an analysis of default risk in mobile home credit abstract there are approximately us 22 billion in outstanding receivables and an active secondary market for mobile home credit in the united states this important segment of the financing industry shares some attributes with traditional home mortgage financing and other attributes with consumer credit in this paper we draw on the mortgage literature to postulate the determinants of default risk for mobile home loans using multivariate logit models we investigate the relevance of payment history loan terms borrower characteristics economic conditions and legal constraints in analyzing loan defaults and delinquencies payment history emerges as the overwhelming factor in predicting the likelihood of default

the scope nature and effects of employee stock ownership plans in japan using data for various years including new data for 1973 84 the authors examine the scope nature determinants and effects of japanese employee stock ownership plans esops in 1988 of firms listed on japan s eight stock exchange markets 91 had an esop and the average non executive employee plan participant owned stock worth about 14 000 probit estimates for a sample of manufacturing firms show that firms were more likely to adopt esops when recent business performance was below average the capital labor ratio was relatively low and employment growth was relatively fast evidence is also found that esops enhanced enterprise productivity the authors argue that esops have played an important and largely overlooked role in the success of the japanese economy over the past two decades

labor taxation and foreign direct investment in this paper we analyze the implications of the effective taxation of labor for profits and hence the decisions made by multinational enterprises concerning the location of their headquarters if a higher employee borne tax burden reduces manager effort it should also negatively affect firm profits and the location of the headquarters we compile data on personal income tax profiles for 52 economies and the year 2002 at different moments of the distribution of gross wages our findings suggest that higher employee borne labor taxes are less conducive to the location of headquarters and foreign direct investment stocks in a given host economy

markets hierarchies and information on a paradox in the economics of organization abstract the literature on the economics of organization presents the following paradox on the one hand firms are said to be repositories of superior information about input characteristics on the other hand markets are said to be superior to hierarchies in coordinating resource allocation because hierarchies are forced to aggregate heterogeneous inputs into homogeneous categories this paper suggests reasons for the association of firms with refined input information and argues that it is not their hierarchical features but their provision of an appropriate framework for rent sharing that is responsible for this association

beyond privatization institutional innovation and growth in china s large state owned enterprises abstract this article demonstrates that china s large state owned enterprises soes are not stagnant fossils waiting to die under economic reform policies this sector has undergone large change due to enhanced enterprise autonomy the impact of market forces rapid growth of domestic demand for upstream products strategic integration with the world economy and the state s policy to promote large businesses china s large soes are developing new institutional forms that do not neatly fit into existing patterns china is experimentally changing its institutions through a combination of central policy local initiative and interaction with international investment this presents a challenge to the transitional orthodoxy and to ideas concerning property rights in development economics there is not a universal model of property rights and government action that works best in all circumstances china s experience with the reform of large soes shows the diverse possibilities for effective industrial institutions

team human capital and worker mobility we discuss the concept of team human capital and study the renegotiation of labor compensation after team members privately observe their own reservation wage as labor productivity can only be high if the number of quits does not exceed a threshold decisions concerning acceptance of individual wage demands become interdependent when a team is made up of salaried workers a peculiar case of efficiency wage results moreover inefficient team dissolution may occur we then show that inefficiency is less likely to occur when team members form a partnership

long term employment and job security over the past 25 years a comparative study of japan and the united states the authors document and contrast changes or lack thereof in job stability over the past 25 years between japan and the united states prime age male workers with at least five years of tenure in japan continued to enjoy much higher job stability than did their u s counterparts most remarkably japan s lost decade had little discernible adverse effect on the job stability of this group of japanese employees by contrast job stability for mid career hires and youth workers deteriorated in japan the authors cross national regression analysis of job loss confirms the consistently more important role that seniority plays in protecting workers from job loss in japan than in the united states and reveals that this gap in seniority s influence on job stability between the two countries widened overall it is the u s economy with the longest economic expansion not the japanese economy with the longest economic stagnation that experienced deteriorating job stability pointing to the absence of converg

