what policy adjustments in the eu ets truly affected the carbon prices abstract carbon market becomes increasingly popular as a cost effective instrument to mitigate co 2 emissions however its construction is a learning by doing process and needs consistent regulatory updates in order to deliver optimal effects this paper uses the event study method to assess the impacts of different policy adjustments on the eua returns in the european union emissions trading scheme eu ets since 2005 comparing to existing studies that focus on the impact of a single policy this paper provides a complementary reference on if and to what extent policy adjustments can impact the carbon prices by classifying all regulatory update events into six categories its key findings are as follows first aggregate impacts of total 50 events studied are low while impacts of events having underlying negative impacts are higher than those having underlying positive impacts second 24 events have significant impacts on eua returns and are coherent to their theoretical impacts except one event third events having negligible impact on eua returns are those that are announced not for the first time or those having no impact on co 2 quotas supply and demand finally there are different impact patterns some events have different impacts on short end and long end carbon prices

the effects of regulatory policies on the cost of debt for electric utilities an empirical investigation this article develops a model of debt cost determination for regulated electric utilities based on an application of finance theory estimation of the model allows the hypothesis that regulatory policy directly influences the cost of debt to be tested and also enables the specific effects attributable to individual regulatory policy variables to be examined regulatory decisions are found to have statistically and economically significant effects on the cost of debt for electric utilities and the most important effects are associated with the treatment of construction work in progress for ratemaking purposes the extent of regulatory delay and whether or not interim rate relief is provided copyright 1989 by the university of chicago

the impact of regulation on the riskiness of electric utilities abstract the impact of regulation on public utility riskiness has been investigated using common stock systematic risk stock beta we show that the stock beta confounds the relevant risk arising out of regulation with the riskiness because of other factors our illustration with a sample of electric utilities underscores the importance of this distinction and contrary to the literature does not support stigler s capture theory view of regulation

dividend stripping risk exposure and the effect of the 1984 tax reform act on the ex dividend day behavior this article investigates the importance of risk exposure and the effects of the 1984 tax reform act on the ex dividend day behavior the tax reform appears to have inhibited short term trading activities by increasing the risk exposure of incorporated traders moreover stocks for which existing listed options permitted the reduction of risk through hedged dividend stripping strategies were affected much less from the new tax code than their nonoptionable counterparts this implies that risk affects investors dividend yield choice and that the ex dividend day behavior may be caused in part by the existence of risk premia copyright 1989 by the university of chicago

market response to banks granting lines of credit abstract prior research has shown and this paper confirms that when the market becomes aware a line of credit is granted the borrower s stock has a positive and significant reaction the borrower s reaction is used to identify the exact date the market becomes aware of the granting of the line of credit this date is used as a one day window to investigate whether the bank s stock also reacts this reaction will be most obvious with large lines of credit all lines of credit larger than us 1 billion granted during the years 1993 1996 are investigated the results show as predicted a positive and significant reaction by the bank s stock

the wealth effect and diamond risk structure of financial regulation the objective of this article was to evaluate the effect of announcements of financial regulation on risk and return in the vietnamese equity market the techniques used for the purpose of analysing risk and return include event study and non parametric tests as well as asset pricing models supplemented with interaction variables and a variety of arch like specifications such as garch tarch egarch and parch we find evidence for the wealth effect the presence of delayed response and a risk shifting behaviour in the form of diamond risk structure our results show that abnormal returns are present around the announcements of operating rules and other stock market regulations abnormal returns can also be obtained after considering legal documents such as circulars and decisions

effects of the 1970 bank holding company act evidence from capital markets this study measures the effects of the 1970 amendment to the bank holding company bhc act on the profitability and risk of bhcs using capital market data differences in abnormal returns and risk among three portfolios of bank shares which differ in their regulatory status are examined in various periods preceding and following the enactment no significant differences in performance and no change in the relative risk of any pair of portfolios were observed thus the null hypothesis that the nonbank expansion provisions of the 1970 amendment had no effect on bhcs risk and profitability cannot be rejected the growth of bank holding companies and their expansion into nonbank activities following the 1970 amendment to the bank holding company bhc act of 1956 produced striking structural changes in the banking industry the nonbank expansion provisions of the statute triggered a continuing debate about the costs and benefits of these provisions black miller and posner 2 consider the amendment to be an important innovation that can increase the efficiency and hence the profitability of financial intermediaries other writers however suggest that nonbank activities of bank holding companies may increase the risk of bank failure thereby increasing the regulatory involvement silverberg 14 orgler and wolkowitz 13 and mayne 10 2 this study analyzes the effects of the 1970 amendment to the bank holding company act on the profitability and riskiness of bank holding companies capital market data are used to measure risk and return fama 6

equal employment opportunity law and firm profitability based on a sample of 260 cases reported in the wall street journal between 1964 and 1986 this study finds that the equity value of firms charged with violating equal employment opportunity eeo laws fell at the time that a suit decision or settlement was announced most dramatically the value of firms involved in class action suits fell 15 6 percent on average around the time of the suit further the average loss to shareholders exceeds the amount firms are required to spend to settle the case this may be due to the expected costs of changing employment practices or to the information about the firm s management that is revealed by the case a staggering number of statutes amendments and court decisions regulating equal opportunity in employment have been passed during the past 25 years firms found guilty of violations of equal employment opportunity laws have been required to pay millions of dollars in back pay and to alter their employment practices to comply with the laws this study measures the costs to firms resulting from government and private lawsuits and the further costs of losing those suits i address this question by examining changes in the market value of the equity of firms at the time a lawsuit is filed for a violation of an equal employment opportunity eeo law and at the time a decision of guilty or a settlement

measuring the effects of regulation with stock price data this article examines the usefulness of stock returns in measuring the effects of regulation when the dates on which market expectations change are not known and standard sources e g the wall street journal are used to choose announcement dates twenty major changes in regulatory constraint since 1887 are considered tests using either monthly or daily data are found to have surprisingly little ability to detect the effects of regulation the evidence shows that formal regulatory announcements are generally anticipated in cases where it is unclear when expectations change

