CONTACTS: Eric Whittington, Assistant Director of External Relations [email protected] Patricia Divine, Assistant Dean for External Relations (336) 758-5030 or (800) 722-1622 Babcock Graduate School of Management Wake Forest University
Tip sheet September 1998
1. Asian stability could trigger inflationary pressures in U.S.
The Southeast continues to outperform the nation in terms of income and job growth and low unemployment. Nationally, a stabilization of the Asian crisis may place inflationary pressures on the U.S. economy, according to Gary Shoesmith, director of the Center for Economic Studies. "As another threat to higher inflation and interest rates, the beneficial inflation effects of the Asian crisis will reverse once the situation there stabilizes," Shoesmith said in his Fall Quarterly Review of the North Carolina, Southeastern and national economies. "In particular, as Asian currencies begin regaining lost ground, import prices will start increasing again, rather than decreasing. At that point, the Fed will likely shift to a tighter monetary stance."
The Center for Economic Studies' Fall Quarterly Review is available online at http://www.mba.wfu.edu/ces/. The entire report and individual charts may be viewed and printed.
2. Mergers and creating value Mergers in various industries continue to create an impact on U.S. competitiveness and on the labor force, and renew questions about the appropriate public policy toward mergers and other types of significant restructuring. Sherry Jarrell, assistant professor of finance and economics at Wake Forest, has developed a technique for determining how the bidder and target firms would have performed (during a five-year period following a completed merger) had the merger not occurred. Her results show that the majority of merged firms studied performed significantly better than they would have had they remained independent. "Unlike previous research or common wisdom in the popular press, mergers between firms in similar industries are no more likely to create value than those between dissimilar firms," Jarrell said.
3. Successful downsizing requires maintaining trust If a company must downsize its work force, preserving trust and employee commitment among the remaining employees is a must. Companies contemplating significant layoffs should take steps to ensure that the downsizing effort meets the business' objectives. Aneil Mishra, an associate professor of management, participated in research that indicates that companies should be willing to share information about the state of the business with their workers, among many other steps, if a downsizing is to be successful.
4. Businesses need strategy to influence public policy Public policies can greatly affect a company's corporate performance, and business leaders should understand that more than money is needed for them to successfully help shape federal public policy, according to Mike Lord. Research conducted by Lord, an assistant professor of management, indicates that successful strategies go far beyond campaign donations. "Corporate-affiliated PAC contributions certainly can help favorable candidates get elected or re-elected over the long run, but such contributions are of limited effectiveness for influencing most important legislative issues, especially those that are contentious," Lord said.
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