some further results on rosen and quandt s labor market model abstract this note presents some new evidence on estimation of rosen and quandt s disequilibrium aggregate labor market model it is found that the earlier results of rosen and quandt are not robust in terms of computational aspects the specification of the minimum condition differencing and different data samples

testing a discrete switching disequilibrium model of the uk labour market this paper develops a test procedure for serial correlation for discrete switching disequilibrium models which include both an endogenous price adjustment equation and lagged dependent variables the tests are applied to a model of the u k labor market and the model is respecified in the light of the test results

on some recent explanations of why capital hires labor conventional microeconomics contains no explanation of why capital hires labor and not the reverse in view of some surprisingly positive results in the theoretical analysis of worker run enterprise systems recent contributions to the theory of the firm have attempted to explain the dominance of capitalist production relations in efficiency terms the present paper critically reviews works in this area by alchian and demsetz 1972 williamson 1975 1980 and jensen and meckling 1979 and contends that a convincing efficiency argument for the general superiority of capital owners over workers control of enterprises still is lacking

incentives for helping on the job theory and evidence recent advances in incentive theory stress the multidimensional nature of agent effort and specifically cases where workers affect one anothers performance through helping efforts this article models helping efforts as determined by the compensation package and task allocation the model is tested with australian evidence on reported helping efforts within work groups the evidence consistently supports the hypothesis that helping efforts are reduced while individual efforts are increased when promotion incentives are strong piece rates and profit sharing appear to have little effect on helping efforts while task variety and helping efforts are positively correlated

employment entrepreneurship and 1992 microeconomic policy and european problems this essay has covered several areas which are not usually regarded as closely interrelated policy conclusions have been discussed briefly at various points and will now be developed more fully in this final section as evidence for the interrelatedness of such disparate fields as corporate finance and employment policy we start from the observation that many large firms are relatively inefficient particularly at product innovation and flexible organization and employment policies in part because top managerial compensation depends mainly on size this creates an incentive for excessive growth and empire building rather than payment to shareholders of the free cash flow which cannot be profitably invested internally more appropriate incentives for top management would increase dividend payments and hence the flow of funds into the capital market available for financing new start ups and small firms as venture capital even in the u s the cost of obtaining external capital often constrains small firms to invest only their internal cash flow fazzari et al 1988

employee ownership and internal governance abstract this paper is designed to counter oliver williamson s hypothetical peer group model of organization with a discussion of three prosperous populations of employee owned firms worked owned scavenger companies taxi cooperatives and professional partnerships such as the large law firm it will be shown here that these firms are formed endure and prevail over their competition for reasons that williamson more than anyone else has taught us to appreciate in particular this paper will argue that the metering problems and human asset considerations that are so prominently featured in williamson s work are crucial for understanding the success of these firms

on the economic rationale for codetermination law abstract this paper develops a positive efficiency economic case for codetermination law resting on the correction of labor and capital market and organizational failures a legally mandated codetermination structure is shown to provide employee checks on several structural incentives for management opportunism codetermination is shown to offer advantages for technical efficiency skill development and knowledge generation through its protection of specific human capital investments financial markets cannot enforce codetermination due to a set of free rider problems

decentralization hierarchies and incentives a mechanism design perspective separation of ownership from management multidivisional firm organizations delegation of production decisions to worker teams delegation of pricing and advertising decisions to retail franchisers reliance on intermediaries in trade or finance and distribution of regulatory authority across different agencies represent examples of organizations that delegate and distribute decision making authority instead of centralizing it this paper reviews literature on costs and benefits of delegated decision making in hierarchical organizations or contracting networks with regard to problems of incentives and coordination it starts by describing incentive and coordination costs of delegation in simple canonical examples of hierarchies where both information and incentives of different decisionmakers differ one class of models pertain to contexts where the classical revelation principle applies i e where costs of contractual complexity information processing or communication are absent agents do not collude and the mechanism designer can commit to the mechanism delegation may conceivably entail a loss of control and coordination arising from the divergence of information and incentives sufficient and necessary conditions for this loss to be mitigated entirely include risk neutrality top down contracting and monitoring of transfers or production assignments between subordinates the next class of models introduces communication costs that restrict the performance of centralized arrangements relative to delegation owing to a resulting loss of flexibility which has to be traded off against possible control losses of delegation finally consequences of collusion among agents is discussed which typically enlarge the range of circumstances under which delegation can attain optimal second best outcomes the paper concludes with a discussion of the relevance of this theoretical literature to recently emerging empirical studies of industrial organizations where delegated decision making plays an important role adoption of innovative human resource management practices new information technologies and retail franchising