accounting for retail land sales analysis of a mandated change abstract this study assesses the stock market s reaction to a series of events leading up to a mandated change in accounting for retail land sales evidence is found to support the conclusion that the market reacted to some of these events in a manner consistent with the effects of the accounting change on debt annagement contracts a distinctive aspect of the analysis is the efficient use of security returns data to detect market reactions and to derive empirical distributions of test statistics employed the analysis is extended by a model for grouping regression equations known as seemingly unrelated regressions however the gains from this extension are modest

the wealth effects of deregulation of canadian financial institutions abstract canada like other industrial countries recently introduced various financial reforms to remove the barriers separating the operations and ownership of banks from non bank financial institutions this study analyzes the wealth effects of the reforms on the banks and non bank financial institutions and the changes in their systematic risk resulting from financial deregulation over the period 1984 to 1991 the results indicate that while there was a significant cumulative gain for the insurance industry unlike a number of u s studies there was no evidence of wealth transfer among the institutions during the period of deregulation of the canadian financial system additional tests indicate that although the regulatory changes did not have a significant effect on the risk of the banks the systematic risk of the non bank financial institutions increased significantly during the period of regulatory reforms

the competitive effects of resale price maintenance the competitive effects of resale price maintenance rpm are theoretically diverse rpm can cause allocation distortions or promote productive efficiencies in the distribution process moreover extant cross sectional empirical evidence is incapable of distinguishing among the potentially disparate effects of rpm this paper conducts hypothesis tests of the alternative theories of rpm the empirical framework relates estimates of the effects of rpm for a cross section of observations to necessary conditions of the alternative models this analysis indicates that rpm is used both to foster cartels and promote efficiencies in the distribution process this result is consistent with the growing body of case study analysis that suggests that rpm is used for a variety of reasons this result also questions the current per se illegal status of rpm in the antitrust laws evidence is also provided concerning the strategic interaction between manufacturers and dealers in the distribution process and the use of financial data in analyzing propositions in industrial organization

marginal and conditional probabilities of excess demand abstract this note compares and illustrates two criteria for classifying observations on a non clearing market namely the marginal probability of excess demand and the probability of excess demand conditional on the observed quantity

safety net losses from abandoning glass steagall restrictions this paper evaluates the redistribution of gains surrounding regulatory relaxations in 1996 and 1997 and ultimate passage of the financial services modernization act fsma of 1999 gains in financial institution stocks may come from projected increases in efficiency increases in the bargaining power of financial institutions or greater access to the federal safety net for customers seeking improved access to capital markets gains in efficiency should result in increased benefits but increases in bank bargaining power could increase funding costs and or decrease capital market access customers may also lose as taxpayers who support the federal safety net this paper finds evidence of potential taxpayer losses and increased bank bargaining power especially vis a vis credit constrained customers for whom safety net subsidies are unlikely to be shifted forward the stock prices of credit constrained customers declined during fsma event windows and in event windows associated with regulatory relaxations

time variation of ex dividend day stock returns and corporate dividend capture a reexamination this paper documents some empirical facts about ex day abnormal returns to high dividend yield stocks that are potentially subject to corporate dividend capture we find that average abnormal ex dividend day returns are uniformly negative in each year after the introduction of negotiated commission rates and that time variation in ex day returns during the negotiated commission rates era is consistent with corporate tax based dividend capture ex day returns are more negative when the tax advantage to corporate dividend capture is greatest and more positive when increases in transaction costs and risk reduce incentives to engage in corporate tax based dividend capture copyright the american finance association 2000

regulation the opec oil supply shock and wealth effects for electric utilities a popular view among specialists in electric utility economics is that the regulatory process exacerbated the negative effects of the opec s oil price increases during the 1970s in contrast peltzman s theory of regulation suggests that regulators should buffer a firm from cost increases this paper examines these contending propositions by examining the stock returns for a sample of electric utilities during the opec oil shock of october 1973 the data are more consistent with a buffering effect than a regulatory lag

ex dividend day stock price behavior the case of the 1986 tax reform act this paper analyzes the behavior of stock prices around ex dividend days after the implementation of the 1986 tax reform act that dramatically reduced the difference between the tax treatment of realized long term capital gains and dividend income in 1987 and completely eliminated the differential in 1988 we show that this tax change had no effect on the ex dividend stock price behavior which is consistent with the hypothesis that long term individual investors have no significant effect on ex day stock prices during this time period the results indicate that the activity of short term traders and corporate traders dominates the price determination on the ex day

analysis of the effectiveness of the first european pollutant emission register eper abstract the aim of this paper is to examine the effectiveness of the first european pollution emissions register eper a regulatory instrument based on the publication of the environmental performance of firms exceeding specified pollution limits the multivariate regression model mvrm is applied to capture the disciplinary effect of the eper so we first perform an analysis to determine whether the publication of the eper has a negative effect on the market value of the listed firms secondly we consider the possibility of the publication of the eper affecting the market value of firms which could be included in the eper but are not because their emissions do not exceed the specified pollution limits finally we prepare an index to compare the environmental results of the firms and analyse whether the consequences of publishing the eper are worse for firms with high relative pollution records

wage and price adjustment in a multimarket disequilibrium model the estimation of wage and price adjustment equations rests heavily on the use of tension variables that aim at capturing the disequilibria in the labour and goods markets disequilibrium models therefore provide a natural way of endogenizing these tension variables this paper estimates jointly a two market disequilibrium model and a wage and price adjustment block where price and wage growth react to excess effective demands the estimation is carried out using the simulated pseudo maximum likelihood methods developed by laroque and salanie 1989 the results look promising as regards the estimation of even more sophisticated models

market expectations of the effects of the tax reform act of 1986 on banking organizations abstract this study investigates market expectations regarding the effect of the tax reform act of 1986 on the banking industry the evidence shows that overall the tax reform did not adversely affect the stocks of banking institutions the findings suggest that overall banking organizations were expected to largely mitigate any negative effects of the tax reform on their cash flow by rebalancing and or repricing their portfolios of assets and liabilities the most significant provision of the new act was the limitation on foreign tax credits interestingly the markets did not expect any adverse valuation effects from the recapture of loan loss reserves or the elimination of the interest deductibility for carrying tax exempt securities

