export market performance of oecd countries an empirical examination of the role of cost competitiveness we investigate the relationship between export market shares and relative unit labour costs using a long panel of 12 manufacturing industries across 14 oecd countries we ask how sensitive are export market shares to changes in relative costs and what determines this sensitivity both costs and embodied technology are important but neither can fully explain changing export positions we explore whether residual country specific trends might be linked to deep structural features of economies sensitivity to labour costs is lower in high tech industries and core erm countries industry elasticities have increased especially in industries subject to increasing product market competition

selecting suitable compensation plans of executive stock options theoretical and empirical works have emphasized that executive stock option plans play an important role in compensation management and corporate governance owing to the incentives to increase firm stock price and volatility levels this study not only proposes models of executive stock options and constructs value matched financial variables for comparing the incentive effects towards these options but also develops an empirical study exploring the characteristics of executive stock options and suitable compensation management for companies this investigation examines the daily value and compares incentive effects of six kinds of executive stock options with the empirical data of tsmc the world s largest dedicated semiconductor foundry which is listed on the tse and nyse empirical results indicate that purchased options would be the best choice for companies that are unsuitable to undertake risky investments while the relative indexed options are appropriate for bear markets and good for companies

the effect of changes in reserve requirements on bank stock prices abstract the present study re examines the tax burden effects of reserve requirements on bank profitability it differs from previous work in two ways 1 changes in stock prices rather than accounting data are used to measure profitability effects and 2 emphasis is placed on changes in reserve requirements as opposed to their level regarding the latter distinction two kinds of changes are considered 1 temporary changes in reserve requirements for the purpose of discretionary monetary policy and 2 more permanent changes in reserve requirement levels based on the event study methodology temporary changes were found to have little effect on security prices whereas more permanent changes had a stronger influence on bank stock prices reflecting a tax burden effect

effects of announcements of reorganization outcome less is known about whether the market perceives the final resolution of post reorganization filing to be idiosyncratic or to carry endemic implications for the corresponding industries this study observes the presence of intra industry information transfers the magnitude and direction of the reactions in response to three separate resolution outcome differs in a systematic way across industry portfolios specifically portfolio rivals that are affected by competitive realignments in the industry experience stock price reactions in the opposite manner to those of the distressed firms thus suggesting dominant competitive effects in addition this study reveals that the discriminatory power and forecast performance of three hybrid neuro fuzzy models are stable and unimpaired across time and are generally superior in classifying rival cumulative prediction error rcpe candidates

the value of corporate voting rights and control a cross country analysis this paper measures the value of corporate voting rights specifically of the control block of votes in a sample of 661 dual class firms in 18 countries in 1997 a consistent measure across countries is proposed the measure is adjusted for takeover probability block holding costs and dividend and liquidity differences between the share classes the value of controlblock votes varies widely across countries it is close to half of firm market value in south korea andclose to zero in finland the value of control block votes is interpretedas a lower bound for actual private benefits of the controlling shareholder the legal environment law enforcement investor protection takeover regulations andpower concentrating corporate charter provisions explain 68 of the cross country variation in the value of control block votes

basket cases tax incentives and international joint venture participation by american multinational firms abstract this paper examines the impact of the u s tax reform act of 1986 tra on international joint ventures by american firms the tra mandates the use of separate baskets in calculating foreign tax credits on dividends received from each foreign corporation owned 50 or less by americans which greatly reduces the attractiveness of joint ventures especially those in low tax foreign countries since the effect of the tra on joint ventures varies with foreign tax rates the country level pattern of subsequent joint venture activity illustrates the sensitivity of organizational form to tax considerations the evidence indicates that american participation in international joint ventures fell sharply after 1986 particularly in low tax countries moreover joint ventures in low tax countries use more debt and pay greater royalties to their american parents after 1986 reflecting their incentives to economize on dividend payments

endogenous political organization and the value of trade agreements abstract in a bargaining model of endogenous protection i introduce fixed costs of political organization that need to be incurred by capitalists prior to actual lobbying unlike maggi and rodriguez clare j pol econ 106 3 1998 575 intersectoral capital mobility is disallowed nevertheless i am still able to obtain their main result that a government with low bargaining power vis a vis the import competing lobby precommits to a free trade agreement further with high fixed organizational costs the government prefers to stay out of such agreements its maximum bargaining power consistent with signing a trade agreement has an inverse v shaped relationship with respect to the size of fixed costs