toward an economic model of the japanese firm i owe a great deal to professor moses abramovitz who suggested that i write this article i appreciate his constant encouragement and guidance which aided me throughout its preparation i am also indebted to three anonymous referees of the journal and to professors ryutaro komiya and michael riordan for their critical comments and helpful suggestions needless to say i am solely responsible for the views expressed in this paper

externalities and corporate objectives in a world with diversified shareholder consumers if shareholders own diversified portfolios and if companies impose externalities on one another shareholders do not want value maximization to be corporate policy instead shareholders want companies to maximize portfolio values this occurs when firms internalize between firm externalities any kind of externality pecuniary or nonpecuniary vertical or horizontal suffices what matters is simply that one company s actions affect another s value thus besides the traditional benefit of risk reduction portfolio diversifi cation offers additional benefits to shareholders through helping internalize externalities this paper documents the extent of diversification and cross ownership of stocks among companies where these externalities are likely to be large and provides a capital market test of how merger offers vary with the extent of cross ownership

employee participation programs group based incentives and company performance a union nonunion comparison this analysis examines whether union representation positively or negatively influences the effectiveness of employee participation programs and group based incentives in improving firm performance examined at the firm level a model of the independent and interaction effects of participation profit and gain sharing and union representation is estimated against data on 841 manufacturing firms in michigan in 1989 the evidence indicates that employee participation programs contributed substantially more to performance in unionized firms than in nonunion firms whereas profit and gain sharing programs contributed substantially more to performance in nonunion firms than in unionized firms

a generalized valuation model for fixed rate residential mortgages this paper uses option pricing techniques to rationally price mortgage instruments subject to both default and prepayment risk attention is given to terminations due to purely financial consideration of the mortgage contract itself as well as to personally induced terminations explicit inclusion of default in the mortgage valuation procedure also permits the valuation of insurance against such default qualitatively it is found that default differs significantly in the behavior from either prepayment or nonfinancial termination quantitatively however there is significant substitution between prepayment and default so that the addition of a default feature to the contract has only a modest impact on mortgage values unless there is substantial price volatility in the housing market or a high loan to value ratio copyright 1992 by ohio state university press

piece rates fixed wages and incentives evidence from a field experiment data from a field experiment are used to estimate the gain in productivity that is realized when workers are paid piece rates rather than fixed wages the experiment was conducted within a tree planting firm and provides daily observations on individual worker productivity under both compensation systems unrestricted statistical methods estimate the productivity gain to be 20 since planting conditions potentially affect incentives structural econometric methods are used to generalize the experimental results to out of sample conditions the structural results suggest that the average productivity gain outside of the experimental conditions would be at least 21 7

determinants of the incidence of group incentives evidence from canada we use canadian data on four group incentive schemes to examine the deter minants of the probability that a firm offers each scheme to its non managerial workers and to production workers alone we find that unionization lowers the incidence of group incentives except for productivity gainsharing larger firms are more likely to offer share purchase plans to all non managerial employees and profit sharing to production workers cash bonuses are less common in larger firms we find little indication that group incentives are either discouraged by machine paced production or more common in firms with good industrial relations

optimal labour contracts under asymmetric information an introduction the review of economic studies has instituted a new series of lectures to be given annually by a younger british economist at the association of university teachers of economics meetings the choice of lecturer is determined by a panel whose members are currently professors hahn mirrlees and nobay this paper is a revised version of the first lecture in the series it was presented at the aute meeting held at the university of surrey in april 1982 and was refereed in the usual way mak