the effects of the nlra on stockholder wealth in the 1930s whereas most recent research examining the effects of the nlra on labor management relations has focused on the impact of specific provisions of the law this study provides an estimate of the impact of the passage of the nlra on 75 firms that were at great risk of being unionized in the 1930s taking changes in shareholder wealth as a measure of the shift in the balance of power caused by the nlra the authors find that the passage of the nlra caused a statistically and economically significant decline in shareholder wealth for the sampled firms specifically by april 1937 stockholder wealth in the firms was 15 9 lower than would have been expected had the nlra not been enacted t he impact of public policy on the balance of power between labor and management has always been a fundamental topic in industrial relations recent changes in many labor management relationships have renewed interest in the influence of public policy on labor relations and raised questions of how modifications in these policies might alter the behavior of the parties according to delaney lewin and sockell 1985 the empirical research on this topic has largely concentrated on specific provisions of the wagner act such as election procedures and regulation of employer unfair labor practices for example getman gold

the impact of fraudulent false information on equity values there are two types of stock price manipulation examined in the theoretical literature 1 insider trading which involves private information that is true and 2 the public spreading of fraudulent false information while there is a large empirical literature on insider trading this is the first empirical article to examine the impact of false fraudulent public information on stock prices and trading volume we find that such false information even after being denied by a credible source such as the sec generates both abnormal returns and abnormal trading volume we also find that the effects of the false information on security returns and volume can be persistent for at least 2 weeks in addition we show that perpetrators of false news attacks can make potentially large profits from such market manipulations

regulator selection methods and electricity prices proponents of regulator change argue that elected utility commissions would perform better than appointed commissions but an unresolved issue is whether the method of regulator selection influences rate levels and rate structures this analysis presumes that regulators are more than mediators between producers and consumers i e that they act in their self interest to maximize their preference functions the authors hypothesize that directly elected regulators reflecting relatively higher voter input to regulatory decisionmaking permit lower electricity prices and that elected regulators will reflect strong opposition to rate increases economic analysis of the relevance of regulatory arrangement finds that this hypothesis is not valid although the direction in the movement of relative rates through time is consistent with their expectations 23 references 7 tables

state regulation of takeovers and shareholder wealth the case of new york s 1985 takeover statutes past studies of takeover regulations have found that such rules increase the premiums paid to the shareholders of successfully acquired targets jarrell and bradley argue that these higher premiums harm shareholders by discouraging takeover activity and protecting inefficient managers bebchuk argues that the higher premiums do not significantly reduce the number of takeovers so that shareholders benefit on average from the higher premiums paid in successful acquisitions this article uses the event study method to measure the net effect of two takeover statutes passed by the new york state legislature in 1985 the results support the conclusion of jarrell and bradley that despite the higher premiums paid to successfully acquired target shareholders ex post these laws on average harm shareholders ex ante

a disequilibrium model of rational expectations for the u k so far the new classical model and the policy ineffectiveness proposition have been tested essentially within an equilibrium framework and disequilibrium methods of estimation have been used to estimate the labor market models in this paper the authors develop an aggregate goods market model for the united kingdom in which the new classical rational expectations hypothesis and the disequilibrium approach are integrated their estimates of the model show that the structural parameters are well determined and price adjustment in the united kingdom is very sluggish therefore the new classical policy ineffectiveness proposition is not valid for the united kingdom copyright 1991 by royal economic society

the intertemporal substitution model of labour market fluctuations an empirical analysis the paper uses two approaches to study whether aggregate fluctuations in employment and unemployment may be explained within a market clearing framework as intertemporal substitution in labour supply first log linear equations for labour supply and unemployment are estimated using a forecasting model to measure wage and price expectations second a utility function is used to derive and estimate an equation for labour supply as a function of the current real wage and consumption the influence of expected future real wages and interest rates is captured by the consumption variable the empirical results do not support the intertemporal substitution model

structural unemployment and disequilibrium abstract in this paper we present a disequilibrium model of the labor market which allows us to distinguish cyclical unemployment due to wage rigidity from structural unemployment this is done through the insertion in the exchange condition of an aggregate disequilibrium model of variables measuring mismatch between disaggregated labor supplies and labor demands such a model also allows unemployment and job vacancies to coexist the model is estimated using canadian quarterly data from 1966 to 1983 our results imply that structural unemployment due to inter industrial shocks while significant is fairly small

voter power and electricity prices overall the results show that the method of regulator selection does not seem to have a consistent statistically significant effect on electricity rates consequently the primary hypothesis of this research is not validated although the direction in the movement of relative rates through time is consistent with our expectations we expected the magnitude of shifts in the importance of method of regulator selection to be much more important than the research results indicate this expectation was based on the external pressures which have emerged since 1970 to which elected regulators would seem to be more sensitive than appointed regulators the empirical analysis indicates that the response to these external pressures was insufficient to cause elected regulators to set electricity rates statistically lower than those set by appointed regulators

market reaction to the formation of export trading companies by american banks the stock and bond market reactions to american banks announcements of their intentions to form export trading companies are investigated the results are robust to various return generating model specifications and are consistent with the view that the markets do not believe that u s bank export trading companies will be successful

