there is a lack of understanding concerning the holistic and systemic nature of public-sector change. This article aims to integrate empirical research on public-sector change in order to provide a conceptual framework centered on unravelling its holistic and systemic nature. A systematic literature review on change in public organizations is conducted which draws on quantitative articles published in journals indexed in SSCI’s Public Administration category. A total of 124 articles were identified by this review. The second part of this work builds on the insights that were generated through an in-depth analysis of 40 papers of the final paper set. For this purpose, 100 factors were extracted that have significant relationships with either the context of change or its impact. Lastly the retained factors were projected on the criteria of the Six Batteries of Change model. This model offers a holistic framework that is proved to be a key driver to boost change, based on empirical research in 111 organizations with various backgrounds. The projection provides valuable insights regarding the rational and emotional side of change in public organizations, their context and impact. This leads to recommendations for future research that is needed to counter the current change paradigms.
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Understanding change in public organizations: A systematic and integrative reviewPublic organizations are continuously required to change in part due to shifting political and societal preferences. While there is extant research demonstrating how change can be managed in public organizations, there is a lack of understanding concerning the holistic and systemic nature of public-sector change. This article aims to integrate empirical research on public-sector change in order to provide a conceptual framework centered on unravelling its holistic and systemic nature. A systematic literature review on change in public organizations is conducted which draws on quantitative articles published in journals indexed in SSCI’s Public Administration category. A total of 124 articles were identified by this review. The second part of this work builds on the insights that were generated through an in-depth analysis of 40 papers of the final paper set. For this purpose, 100 factors were extracted that have significant relationships with either the context of change or its impact. Lastly the retained factors were projected on the criteria of the Six Batteries of Change model. This model offers a holistic framework that is proved to be a key driver to boost change, based on empirical research in 111 organizations with various backgrounds. The projection provides valuable insights regarding the rational and emotional side of change in public organizations, their context and impact. This leads to recommendations for future research that is needed to counter the current change paradigms.
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In turbulent times, China and the EU need to collaborateThere is no doubt that we live in times where free trade is under pressure, with a rise in protectionism observed across the globe. A growing number of countries impose tariffs and other trade restrictions in order to shield their own markets from foreign competition.
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Price-cost margins and fixed costsThis paper introduces a new method which allows to simultaneously estimate price-cost margins and fixed costs in production, using standard production data on expenditures of inputs and revenue at the firm level. In particular, we exploit properties of the primal and dual price based and cost based Solow residual, in which we allow not only for the flexible treatment of capital (either fixed, variable or a combination of both) but also for the flexible treatment of other input factors, such as labor and intermediate inputs. We use a 30 year long firm level panel of Belgian firms to estimate price-cost margins and fixed costs as a share of revenue to show the following key results: Ignoring fixed costs in production, as in most of the literature, underestimates price-cost margins and overestimates excess profit margins. We also find that fixed costs as well as price-cost margins decline in the last three decades, pushing excess profit margins downwards, suggesting highly competitive markets in Belgium.
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Price-cost margins and fixed costsThis paper provides a new method to estimate price-cost margins in the presence of fixed costs of production. We exploit properties of the primal and dual revenue based and cost based Solow residual. Ignoring fixed costs in production underestimates price-cost margins and overestimates excess profit margins. Using a 30 year panel of Belgian firms we estimate price cost margins of 25.9% on average, with fixed costs as a fraction of sales of 23.4%. Fixed costs as well as price-cost margins have declined in the last three decades, pushing excess profit margins close to zero, suggesting competitive markets. The presence of fixed costs implies that price-cost margins might change not only due to a change in firms' market power, but also due to changes in the production process (i.e., the mix between variable and fixed costs) or even due to a combination of both. Our novel methodology is able to distinguish these underlying mechanisms, thereby providing an additional layer of insight to the ongoing academic and policy debate on firms' market power.