the case of royal ahold
Journal of Accounting and Public Policy 26 (2007) 328–375 www.elsevier.com/locate/jaccpubpol Investor relations, reputational bonding, and corporate governance:
The case of Royal Ahold
Abe de Jong a, Douglas V. DeJong b,*, Gerard Mertens a,
Peter Roosenboom a b a
Department of Financial Management, RSM Erasmus University, Netherlands
Tippie College of Business, University of Iowa, Iowa City, IA 52242, United States
Abstract
Royal Ahold (Koninklijke Ahold NV) was one of the major success stories in the
1990s and is one of the major failures, suffering a complete meltdown, in 2003. We investigate the strategy, investor relations, accounting transparency and corporate governance of Ahold; these elements jointly drive the firm’s performance over the past decade. Investor relations and its implications are an important but under researched aspect of the market’s belief formation process. For Ahold, investor relations is an important component of reputational bonding [Siegel, J., 2005. Can foreign firms bond themselves effectively by renting US securities laws? Journal of Financial Economics 75,
319–359]. Our clinical study documents investor relations’ influence on investor expectations. We then provide an in-depth analysis of the strategy, accounting transparency and corporate governance that lead to Ahold’s downfall. We provide insights and implications into these relationships that present theory and empirical studies have not fully addressed. Ó 2007 Elsevier Inc. All rights reserved.
*
Corresponding author. Tel.: +1 319 3350919; fax: +1 319 3351956.
E-mail addresses: ajong@rsm.nl (A. de Jong), douglas-dejong@uiowa.edu (D.V. DeJong), gmertens@rsm.nl (G. Mertens), proosenboom@rsm.nl (P. Roosenboom).
0278-4254/$ - see front matter Ó 2007 Elsevier Inc. All rights reserved. doi:10.1016/j.jaccpubpol.2007.03.002 A. de Jong et al. / Journal of Accounting and Public Policy 26 (2007) 328–375
329
JEL classification: F36; G38; K22; M40
The case of Royal Ahold
Abe de Jong a, Douglas V. DeJong b,*, Gerard Mertens a,
Peter Roosenboom a b a
Department of Financial Management, RSM Erasmus University, Netherlands
Tippie College of Business, University of Iowa, Iowa City, IA 52242, United States
Abstract
Royal Ahold (Koninklijke Ahold NV) was one of the major success stories in the
1990s and is one of the major failures, suffering a complete meltdown, in 2003. We investigate the strategy, investor relations, accounting transparency and corporate governance of Ahold; these elements jointly drive the firm’s performance over the past decade. Investor relations and its implications are an important but under researched aspect of the market’s belief formation process. For Ahold, investor relations is an important component of reputational bonding [Siegel, J., 2005. Can foreign firms bond themselves effectively by renting US securities laws? Journal of Financial Economics 75,
319–359]. Our clinical study documents investor relations’ influence on investor expectations. We then provide an in-depth analysis of the strategy, accounting transparency and corporate governance that lead to Ahold’s downfall. We provide insights and implications into these relationships that present theory and empirical studies have not fully addressed. Ó 2007 Elsevier Inc. All rights reserved.
*
Corresponding author. Tel.: +1 319 3350919; fax: +1 319 3351956.
E-mail addresses: ajong@rsm.nl (A. de Jong), douglas-dejong@uiowa.edu (D.V. DeJong), gmertens@rsm.nl (G. Mertens), proosenboom@rsm.nl (P. Roosenboom).
0278-4254/$ - see front matter Ó 2007 Elsevier Inc. All rights reserved. doi:10.1016/j.jaccpubpol.2007.03.002 A. de Jong et al. / Journal of Accounting and Public Policy 26 (2007) 328–375
329
JEL classification: F36; G38; K22; M40
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