the gains from takeover deregulation evidence from the end of interstate banking restrictions this paper uses interstate banking deregulation to explore the benefits of takeover deregulation and how these benefits are distributed across different firms we find large and significant abnormal returns around the interstate banking and branching efficiency act of 1994 which imply it created 85 billion of value in the banking industry consistent with an active market for corporate control allowing beneficial consolidation and providing needed discipline there is a strong negative relationship between banks abnormal returns and their prior performance consistent with managerial entrenchment limiting takeover discipline banks with higher insider ownership lower outside block ownership and or less independent boards have lower abnormal returns imagine an economy in which strict regulation has prohibited all takeover activity and the governing body suddenly announces that the restrictions on mergers and acquisitions will be eliminated in one year the capital market response to this announcement would establish the aggregate value added from an active corporate control market and differences between individual firms stock price reactions would reveal which firms benefit most from unrestricted consolidation and takeover discipline in some ways this hypothetical situation became reality for the u s banking industry in 1994 when congress wrote and passed the interstate banking and branching efficiency act ibbea this legislation liberalized the bank takeover market by eliminating the various state laws restricting bank mergers across state lines the ibbea was widely expected to accelerate the consolidation already occurring within the banking industry see for example american banker 10 11 94 a more active takeover market should increase firm values in at least two ways first unrestricted consolidation would allow firms to better utilize

stock market reactions to the depository institutions deregulation and monetary control act of 1980 abstract this paper evaluates the effects of events leading to the passage of the depository institutions deregulation and monetary control act of 1980 the evidence suggests that the initial proposal of the act by then president carter and the final passage of the act by the house of representatives produced positive abnormal returns to stockholders of large commercial banks stockholders of small commercial banks and small savings and loans on the other hand generally experienced negative abnormal returns furthermore when hopes of passage of the act faced significant negative positive abnormal returns were experienced by stockholders of large small commercial banks

explanations of unemployment economists commonly distinguish between two sorts of unemployment roughly speak ing the involuntarily unemployed workers are unwillingly out of work i e they feel that they would be better off with jobs on the other hand the voluntarily unemployed workers prefer to be out of work for any of a wide variety of reasons e g because they are searching or training for a job or because they choose leisure over work

dividend distributions and closed end fund discounts abstract empirical support for the hypothesis that closed end fund discounts are related to overhanging tax liabilities has been mixed we introduce a new approach to testing this hypothesis by examining changes in discount levels following distributions of dividends and capital gains since distributions reduce future shareholder tax liabilities the tax liability hypothesis implies that closed end fund discounts should decline following distributions focusing on changes in discounts isolates this tax effect by eliminating the impact of other fund specific factors on discount levels our results support the tax liability hypothesis showing that short run fluctuations in discounts are directly affected by taxable distributions

an examination of the impact of the garn st germain depository institutions act of 1982 on commercial banks and savings and loans this paper evaluates the effects of events leading to the passage of the garn st germain depository institutions act of 1982 the evidence suggests that the call for reform by president reagan s housing commission and the senate passage of the bill produced positive abnormal returns to stockholders of large savings and loans and commercial banks stockholders of small s ls and banks on the other hand generally experienced negative abnormal returns furthermore when hopes of passage of the act faded significant negative positive abnormal returns were experienced by stockholders of large small s ls and banks this study examines the impact of the passage of the garn st germain depository institutions gsgdi act of 1982 on commercial bank and savings and loan stockholder returns the gsgdi act represents one of two major revisions of the financial system over the last twenty years the other being the depository institutions deregulation and monetary control act of 19801 the proposal for such a change reflected the growing inadequacy of the regulatory structure of financial institutions to adapt to rapid changes in technology shifting consumer demands for financial services and extremely volatile interest rates efforts to reform the financial system resulted in passage of the gsgdi act of 1982 which included provisions seeking to improve both the implementation of monetary policy and the degree of equity in the regulation of financial institutions such improvements were intended to reduce the operational and financial risk of financial institutions a central issue in the economics of regulation is whether regulatory actions benefit the economic agents they are intended to benefit a large body of literature exists which examines the economic effects of regulation much of this literature has utilized the concepts and methods of welfare economics to assess the extent

an analysis of the impact of deposit rate ceilings on the market values of thrift institutions this paper examines the impact of changes in deposit interest rate regulations on the common stock values of savings and loan institutions the analysis indicates that stockholder owned savings and loans s l s have experienced statistically significant declines in equity market values at the announcement of the removal of ceilings on certain consumer small saver certificate accounts and the introduction of short term variable rate money market certificates we find the evidence to be consistent with the hypothesis that s l s have earned economic rents from restrictions on interest rates paid to small saver accounts and that relaxation of interest rate ceilings has reduced these rents a central issue in the economics of regulation is whether regulators behave in a way that primarily benefits the economic agents whose actions they are supposed to regulate the proposition that regulation is demanded and acquired by the regulated and that regulations are designed and administered primarily for their benefit was originally put forth by stigler 19 and has come to be known as the capture theory of regulation an alternative view is that regulators adopt policies which serve some other perhaps public or possibly the regulators own interest and that administration of these policies does not benefit the regulated entities this paper examines the regulation of savings and loan associations deposit interest rates and reports evidence pertaining to the impact of the administration of regulation regulation of interest rates paid to depositors in federally insured savings and loan associations began in 1966 since that time several changes in the maximum allowed interest rates deposit rate ceilings have been made these changes present an opportunity to observe the impact of one form of regulatory action on savings and loan institutions deposit rate regulation has been the subject of extensive previous research the empirical investigations have focused primarily on two issues 1 the allocational efficiency and wealth redistribution effects of rate ceilings and 2 the impact of deposit rate ceilings on the flow of funds into the residential

auditor reputation the impact of critical reports issued by government inspectors in recent years u k department of trade investigations into the affairs of a specific company have sometimes been critical of the work done by its auditors and reporting accountants this article assesses the impact of this criticism on the auditor s reputation in particular it examines the stock price performance of the auditor s listed clients the results show a small wealth loss for the audit clients the article also examines the impact of the department of trade criticism on an audit firm s number of listed clients and its future audit fees compared to a control group the criticized auditors appear to suffer a small loss in market share based on number of listed clients and on audit fees the evidence suggests that criticized auditors incurred economic losses from the damage to their reputations this is consistent with models of reputation advanced in the industrial organization literature