innovation and market strategy in italian industrial cooperatives econometric evidence on organizational comparative advantage abstract this paper argues that more than one type of organizational form can be simultaneously efficient within an industry when differentiation in product qualities are significant firms with some exogenous or persistent component to their organizational structure will specialize in product qualities for which their organizational structure puts them at an advantage relative to other firms this framework is used in an empirical study of innovation and market strategy of industrial cooperatives results of management surveys of italian cooperatives on company strategy are combined with company financial data to test the hypothesis that industrial cooperatives will hold organizational comparative advantages in innovative activity which stresses the production knowledge of ordinary employees in high quality products and in the use of specialized corporate alliances strong evidence supporting the hypotheses are found when the performance of the firm is measured by its profitability and income per member

worker participation and productivity in labor managed and participatory capitalist firms a meta analysis using meta analytic techniques the author synthesizes the results of 43 published studies to investigate the effects on productivity of various forms of worker participation worker participation in decision making mandated codetermination profit sharing worker ownership employee stock ownership or individual worker ownership of the firm s assets and collective ownership of assets workers collective ownership of reserves over which they have no individual claim he finds that codetermination laws are negatively associated with productivity but profit sharing worker ownership and worker participation in decision making are all positively associated with productivity all the observed correlations are stronger among labor managed firms firms owned and controlled by workers than among participatory capitalist firms firms adopting one or more participation schemes involving employees such as esops or quality circles

valuing commercial mortgages an empirical investigation of the contingent claims approach to pricing risky debt this paper empirically investigates a contingent claims model of commercial mortgage pricing we find that the magnitude of the observed default premia for a sample of nonprepayable fixed rate bullet mortgages can be explained by the contingent claims model in addition the model explains a significant proportion of the period to period changes in the default premia however given an assumed negative correlation between building value changes and interest rate changes the model s risk structure tends to increase less steeply with increasing maturity than the observed risk structure since the seminal work of black and scholes 1973 corporate liabilities have been modeled as options on the total value of the firm this contingent claims approach to bond pricing was refined by merton 1974 to allow for cash dispersals prior to the bonds maturities and by brennan and schwartz 1980 and ingersoll 1987 to allow for interest rate uncertainty although variants of these bond pricing models are currently being used extensively on wall street they have not been tested extensively moreover empirical studies have not successfully accounted for the observed spread between the rates on risky and default free debt jones mason and rosenfeld 1984 empirically investigate a model that assumes a nonstochastic term structure of interest rates while ramaswamy and sundaresan 1986 examine a model with stochastic interest rates to price floating rate notes in both cases the models could not explain the observed default premia the relative lack of empirical analysis is due partly to the complicated nature of corporate bonds major corporations generally have a large number of different bond issues outstanding that have different priorities in the event that the firm goes bankrupt moreover the bonds can have a variety of covenants specifying sinking fund provisions conditions under which technical default will occur and other restrictions that can have an impact on their value although these complications do not preclude pricing various bond issues on a case by case basis they make it difficult to test systematically the accuracy of the pricing model

a model of rationing and labour supply theory and estimation a number of authors most prominently clower 1965 and leijonhofvud 1968 have interpreted keynes s theory of unemployment as a disequilibrium model nominal price and wage rigidity prevent the labour market from clearing the actual level of employment is given by the minimum of the effective demand for labour and the effective supply general disequilibrium models of income and employment determination have been developed by barro and grossman 1976 and malinvaud 1977 the model has been extended to the open economy by dixit 1978 and to a two period rational expectations context by neary and stiglitz 1979 the econometric implications of the disequilibrium approach have been developed by goldfeld and quandt 1972 maddala and nelson 1974 and rosen and quandt 1978 among others in summary the disequilibrium approach has provided a fruitful context for analysing macroeconomic behaviour in a competitive walrasian system the notional supply of labour is defined as the amount of labour a worker wishes to provide when he can buy and sell as much as he would like in all markets subject only to his budget constraint and given prices and wages the notional supply of labour then is given by l where 1 c attains the indirect utility function

is profit sharing participation evidence on alternative firm types from west germany abstract systematic differences are reported in the structural and performance characteristics of firms in subsamples based on a profit sharing and b participation in control employee involvement in decision making moreover whereas group b firms tend to conform to a theoretical participatory stereotype group a firms do not the coincidence of profit sharing and participation in control in a given firm is not surprisingly quite low these results cast doubt on current theoretical and policy arguments concerning productivity gains dependent on the joint use of participation and profit sharing but indicate that one precondition for weitzman type macro economic benefits of profit sharing in the absence of participation may be present

