Jun 2016, Volume 10 Issue 2

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  • Orginal Article
    Pingping Fu,Jun Liu,Xiaoli Ji,Su Zhong,Guangtao Yu

    As a trait, leader confidence has been examined in major leadership theories, such as transformational/charismatic, Pygmalion, and empowering leadership. However, how confidence affects leadership effectiveness remains an empirical question. Conceptualizing leadership confidence in two behavioral approaches—demonstrating self-confidence (DC-self) and demonstrating confidence in followers (DC-follower)—this study tests the independent effects of the two DC behaviors as well as their interactive effects with firm environment on followers’ commitment. Results of Hierarchal Linear Modeling analyses suggest that both DC behaviors have significant impact on follower commitment and their effects attenuate each other. Results also reveal that DC-self interacts with firm environment to influence follower commitment. The effect of DC-self on follower commitment is stronger in a more competitive environment. Those findings and their implications for leadership research and practice are discussed.

  • Orginal Article
    Ming-Hua Liu,Cherrie Chen Xu

    This study investigates how equity investors react to bank loan announcements in China using an event study methodology. By estimating the average Cumulative Abnormal Returns (CARs) over the event period and controlling for the impact of other factors such as borrower, lender and loan characteristics, we find that the overall reaction is negative. However, the results for the two sub-sample periods are different. After the onset of the Global Financial Crisis, the average CARs are no longer statistically different from zero, indicating higher lending standards and improvement in the quality of credit analysis of Chinese banks.

  • Orginal Article
    Tingru Cui,Deliang Wang,Jerry Wenjie Ping

    With the chaotic nature of disasters and the uncertainty that surrounds them, the understanding of how to achieve effectiveness in crisis management remains limited. This paper investigates how government applies various capabilities in the crisis management process contingent upon the nature of different disasters. By demonstrating the crisis management process from a contingent perspective, the capabilities that government should emphasise can vary according to the nature of the disaster. This study develops a framework for crisis management to serve as a guide when government is facing a crisis.

  • Orginal Article
    Zhe Li,Deming Dai,Fang Wang

    Movement of major fund1 flows has great impact on capital markets, especially in China. This study investigates the relationship between abnormal main fund movements and firm’s earnings management behavior, specifically, whether the abnormal main fund movements cause firms to keep a low profile for “self-protection” from being detected by the government. The empirical results of this study suggest that: (1) The mandatory disclosure of the “Top-ten circulating stockholders” requirement does not only reduce information asymmetry between investors and listed firms, but also strengthens and improves the efficiency of related government regulations in detecting disclosure of false information. This, in turn, increases the risk of being detected for firms with earnings management activities. (2) After abnormal main fund movements, relevant firms significantly reduce the level of earnings management to avoid attention from the public and regulatory agencies. (3) Using political connections as a proxy for the “shield effect” to mask political cost, we show that the negative relation between abnormal main fund movements and earnings management exists only for the subsample of firms without political connections. This paper provides a new angle for political cost study, and suggests that traditional political cost hypothesis should be further generalized.

  • Orginal Article
    Gert Bruche,Yingying Hong

    This study investigates the internationalization and resource accumulation process of the three largest Chinese construction machinery companies: Sany, XCMG and Zoomlion. It takes a longitudinal approach to analyze the internationalization process of the three companies over the last 25 years. Although the three companies’ paths in the early acquisition of technologies and firm-specific advantages (FSA) differ significantly, however, their internationalization process exhibits similar pattern. They all exploit the same home-country based FSAs in their south-south expansion into other emerging markets, and seem to mimic each other in their strategic moves. In the south-north expansion into advanced economies they skip the export stage and rely almost exclusively on foreign direct investment of both forms, greenfield and M&A, to pursue asset augmenting objectives and overcome their “liability of origin”. The study concludes by discussing several topics of interest, such as the implications of accelerated resource accumulation, the impact on competition with advanced multinationals in the home market or possible effects on the level of state support and risk taking behavior in the internationalization process by the companies’ ownership type.

  • Orginal Article
    Fengbin Wang,Chi Zhang,Chunyan Sun,Zhexiong Tao

    With a focus on the alignment between business strategies and organization design, this illustrative case study describes and analyzes the evolution and reform of Midea’s organizational structure when confronting both internal and external changes. As one of China’s biggest and fastest-growing household appliance enterprises, Midea adopted, discarded and readopted an M-form1 organizational structure within a five-year period from 1997. This case study first investigates the reasons behind Midea’s reform toward decentralization and the formation of governing rules to balance centralization and decentralization. Different decentralized structures are then contrasted basing on product segments, business streams or even key subsidiaries acting as second-tier group companies. After its trial transformation into an H-form company that holds majority shares in several incorporated subsidiaries, Midea chose to switch to a group company incorporated structure soon after its leadership transition in 2012. Preceding the shortening of the group’s ownership chain was the construction, refinement, and evolution of its 9+2+4 divisional structure. This case study is prepared to provoke discussion and thoughts on the (re)design of a properly decentralized structure suitable for large-sized companies with multiple businesses and the links with external and internal factors.