does the japanese governance system enhance shareholder wealth evidence from the stock price effects of top management turnover this article examines the stock price effects of top management turnover announcements for 432 japanese corporations from 1985 to 1990 we find that these announcements are associated with significantly positive abnormal returns the returns are greater when turnover is forced than when turnover represents normal succession the stock price effects are also significantly positive when turnover is forced and the successor is appointed from outside the firm we find that large shareholders play an important role during outside succession this evidence suggests that the disciplinary decisions of japanese governance mechanisms are consistent with shareholder wealth maximization article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

why do stock prices drop by less than the value of the dividend evidence from a country without taxes abstract it is well documented that stock prices on ex dividend days drop by less than the value of the dividend on average this has commonly been attributed to the effect of tax clienteles we examine data from the hong kong stock market where neither dividends nor capital gains are taxed as in the u s the average stock price drop is less than the value of the dividend specifically the average dividend for the period 1980 1993 is hk 0 12 and the average price drop is hk 0 06 we are able to account for this both theoretically and empirically through market microstructure arguments

japan s shift from process to product patents in the pharmaceutical industry an event study of the impact on japanese firms in 1975 japan expanded the scope of its patent law by introducing product patents for newly developed chemical and pharmaceutical products we use rate of return data from the tokyo stock exchange for japanese pharmaceutical companies to examine the impact of the change in the patent law our empirical findings indicate that the passage of the new patent law induced an excess return of approximately 26 percent to a portfolio of large pharmaceutical companies companies with r d programs specializing in new product development experienced large gains while companies with r d programs specializing in imitative process patents experienced no gains

using stock price data to measure the effects of regulation the interstate commerce act and the railroad industry this article usesjinancial data to measure the effects of the passage of the interstate commerce act of 1887 and subsequent legislative and judicial developments on firms in the railroad industry the results indicate that the interstate commerce act had a significant positive impact on railroad stock prices and that court decisions in the 1890s which severely restricted the powers of the interstate commerce commission caused negative stock price reactions thesefindings offer support for the revisionist view of regulatory history according to which the railroads welcomed regulation as a means offacilitating the enforcement of cartel like agreements

regulator selection and endogenous systematic risk a major issue in the financial literature of regulated industries is whether the cost of capital is endogenous to the regulatory process cross spectral estimates of the market model are used to determine if the method of regulator selection contributes to either frequency dependence or phase shift lead lag in electric utility systematic risk it is determined here that electric utilities regulated by elected commissions experience frequency dependence in systematic risk this finding lends support to the assertion that the cost of capital is endogenous to the regulatory process

ex dividend day stock price behavior discreteness or tax induced clienteles abstract since prices are constrained to discrete tick multiples while dividends are essentially continuous ex day price changes will not equal dividends we argue that the expected price drop is strictly less than the dividend but within one tick of the dividend the price drop to dividend ratio will i be less than one ii increase with dividends generally and iii decline between tick multiples giving a sawtooth pattern in the data since dividends and dividend yields are highly correlated discreteness will give the impression of tax induced dividend clienteles even if there are none taxable cash dividends and nontaxable stock dividends exhibit similar ex day behavior

election returns as a signal of changing regulatory climate abstract this paper considers the effects of changes in regulatory climate on the expected future profitability of regulated electric utilities previous researchers addressing issues relating to regulatory environment have examined the determinants of investor perceptions of regulatory climate the effect that the method of commissioner selection in particular has on regulatory climate and the effects of regulatory climate on the cost of capital to the regulated firm this paper seeks to ascertain the importance of regulatory climate by examining the stock market performance of regulated electric utilities at the time of an unanticipated change in regulatory environment these results indicate that in those states in which the change in regulatory climate was most clearly unanticipated an adverse change in the regulatory environment did result in negative abnormal returns to utilities operating in those states thereby indicating a reduction in the expected future profitability of the regulated firms in addition our results provide support for the proposition that the firm s systematic risk is lower when enforcement of regulation is more stringent

regulation and systematic risk the case of electric utilities a primary finding is that the presence and intensity of regulation strongly affect systematic risk the empirical results support the view that beta is endogenous to regulation and suggest caution regarding the use of observed measures of systematic risk in assessing the cost of capital in regulatory procedures results suggest that systematic risk is not only endogenous but also uniformly lower in regulated versus unregulated regimes beta is lower the more intensive the degree of regulation and the results hold whether regulation is measured in terms of conferred authority statutes and judicial opinions of inputs resources devoted to regulation or of outputs regulated price the record for the period 1969 74 when factor prices for electric utilities were rising dramatically suggests that the observed lowering of risk cannot be attributed to simple regulatory lag on the other hand the results are observationally equivalent to regulation lowering systematic risk as a by product of wealth redistribution or because reduced risk is the preferred outcome of political constituents 32 references 8 tables

tax induced trading around ex dividend days abstract this paper investigates trading volume around ex dividend days for taxable distributions cash dividends it is found that trading volume increases significantly around the ex dividend day this increase is more pronounced for high yield actively traded stocks and after brokerage commissions became negotiable the results are consistent with the hypothesis that short term traders have an impact on ex day price behavior at least for taxable distributions for non taxable distributions stock splits and stock dividends we find negative abnormal volume around ex day

what can regulators regulate the case of bank entry previous researchers have claimed that the banking acts of 1933 and 1935 reduced the annual rate of entry of new commercial banks by as much as 50 percent between 1936 and 1962 in contrast the authors find that this legislation did not reduce bank entry rates previous studies did not account for legislative changes that reduced restrictions over branch banking and stimulated growth in the number of branches in about half the states during the 1936 62 period after accounting for these changes in branching laws it becomes clear that entry of new banks was depressed by growth in branch banks not by restrictive federal regulations copyright 1992 by ohio state university press

on the efficiency of least squares regression with security abnormal returns as the dependent variable monte carlo procedures are used to compare the finite sample performance of several estimators that may be used in cross sectional regressions with security abnormal returns as the dependent variable alternative models of event induced increases in stock return variance are examined for the event clustering scenario event clustering implies crosssectional correlation and heteroskedasticity in market model prediction errors violating one of the fundamental ordinary least squares ols assumptions i i d disturbances nonetheless provided that the conditions for asymptotic validity derived by greenwald 1983 are met the ols estimator is well specified in finite samples further for sufficiently large cross sections there is no advantage to several other more complex estimators