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

managerial objectives capital structure and the provision of worker incentives worker incentive schemes are invariably assumed to be administered by an owner entrepreneur who has an incentive to understate worker performance after the event while tournaments can overcome this problem they discourage cooperation between workers we show that a professional manager concerned with equality between workers and with avoiding bankruptcy rather than maximizing shareholder wealth will conduct a tournament that preserves individual effort incentives while promoting cooperation between workers the theory predicts lower debt levels and more compressed pay scales as cooperation becomes more important in the limit this becomes a group bonus scheme supported by blue chip debt

estimating the performance effects of business groups in emerging markets business groups confederations of legally independent firms are ubiquitous in emerging economies yet very little is known about their effects on the performance of affiliated firms we conceive of business groups as responses to market failures and high transaction costs in doing so we develop hypotheses about the effects of group affiliation on firm profitability affiliation could either boost or depress firm profitability and members of a group are likely to earn rates of return similar to other members of the same group using a unique data set compiled largely from local sources we test for these effects in 14 emerging markets argentina brazil chile india indonesia israel mexico peru the philippines south africa south korea taiwan thailand and turkey we find evidence that business groups indeed affect the broad patterns of economic performance in 12 of the markets we examine group affiliation appears to have as profound an effect on profitability as does industry membership yet strategy scholars have a much clearer grasp of industries than of groups moreover membership in a group raises the profitability of the average group member in several of the markets we examine this runs contrary to the wisdom conventional in advanced economies that unrelated diversification depresses profitability overall our findings suggest that the roots of sustained differences in profitability may vary across institutional contexts conclusions drawn in one context may well not apply to another copyright 2001 john wiley sons ltd

some behavioral perspectives on the dominance of hierarchical over democratic forms of enterprise abstract this paper explores possible reasons why participatory modes of organization whole potentially viable and preferable to hierarchical modes for a large majority of workers may be dominated by the latter in capitalist market economies after exploring the developmental preconditions for the evolution of a mature participatory mode using a behavioral approach to organizations it is suggested that since the interest of those possessing scarce managerial skills may lie with hierarchical firms a participatory sector may be uncompetitive unless rights to enter labor contracts are redefined thus the analysis offers a partial explanation of the political nature of the demand for workplace democracy

firms choice of method of pay using data from the bls industry wage survey the author tests the theory that firms choose their methods of pay by balancing the gains from more precise links between performance and pay against m

modelling and forecasting mortgage delinquency and foreclosure in the uk in the absence of micro data in the public domain new aggregate models for the uk s mortgage repossessions and arrears are estimated using quarterly data over 1983 2014 motivated by a conceptual double trigger frame framework for foreclosures and payment delinquencies an innovation to improve on the flawed but widespread use of loan to value measures is to estimate difficult to observe variations in loan quality and access to refinancing and shifts in lenders forbearance policy by common latent variables in a system of equations for arrears and repossessions we introduce for the first time in the literature a theory justified estimate of the proportion of mortgages in negative equity as a key driver of aggregate repossessions and arrears this is based on an average debt equity ratio corrected for regional deviations and uses a functional form for the distribution of the debt equity ratio checked on irish micro data from the bank of ireland and bank of england snapshots of negative equity we systematically address serious measurement bias in the months in arrears measures neglected in previous uk studies highly significant effects on aggregate rates of repossessions and arrears are found for the aggregate debt service ratio the proportion of mortgages in negative equity and the unemployment rate economic forecast scenarios to 2020 highlight risks faced by the uk and its mortgage lenders illustrating the usefulness of the approach for bank stress testing for macroeconomics our model traces an important part of the financial accelerator the feedback from the housing market to bad loans and hence banks ability to extend credit

