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LUBS5901M

Quantitative Methods for International

Semester One 2019/20

Section A There are three questions in this section. Please answer ALL of them.

Question 1.

A research team investigates the rise of tax-driven cross-border merger and acquisitions (M&As) among US firms. In 2014, about 66% of the US cross-border M&As were primarily tax  driven  (i.e.,  acquiring  firms  in  countries  having  more  competitive  tax  systems). Therefore,  the  team   is   interested   in  examining   how  the   US–target  country  tax competitiveness  difference  affects  the  US  acquirers’  return  of  cross-border  M&As worldwide.

Propose two effective sampling strategies for this study. Please explain how to implement and justify the suitability of the proposed strategy.

[12 marks]

Question 2.

A manufacturing company is analysing the international sales performance in three foreign markets (labelled as 1, 2, and 3). The performance in the last two years are presented in the boxplot (see Figure 1.1).

Figure 1.1. Boxplot of foreign sales

Foreign market

Please compare the shape and spread of sales performance across the three foreign markets. If the manufacturing company considers reshoring its international operation back to the home country and only keeps one foreign market, could you please advise which two markets to exit? Explain your choice.

[12 marks]

Question 3.

You are exploring the impact of CEOs’ international working experience on SMEs export performance. 2000 samples are selected. The descriptive statistics for the two variables are:

Mean

Standard

deviation

Minimum

Q1

Q2

Q3

Maximum

CEO

international experience

12.22

9.12

1

5

10

16

150

Export performance (£ million)

17.91

1.78

10.78

15.89

16.81

17.91

28

In order to further investigate the relationship between the two variables, a scatter plot is drawn:

CEO International Experience

Please  describe  the  distribution  of  the  CEOs’  international  experience  and  export performance, respectively, based on the descriptive statistics and discuss the relationship between them.

[12 marks]

Section B There are two questions in this section. Please answer ALL of them.

Question 4.

Researchers aim to examine how public disclosure of corporate social irresponsibility (CSI) affect the foreign subsidiary governance mechanisms of multinational enterprises (MNEs) in order to mitigate the negative impact on firm reputation. They distinguish between two different types of governance mechanisms – Informational control and ownership control:

Information control: defined as to what extend MNEs efficiently collect and share information with all related global stakeholders in order to prevent further reputation erosion and to end continuation of doubts about their overall trustworthiness;

Ownership control: defined as to what extend the focal firm owns the source of the negative incident.

Four hypotheses are developed:

Hypothesis 1. Public disclosure of an MNEs CSI in a host country is associated with higher subsequent information control of foreign subsidiaries in that country.

Hypothesis 2. Public disclosure of an MNEs CSI in a host country is associated with lower subsequent ownership control of foreign subsidiaries in that country.

Hypothesis 3. The positive effect of public disclosure of an MNEs CSI in a host country on its subsequent information control of foreign subsidiaries in the country is stronger when the host country has higher press freedom.

Hypothesis 4. The negative effect of public disclosure of an MNEs CSI in a host country on its subsequent ownership control of foreign subsidiaries in the country is stronger when the host country has higher press freedom.

In the regression analysis, the public disclosure of CSI incidents is measured by the number of news reports of incidents of CSI in a focal host country in one year. The moderator press freedom is measured by the annual Press Freedom Index that Reporters Without Borders produce. Meanwhile, a number of control variables are considered:

•   CSI disclosure in other countries (measured by the number of CSI incidents in countries other than the focal host country),

•    Host-country population,

•   Foreign subsidiary size (measured by the number of employees),

•   Common language (measured by a dummy variable that equals  1 if the official languages in the two countries are the same),

•   Resource-seeking FDI (measured by a dummy variable that equals 1 if the focal subsidiaries  operate   in   labour-seeking   industries  or  industries  seeking   raw materials),

•    Geographic distance (measured by the distance between the two capital cities),

•   2008 Financial crisis (measured by a dummy variable that equals 1 for year 2008).


The correlation table and regression results are reported in Table 2.1 and Table 2.2.

Table 2.1 Correlations

Information control Ownership control

Information control

Ownership control

CSI disclosure in the host country host-country press freedom

CSI disclosure in other countries Host-country population Foreign subsidiary size Common language

Resource-seeking FDI

Geographic distance

2008 Financial

1

0.019

0.030

-0.079

-0.118

-0.016

-0.027

-0.034

0.004

0.036

0.038

0.019

1

-0.008

0.143

0.020

-0.081

-0.109

0.041

-0.017

-0.012

0.004