capital market response to emission rights returns evidence from the european power sector prior studies on the distributional effects of the european union s emission trading scheme eu ets have so far only relied on supply and demand data empirical evidence from capital markets has been missing we address this gap and measure the ets s economic consequences using the expectations of investors towards the regulatory impact on firm value employing a multifactor model we show that returns on common stock of the largest affected industry power generation are positively correlated with rising prices for emission rights this implies that the market predicts that firms are not only able to pass on their share of the regulatory burden to customers but even achieve windfall profits by overcompensating for the costs

tax reform and ex dividend day behavior this paper investigates the effect of a major canadian tax reform on the ex dividend day behavior of companies on the toronto stock exchange the results are inconsistent with the hypothesis that price changes on ex dividend days reflect the relative taxation of dividends and capital gains for the representative investor but are consistent with the hypothesis that ex dividend day price behavior reflects short term trading activities

the differential impact of two significant court decisions concerning banking consolidation abstract two 1981 court rulings effectively removed the possibility that federal regulatory agencies could apply the theory of probable future competition to block future bank mergers and takeovers results show that the impact of this regulatory change which occured without any contemporaneous public press coverage led to a significant decline in the wealth of shareholders of banks that had been active acquirers these findings are consistent with mueller s size maximization and roll s hubris hypothese

value event studies this paper discusses appropriate methodology for measuring the effect of an event on the value of a firm s equity th e key points are 1 cumulative abnormal returns do not measure the effect of an event on firm value if there are dividends during the event window 2 it is generally appropriate to use pre event parameters of the return generating process even if the event alters the parameters during the event window and 3 controlling for fact ors other than the return on the market portfolio improves the power of the estimation the formula for the effect of an event on the value of a firm when there are dividends during the event window is developed a nd applied to a study of the effect of the bhopal disaster on the value of union carbide copyright 1992 by mit press

unemployment insurance and labor supply and demand a time series analysis for the united states abstract a disequilibrium model of the u s labor market in which the unemployment insurance system plays a key role is estimated an increase in the level of real unemployment benefits markedly lowers employment and raises real wages

do epa defendants prefer republicans evidence from the 2000 election i introduction there is an extensive body of literature documenting the effects of political interference in bureaucratic agencies much of this deals with the enforcement of antitrust disputes as mediated by the federal trade commission a corresponding literature on the political control of the environmental bureaucracy does not exist however there is a perception that the aggressiveness of environmental protection agency epa enforcement could vary from one administration to the next 1 the present article aims to subject these anecdotal impressions to empirical tests it uses the change in the price of publicly quoted companies that have civil judicial litigation outstanding with the epa when a political event takes place such as a presidential election to assess the market s reaction to this event ii literature review the biggest problem in doing empirical studies of the effect of political and legislative changes on stock market valuations is the fact that these changes happen slowly over a period of months or years given the assumption of efficient markets stock markets should immediately reflect all available information including the possibility of political changes this is the reason why studies of the effect of legislation and political change on market valuations have generally found insignificant results as in binder 1985 cutler 1988 downs and tehranian 1988 and graddy et al 1992 2 this article uses a better measure of the probability of a political event the measure of the probability of the outcome of an election is obtained from the iowa electronic market iem only herron et al 1999 and knight forthcoming have used this data source for similar purpose before 3 the iem is a set of continuous double auction markets operated by the university of iowa henry b tippie school of business most of the existing literature in this field has used opinion poll data such as brander 1991 the disadvantages of this are well known they are usually conducted over several days and so do not represent the probability of the election of a candidate on a single day they do not represent probabilities of election but rather expected vote shares they are not usually released daily and finally they have wide margins of error especially long before an election when many people have not yet made up their minds who to support herron et al 1999 pp 58 59 these are also some of the reasons that economists are generally skeptical of surveys preferring to rely instead on revealed preferences the only other possibility is the use of bookmaker s odds as used by roberts 1990b this still has the disadvantage that odds are not quoted daily and so must be interpolated also the present study attempts to measure the importance of political control of the environmental bureaucracy the existing literature focused on a variety of other federal agencies and industries iii data and empirical model data the dependent variable used here is the abnormal daily returns to the stock market price of a company that has environmental litigation outstanding on the day of an election the idea is that if the market considers the company to be politically sensitive then the returns to the company s shares should respond to changes in the probability of a political event as reported by the iem the stock market data comes from the center for research in security prices cr sp 4 the article uses individual company returns as opposed to the construction of portfolios of stocks that are then combined with data on returns to the portfolio as used by roberts 1990b and herron et al 1999 the present paper uses interaction terms between the likelihood of political events and individual characteristics of the companies such as the industry that they are in and the number of times they have been sued before this is not possible when aggregate portfolio returns are used because that would not allow the isolation of disaggregated individual company effects

the reaction of bank stock prices to news of derivatives losses by corporate clients abstract from march through may of 1994 several large nonfinancial firms announced millions of dollars in losses from derivatives deals especially those arranged by bankers trust accompanying these announcements and related news stories were allegations that bankers trust had either misrepresented lied or deceived its clients using sur methods we investigate how these announcements affected bankers trust and three portfolios of banks dealers nondealers and nonusers our results indicate significant cumulative abnormal returns of 12 14 bankers trust 5 56 13 dealer banks and 2 45 32 nondealer user banks the evidence suggests an intra industry information transfer effect consistent with rational pricing the replacement cost of derivative contracts is an important factor in explaining the variation in abnormal returns across banks

estimating the structure of market reaction to news information events and lumber futures prices we develop a new event study technique the distributional event response model derm appropriate to relatively slowly evolving information events we apply the model to twelve years of daily lumber futures prices and analyze the effects of three different types of information releases a monthly housing starts estimates b aperiodic administrative and judicial announcements about u s canada trade disputes and c novel and unprecedented court decisions related to the endangered species act esa the information releases are different in ways that predict their relative speeds of impoundment in prices we find that housing start events are absorbed more quickly than trade events which are absorbed more quickly than esa events