industrial strategy a missing link in british economic policy this paper critically analyzes the potential and limitations of economic instruments for environmental protection it presents a general framework for analyzing environmental issues along with a taxonomy for classifying different approaches to environmental protection a key contribution of the paper is to identify critical steps in marketing economic incentive approaches for environmental protection the challenge to researchers is to design tools that will help achieve environmental goals more effectively this means taking careful account of political technical and economic constraints in system design copyright 1993 by oxford university press

on the incidence of profit and equity sharing theory and an application to the high tech sector abstract profit and equity sharing benefit some firms through improvements in innovation production quality retention of key employees and specific human capital formation the analysis predicts high share contract incidence in the high tech sector a hypothesis supported by survey data collected from small and large high tech firms however externalities associated with this sector s market entry mechanism imply that the optimal level of profit and equity sharing may not have been achieved

introduction do compensation policies matter excerpt the papers in this volume should give the reader a sense of the exciting empirical research that has recently taken place on compensation related issues as a set these papers considerably expand our empirical evidence on the effects of compensation policies several papers show that executive compensation is structured in a way that at least implicitly ties executive compensation changes to measures of corporate performance and crucially that doing so leads to improved corporate performance leonard murphy gibbons abowd others show that compensation systems that pay workers for performance in the sense of providing explicit or implicit incentives for high levels of performance can motivate individuals to increase their effort levels ehrenberg bognanno hamermesh asch kahn sherer still others show that high wage policies do have some of the effects that proponents of efficiency wage theories claim for them krueger groshen holzer finally one shows that profit sharing plans appear at least weakly to increase employment stability chelius smith

a clash of capitalisms foreign shareholders and corporate restructuring in 1990s japan this article examines the clash between stakeholder and shareholder based business systems resulting from an increase in foreign portfolio investment in the japanese economy during the 1990s an analysis of 1 108 firms between 1991 and 2000 shows that as foreign institutional investors who were more interested in investment returns than in long term relationships replaced domestic shareholders one fundamental pillar of japan s stakeholder capitalism began to crack japanese firms began to adopt downsizing and asset divestiture practices more characteristic of anglo american shareholder economies the influence of foreigners however was weaker in firms more deeply embedded in the local system through close ties to domestic financial institutions and corporate groups thus foreign investors were influential primarily in firms less embedded in the existing stakeholder system this research contributes to debates on globalization and convergence of business systems institutional change and corporate

the determinants of default on insured conventional residential mortgage loans this paper presents empirical evidence on the determinants of default for insured residential mortgages a multinomial logit model is specified and estimated for regional aggregates constructed from cross sectional and time series data the results document the independent statistical significance of contemporaneous payment income and loan value ratios and unemployment rates as well as more commonly studied determinants of default such as age and the original loan value ratio

basic research inside the firm lessons from an in depth case study abstract the economic analysis of basic research in firms has been a growing concern but only a few attempts have been made to understand the realities which characterize the implementation of this activity in an in depth case study this paper considers the organisational specificities of basic research inside the firm and emphasizes the strategic role of human resources it shows that the process of innovation which was seen in the 1970s as a stock of information to be managed became during the 1980s a sequential learning process which covers a variety of different but complementary organizational designs in the basic research unit on this basis some analytical implications for technology and innovation processes are suggested as the production process is a sequential learning process an innovative firm strategy is defined as one which is able to balance short and long terms requirements with regard to profitability this appears as an out of equilibrium problem where the crucial determinant is the organizational design chosen by the firm in order to generate and implement new learning and skills

unions and the incidence of performance linked pay schemes in britain abstract this paper examines the relationship between trade unions and the incidence of share ownership profit sharing and value added schemes in britain the first two schemes are more common in the union sector whilst the third occurs more in non union establishments a distinction is made between weak and strong unions and it is found that performance linked pay schemes are in general less likely to be present if an establishment has a strong union rather than a weak one