the dating game do managers designate option grant dates to increase their compensation we provide evidence of two variants of a dating game that entails picking a grant date ex post that is after the board s compensation decision is made back dating picking a date before the board decision date and forward dating waiting after the board decision date to observe the stock price behavior consistent with back dating we find stock return behavior around the grant date to be positively related to reporting lag in the promptly reported sample we find stock return behavior and the pattern of reporting lags consistent with forward dating our calculations show that managers can obtain economically significant benefits by playing the dating game

the trade effects of the eu turkey customs union in the present study we argue that the salient features of both the eu 15 countries and turkey are conducive to making the effects of the 1995 eu turkey customs union asymmetric among the incumbent eu countries in order to support our argument we rely on a model in which trade involves the exchange of vertically differentiated products this model generates the prediction that the more contiguous an incumbent country is to the joining country in terms of technological sophistication the larger will be the crowding out of this country s exports to the other incumbent countries as a result of the cu expansion using a gravity model we estimate the effects of the customs union between turkey and the eu 15 by differentiating between exports from a lower technology eu 15 countries we term this group of countries south to higher technology eu 15 countries the north b north to south c south to turkey d north to turkey and e turkey to eu 15 our econometric results indicate that in contrast to north s exports to the other eu 15 countries which have remained intact the southern countries exports to the other eu 15 countries have declined as a result of the cu moreover the extra penetration of the turkish market by the eu 15 countries has not been more favourable to the southern group

uk directors trading the impact of dealings in smaller firms this paper reasesses the u k results of significant abnormal returns from directors trading for a new sample of directors trades 1984 86 and finds that abnormal returns tend to be concentrated in smaller firms when an appropriate benchmark portfolio is used it is found that the significance of the abnormal returns is substantially reduced with the implication that directors trading does not yield particularly high profits to either the directors themselves or to an outside investor mimicking those trades coauthors are john matatko ian tonks and richard purkis copyright 1994 by royal economic society

performance changes around bank mergers revenue enhancements versus cost reductions this paper examines operating performance around commercial bank mergers we find that industry adjusted operating performance of merged banks increases significantly after the merger large bank mergers produce greater performance gains than small bank mergers activity focusing mergers produce greater performance gains than activity diversifying mergers geographically focusing mergers produce greater performance gains than geographically diversifying mergers and performance gains are larger after the implementation of nationwide banking in 1997 further we find improved performance is the result of both revenue enhancements and cost reduction activities however revenue enhancements are most significant in those mergers that also experience reduced costs

what fraction of stock option grants to top executives have been backdated or manipulated we estimate that 13 6 of all option grants to top executives during the period 1996 2005 were backdated or otherwise manipulated our study primarily focuses on grants that were unscheduled and at the money of which we estimate that 18 9 were manipulated the fraction is 23 0 before the new two day filing requirement took effect on august 29 2002 and 10 0 afterward for the minority of grants that are not filed within the required two day window the fraction of manipulated grants remains as high as 19 9 we further find a higher frequency of manipulation among tech firms small firms and firms with high stock price volatility in addition firms that use smaller non big five auditing firms are more likely to file their grants late finally at the firm level we estimate that 29 2 of firms manipulated grants to top executives at some point between 1996 and 2005

the contribution of nonhomothetic preferences to trade abstract this paper estimates the economic significance of preference nonhomotheticity in international trade tastes are assumed to be identical but budget shares depend on per capita income a linear expenditure system is estimated for 34 countries over 11 commodity aggregates a counterfactual exercise is conducted to estimate the volume of trade caused by deviations from homotheticity the results indicate that nonhomothetic preferences may account for as much as one quarter of interindustry trade flows

corporate governance through the proxy contest evidence and implications the current literature concerning proxy contests provides little evidence that shareholders suffer materially from sub par performance prior to a contest furthermore no study has thoroughly examined the long term performance of targeted firms subsequent to a proxy contest using a sample of ninety seven election contests during the period 1968 87 the authors find negative abnormal returns and deteriorating operating performance prior to the announcement of a contest following the contest negative abnormal returns are observed these negative returns are driven by cases in which dissident shareholders successfully acquire board seats the results for accounting based operating performance measures confirm these findings copyright 1993 by university of chicago press

the repricing of executive stock options abstract we examine a sample of firms that reset the exercise prices on their executive options these repricings follow a period of about one year of poor firm specific performance in which the average firm loses one fourth of its value no other offsetting changes to option terms or compensation are made and many firms reprice more than once without repricing a majority of the options would have been at the money within two years we find that when faced with circumstances in which repricing might be chosen firms with greater agency problems smaller size and insider dominated boards are more likely to reprice