ex dividend price behavior of common stocks this study examines common stock prices around ex dividend dates such price data usually contain a mixture of observations some with and some without arbitrageurs and or dividend capturers active our theory predicts that such mixing will result in a nonlinear relation between percentage price drop and dividend yield not the commonly assumed linear relation this prediction and another important prediction of theory are supported empirically in a variety of tests marginal price drop is not significantly different from the dividend amount thus over the last several decades one for one marginal price drop has been an excellent average rule of thumb article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

macroeconomic planning and disequilibrium estimates for poland 1955 1980 the authors specify and estimate a four equation disequilibrium model of the consumption goods market in a centrally planned econo my this work is based on previous papers of r portes and d winter 1977 and w charemza and r quandt 1982 the model contains a household demand equation a planners supply equation a min condition and plan adjustment equation through which plan formation becomes endogenous the paper uses a unique new data set of time series for plans for the major macroeconomic variables in poland the overall framework is applicable to any large organization which plans economic variables coauthors are richard e quandt david winter and stephen yeo copyright 1987 by the econometric society

a multimarket bounded price variation model under rational expectations corn and soybeans in the united states the bounded prices model under rational expectations is extended to a multimarket setting because the resulting rational expectations model is highly nonlinear fair and taylor s iterative procedure is employed in conjunction with the multimarket framework to obtain maximum likelihood estimates of a supply demand model for corn and soybeans the estimated model is then used to simulate the market equilibrium effects associated with removing price support and acreage set aside programs over the sample period among other things the results reveal that acreage set asides have dominated the induced supply effects of price support programs for corn

a microstructure analysis of ex dividend stock price behavior before and after the 1984 and 1986 tax reform acts this article extends ex dividend research by explicitly modeling trading at bid and ask quotations this refinement distinguishes between buying and selling for long term investors and short term dividend capture traders it also explicitly incorporates the bid ask spread and eliminates some potential measurement errors that may bias returns marginal conditions are tested during 1983 and 1988 periods that span the 1984 and 1986 tax reform acts results for long term investors are consistent with the elimination of favorable capital gains tax rates at observed prices tax neutral short term traders cannot profit corporate dividend capture traders face profit opportunities during 1983 that disappear by 1988 copyright 1996 by university of chicago press

dividend capture in nasdaq stocks abstract we examine the importance of dividend capture trading in nasdaq stocks by testing for cross sectional relations between ex day abnormal returns and bid ask spreads throughout we find that ex day returns and spreads are positively related the relation increases across dividend yield quintiles and is strongest in high yield stocks the relation does not appear in a sample of non ex dividend days these findings indicate that dividend capture trading affects the ex day returns of at least some particularly high yield nasdaq stocks and that dividend capture trading is important for understanding ex dividend day returns

can hysteresis explain different labour market operations between europe and the united states this paper offers an analysis of the labour market operation in europe and the united states during 1970 1985 it appears that the labour market developments in europe are more characterized by hysteresis than in the united states simulation results indicate that the unemployment rate in europe would have reached the level of that in the united states in 1985 when wage formation had been more similar

ex dividend day trading who how and why evidence from the finnish market abstract this study examines the ex dividend day trading behavior of all investors in the finnish stock market consistent with dynamic dividend clientele theories investors with a preference for dividend income buy shares cum dividend and sell ex dividend the reverse is true for investors with the opposite preference investors also engage in overnight arbitrage earning on average a 2 overnight return on their invested capital trades at the investor level reveal that idiosyncratic risk is an important determinant in the choice of stock for short term ex day trading furthermore transaction costs and dividend yield jointly determine whether the volume of short term trading activity is nonzero

does the japanese stock market price bank risk evidence from financial firm failures the ability of the japanese stock market to appropriately price the riskiness of japanese financial firms has been frequently questioned particularly in light of japan s widespread financial distress in recent years and poor disclosure requirements this paper examines the response in equity returns of japanese banks to the failure of four commercial banks and two securities firms between 1995 and 1998 using event study methodology the analysis finds that share prices of surviving banks on the whole responded unfavorably to the failures and that financially weaker survivors were more adversely affected this suggests that despite the distress and alleged opaqueness bank shareholders were able to use available indicators of financial condition both to incorporate new information quickly into stock prices and to differentiate among banks

the impact of the 1980 depository institutions deregulation and monetary control act on market value and risk evidence from the capital markets the depository institutions deregulation and monetary control act of 1980 brought about major changes in the banking industry this study employs capital market data to examine the act s impact on the relative competitive positions of distinct classes of firms within the industry the evidence supports the hypothesis that federal reserve system banks profited from the regulatory change at the expense of nonmember banks and savings and loans copyright 1988 by ohio state university press

security price reactions around corporate spin off announcements abstract we examine security price reactions around the announcements of 123 voluntary spin offs by 116 firms between 1963 and 1981 involving a pro rata distribution of the common stock of a subsidiary to the stockholders of the parent firm the median spin off in the sample is 6 6 of the original equity value and is associated with an abnormal return of 7 0 from 50 days prior to the announcement through completion of the spin off no evidence is found to indicate the gains to stockholders represent wealth transfers from senior securityholders over the entire event period we find positive gains for firms engaging in spin offs to facilitate mergers or to separate diverse operating units but negative returns to firms responding to legal and or regulatory difficulties in the two day interval surrounding the first press announcement we find positive average excess returns for all groups

the economic effects of client losses on otc bank derivative dealers evidence from the capital market this paper investigates the economic impact of client derivatives losses on otc derivatives dealers its focus is on the capital marketers reaction to losses suffered by four end users of otc derivatives products arranged with bankers trust new york evidence is provided on the impact of these end user losses on bankers trust itself as well as whether these losses produced any systemic or contagion effects extending to other major bank otc derivatives dealers finally the paper investigates whether possible systemic effects may be associated with bank specific characteristics such as the level of derivatives exposure counterparty risk and reliance on trading income copyright 1996 by ohio state university press