pricing mortgage default and foreclosure delay this paper extends current mortgage pricing models to recognize the impact that delays between default and foreclosure have on the value of default to the borrower and the resulting value of the mortgage to investors the model explicitly captures potential costs through postforeclosure deficiency judgments and benefits in the elimination of negative equity and free rent that must be weighed at the time of default in determining whether the ultimate put option via allowing foreclosure is in the money the results provide policy implications concerning the operation of the fha insurance program copyright 1997 by ohio state university press

the productivity effects of employee stock ownership plans and bonuses evidence from japanese panel data the authors report the first results for japanese firms on the effects of employee stock ownership plans esops and bonuses by estimating production functions using new panel data they find that the introduction of an esop will lead to a 4 5 percent increase in productivity this productivity payoff takes three to four years there is a modest productivity gain from the bonus system the authors also find evidence that the productivity effect of bonuses is enhanced by the existence of esops suggesting that esops may create a climate conducive to profit sharing by enhancing long term commitment and peer monitoring copyright 1995 by american economic association

defaults on mortgage obligations and capital requirements for u s savings institutions abstract this paper analyzes credit risk for residential mortgages estimates of the hazard of mortgage default are presented based upon a large sample of conventional loans issued in the late 1970s mean returns are estimated together with variances and covariances for various loan to value ltv ratios and geographic groups these results are then used to analyze capital requirements for institutions holding mortgages we ask for a given bankruptcy risk how should capital requirements vary by ltv and geographical diversification the empirical results indicate that both factors have powerful effects upon bankruptcy risk thus capital requirements should vary substantially along these dimensions

profit sharing and employee share ownership profit sharing and employee share ownership saul estrin paul grout and sushil wadhwani this paper evaluates the likely effects of linking a part of a worker s pay to the employer s profits it has been suggested by weitzman that this would raise employment by lowering the cost of taking on an extra worker however this can only happen if existing workers are willing to let their share of value added fall and experience of those firms in the uk who already operate profit sharing schemes suggests that the weitzman mechanism is not operative there is however some evidence that profit related pay does boost productivity but there are other ways of raising productivity such as performance related pay which may be more effective productivity enhancing effects are likely to be greatest when employees are involved in decision making as well but this is likely to undermine the weitzman case still further even if the argument that profit sharing raises employment is not compelling it is sometimes suggested that it can do little harm however there is evidence that it may well be inflationary in which case the government would be advised to proceed cautiously we argue that there is very little case for the introduction of a permanent subsidy to encourage increased profit sharing although there may be a case for a temporary one to overcome managerial inertia however there is a danger that a subsidy will promote cosmetic schemes designed to be eligible for the subsidy but which do not reflect any real change in behaviour

the credit constrained consumer an empirical study of demand and supply in the loan market this article presents an empirical analysis of credit constrained households in which models of both demand and supply sides of the market for loans are simultaneously estimated we develop a discrete choice logit model of the consumers decision on whether or not to apply for credit combining this with a reduced form logistic model for the banks credit granting decision we then estimate the model with cross sectional data as a nonlinear ordered sequential logit our findings shed light on the criteria used by banks in assessing credit applications and reveal the strong dependence of preferences on demographic characteristics the results also suggest that agents face significant fixed costs in applying for loans the fact that we jointly estimate models of both supply and demand sides of the credit market enables us to examine whether particular groups in the population are more frequently credit rationed because they tend to demand more loans or because they are viewed as bad credit risks by lenders

mortgage default and possession under recourse a competing hazards approach recent studies by ambrose buttimer and capone have stressed the fact that lender and borrower decisions after the initial default on amortgage may significantly affect the amount and timing of recoveries and hence more broadly the value and riskiness of mortgage loan portfolios this study uses microeconomic data from the uk to examine the timing decisions of mortgage lenders and borrowers when mortgages are in default the results suggest that salary and interest rates influence timing decisions more than loan to value ratios do and that lenders and borrowers accelerate the resolution of delinquent mortgages as the economic climate deteriorates