competitiveness through management of diversity effects on stock price valuation this study s premise is that firms that can lower their costs and enhance their differentiation through the effective management of their human resources have a competitive advantage using data fr

issuing costs to existing shareholders in competitive and negotiated underwritten public utility equity offerings abstract this paper presents the results of an empirical investigation of whether there is any difference in the cost incurred by public utilities if they issue new equity through a negotiated or competitive underwriting we conclude that the expected cost of a competitive offer is less than the expected cost of a negotiated offer but that the variance of the cost is substantially greater with a competitive offer these results are interesting because most public utilities use negotiated underwriting unless forced by regulation to use competitive offers this paper is also an addition to the growing agency theory literature

on the estimation of simultaneous equations error components models with an application to a model of developing country foreign trade summary an empirical balance of payments model involving the demand and supply of imports and exports for 31 developing countries is estimated utilizing panel data over 1964 1987 in order to compute errorcomponents 3sls estimates of this model which requires different instruments for different equations we propose a generalization of the fuller battese transformation to obtain gmm estimates our empirical results suggest that very little of the short run adjustment in external imbalances is likely to be achieved by exchange rate policies and most of the burden must fall on aggregate demand management

the effect of two tier collective bargaining agreements on shareholder equity this study uses an event time methodology to examine the impact of two tier agreements on shareholder equity from 1981 through 1986 following announcements of two tier agreements about half of the firms in the sample had negative abnormal returns returns with values below the expected market returns and half had positive abnormal returns because the positive returns exceeded the negative returns in absolute value however there was a statistically significant increase in mean firm value the abnormal returns averaged between 2 and 4 over a 10 to 12 week period following the announcement a figure that approximately equals the transactions cost of a stock purchase the authors speculate that this rather low average gain may help explain the marked decline of new two tier agreements during the latter half of the 1980s

mars venus marriages culture and cross border m a using a sample of over 800 cross border acquisitions during 1991 2004 we find that contrary to general perception cross border acquisitions perform better in the long run if the acquirer and the target come from countries that are culturally more disparate we use mainly the hofstede measure of cultural dimensions to measure cultural distance but also examine alternative proxies the positive relationship of performance to cultural distance persists after controlling for several deal specific variables and country level fixed effects and is robust to alternative specifications of long term performance cash and friendly acquisitions tend to perform better in the long run there is also some evidence of synergies when acquirers are from stronger economies relative to the targets

multinational learning under asymmetric information the aim of this paper is to analyze the competition between a multinational and the incumbent firm in a foreign market under asymmetric information about demand and unobservable outputs it is shown that the incumbent firm increases its production in the first period to signal to the multinational that the demand is low the multinational reduces its output in the foreign market in order to signal jam in addition the multinational increases its production in the other market however total production of the multinational is lower implications for research and development expenditure by the multinational are examined

the impact of trade liberalisation on exports imports and the balance of payments of developing countries this paper uses panel data and times series cross section analysis to estimate the effect of trade liberalisation on export growth import growth the balance of trade and the balance of payments for a sample of 22 developing countries that have adopted trade liberalisation policies since the mid 1970s we find that liberalisation stimulated export growth but raised import growth by more leading to a worsening of the balance of trade and payments to the extent that this has constrained the growth of output and living standards the findings have important implications for the sequencing and degree of liberalisation

syndicated loan announcements and the the market value of the banking firm this paper examines valuation effects on the stocks of fifteen participating money center banks of 774 announcements of syndicated loans representing announcements of investment decisions for the lenders the authors find that announcements of ldc loans in the 1970s especially those to latin american borrowers are associated with negative abnormal returns to the lending banks while announcements of loans to u s corporate borrowers in the 1980s especially those for takover finance are associated with positive abnormal returns while a number of testable predictions are consistent with the negative abnormal returns for latin american loans they explain response to takeover loans with a return to liquidity hypothesis copyright 1995 by ohio state university press