the interaction of monetary policy and wages this paper focuses on the interaction of monetary policy and wage formation in economies with strong labor unions government and unions are viewed as endogenous utility maximizers and the macroeconomic consequences of their strategic interaction are explored with the aid of some elements of simple game theory specifically it is shown a how labor unions adjust wages to prices so as to maximize their utility following changes in monetary policy b how the effectiveness of monetary policy is circumscribed without necessarily being nullified by the utility maximizing reactions of unions and c how the interplay of government and unions can create a persistent tendency towards inflation and unemployment simultaneously

union effects on productivity profits and growth has the long run arrived this article interprets literature examining union effects on economic performance production function studies indicate small overall union impacts on productivity positive effects where they exist appear to result from management response to decreased profit expectations and from a natural selection process lower profitability among unionized firms is well established more interesting is the possibility that unions appropriate quasi rents deriving from long lived tangible and intangible capital the connection between unions investment behavior and productivity growth emerges as a particularly fruitful line of empirical inquiry although it does not encourage a sanguine view of unionism s long run impact

debt equity swaps regulation k and bank stock returns abstract since the early 1980s the financial health of several highly levered ldcs has become increasingly precarious their financial problems in turn imply potentially serious financial problems for their creditors foremost among whom are some of the largest banks in the american financial system in order to relieve some of the pressure on the lending firms the board of governors has recently amended regulation k which provides guidelines for international banking operations to allow for unrestricted investment in foreign nationalized firms through the mechanism of the debt equity swap this paper examines the capital market reaction to the regulatory change and we find that 1 investors on average viewed the change as a wealth increasing event 2 the magnitude of the market reaction was significant and positively related to the level of foreign lending exposure and 3 among ldc lenders the capital market reaction differed significantly between money center and non money center banks

differential impact on bank valuation of interstate banking law changes abstract by 1988 forty seven states and the district of columbia had enacted legislation liberalizing interstate banking restrictions this study systematically investigates the market impact of these law changes on bank stock prices using an event parameter event study methodology we assess the differential impact on in state and out of state banks to a given state law change we also assess the differential impact of law changes upon banks included in or excluded from any regional compacts among states money center banks are treated as a special class of out of state or excluded banks we find that out of state and out of region banks excluding money center banks have profited most from these law changes and money center banks have been least positively affected both at the time of enactment and at the effective date of the law changes we attribute these findings to the opening of interstate banking opportunities to other than money center and foreign banks thus leveling the playing field

unemployment disequilibrium and the short run phillips curve an econometric approach the paper specifies a disequilibrium model for the aggregate labour market consisting of demand and supply functions for labour an adjustment equation for wages as well as for prices a transactions equation and finally an equation that relates measured unemployment to vacancies and to excess demand the model has a more sophisticated treatment of dynamics than earlier disequilibrium models the parameter estimates and the goodness of fit are satisfactory and the model s implications for the behaviour of several important variables are sensible in particular excess demand estimates computed in various ways are reasonable

price inertia and policy ineffectiveness in the united states 1890 1980 this paper introduces a new approach to the empirical testing of the lucas sargent wallace lsw policy ineffectiveness proposition which compares the lsw hypothesis with an alternative that states that prices respond fully in the long run but only gradually in the short run to nominal aggregate demand disturbances the empirical equations estimated for a new set of quarterly data extending back to 1890 exhibit uniformly high responses of real output and low responses of price changes to anticipated changes in nominal gnp the paper compares and tests three alternative methods of introducing persistence effects into the lsw framework

the rise and fall of railtrack plc an event study forming railtrack was a key part of the privatization of british rail br railtrack took over the ownership of br s fixed infrastructure in april 1994 and its parent company the railtrack group was floated in may 1996 on the london stock exchange lse despite the group posting some excellent financial results in the early years railtrack s record on infrastructure improvement and safety was frequently criticized this apparent inconsistency between shareholder interests and public service obligations culminated in railtrack being placed in administration in october 2001 in view of this apparent inconsistency and the high court claim for additional compensation brought against the government by a group of 49 000 small investors the reaction of the stock market to 19 key events is modelled among other things we find when railtrack announced after the fatal derailment of a high speed train near the hertfordshire town of hatfield that there would be a 6 month programme of emergency track repairs t

the selection of public utility commissioners a re examination of the importance of institutional setting the result of a great many studies is that it makes no difference to the rate level whether the public utility commission is appointed or elected nevertheless the typical response to an inquiry regarding the effect of appointment versus election is that a difference in resulting rate structure should exist in this paper we have reconciled these views and more carefully examined the issue of whether institutional setting does matter in the setting of regulated electricity prices we suggest that one should not necessarily expect elected pucs to behave differently than appointed ones instead different behavior should be expected from pucs that are closer to their constituents than those more isolated irrespective of whether the puc is elected or appointed the results of an empirical examination based on a large sample of utilities operating during the period of 1981 83 support this view the more narrowly defined is the consumer voter group everything else the same the lower is the rate set by the puc

regulator selection and financial performance for public utilities selection method and the returns experienced by common equity owners abstract this paper extends the work of others who have analysed the relationship between regulatory process and regulatory outcome and examines the hypothesis that there is a difference in regulatory treatment received by public utilities depending on whether their regulators are elected directly by the public or appointed the hypothesis of differential treatment is tested using the market based returns and risks realized by the utility s common stockholders the relevance of these measures is based on the premise that share prices incorporate all information about the future expected cash flows of the firm and thus reveal any perceived differences in the treatment received or expected to be received from the two subsets of regulators raw return and risk measures indicate higher returns and lower risks for equity owners of electric utilities regulated by appointed commissioners for the periods 1964 1968 and 1970 1979 the outcome was reversed for the period 1980 1984 with the equity owners of electric utilities regulated by elected commissioners earning higher returns than owners of firms regulated by appointed commissioners when standard statistical testswere applied the only significant differences in risk adjusted returns were those for 1964 1968 when the owners of firms under appointed commissioners earned higher risk adjusted returns than did owners of firms regulated by elected commissioners