excess asset reversions and shareholder wealth the ownership of pension assets in a defined benefit pension plan is an unresolved issue in corporate finance the issue is important because it defines the appropriate investment policy for a pension fund in this paper we summarize the ownership debate in the form of two mutually exclusive theories we then focus on a recently popular event in pension finance excess asset reversions our paper demonstrates the valuation effects associated with this event in a stochastic dominance framework under certain conditions a reversion constitutes an expropriation of wealth from the participants and beneficiaries of the plan to the firm using data provided by the pension benefit guaranty corporation and the center for research in security prices tape we examine the returns to the shareholders of 58 companies which conducted excess asset reversions between 1980 and 1984 our results show that large abnormal returns accrued to these shareholders around the time of the reversion these findings have implications both for the appropriate investment policy of pension funds and for public policy with respect to plan terminations

an analysis of the use of accounting and market measures of performance in executive compensation contracts prior research has provided useful insights into the structure of compensation plans and their incentive effects however one important limitation of these studies is the virtual absence of any cross sectional analyses of the attributes of compensation contracts 2 this absence is related in part to the problems associated with controlling for other factors that affect compensation that is compensation contracts are

multiple measurements of u s income inequality using 1980 state census data the gini ratio theil index coefficient of variation atkinson measure four values and nelson index as separate measurements of income inequality are regressed with nineteen ses variables traditionally found significant with gini in past research the standard deviation of educational attainment is dominant among all independent variables as the strongest predictor of inequality mean family income dominant in prior research is a distant second in predictiveness more diversity than commonality is evident among the nineteen ses variables as they predict income inequality measured by the eight different techniques copyright 1988 by mit press

security price reactions to initial reviews of common stock by the value line investment survey this study examines daily price reactions to initial reviews of securities by the value line investment survey the reviews are found to convey information to the market as significant abnormal returns are found over a 3 day period around release of the information furthermore there is no statistically significant subsequent price reation after this 3 day period consistent with market efficiency

proxy contests and the governance of publicly held corporations abstract analysis of 60 proxy contests for seats on the boards of exchange listed firms during 1978 1985 shows that three years after the contest less than one fifth of the sample firms remain independent publicly held corporations run by the same management team proxy contests are typically followed by managerial resignations even when dissidents fail to obtain a majority of board seats and are often followed by sale or liquidation of the firm the average stockholder wealth gains associated with proxy contests are largely attributable to gains by companies in which dissident activity leads to sale or liquidation

import compression and export performance in developing countries the debt crisis that began in 1982 forced a number of developing countries that had relied on external financing into rapid adjustment of their current account positions in many of these countries external adjustment mainly took the form of import reduction or what has been termed import compression to generate trade balance surpluses necessary to service the existing stock of foreign debt while the effects of import compression on consumption and growth have been discussed in the literature there has been little concern expressed with regard to the direct effects such a policy can have on export performance this paper develops a model that takes explicit account of the feedbacks between imports and exports that arise through the effects of imported inputs on exports and the availability of foreign exchange on imports empirical tests of this model for 34 developing countries tend to confirm both these hypotheses these results point clearly for additional foreign financing to reduce the need for import compression and its attendant negative effects on the supply of exports

toehold acquisitions shareholder wealth and the market for corporate control this study examines the valuation consequences of control related outcomes that fol low toehold acquisitions we find evidence that toehold acquisitions facilitate valueenhancing control transfers the types of control transfers not only include takeovers but also internal mechanisms such as proxy fights and management turnovers we find that toehold targets experiencing such control transfers exhibit an abnormal increase in share value while those not experiencing such control transfers exhibit an abnormal de crease in share value the results suggest that the positive valuation effect associated with toehold acquisitions reflects the expected benefits of subsequent control transfers

communication costs information acquisition and voting decisions in proxy contests this article synthesizes some recent progress in the theories of corporate control and political lobbying to model the proxy campaign as a political campaign the model yields a number of testable implications only some of which have been examined in the literature for example if the loss from voting for a bad dissident exceeds the gain from voting for a good dissident the model predicts that as communication costs fall the number of proxy fights increases announcement day returns decrease and the fraction of dissident wins first increases and then decreases article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

is there a j curve abstract if the response of the value of the trade balance to movements in the real exchange rate is described by a j curve then a real depreciation initially worsens a balance of trade deficit only improving it over time this paper investigates whether a j curve can be detected in the last twenty five years of american data no statistically reliable evidence of a stable j curve is detected the model is checked extensively to support this finding

altering the terms of executive stock options abstract we examine the practice of resetting the terms of previously issued executive stock options we identify properties of reset options develop a model for valuing resettable options and characterize the firms that have reset options we find the vast majority of options are reset at the money resulting on average in the strike price dropping 40 our valuation model suggests that resetting has only a small impact on the ex ante value of an option award but the ex post gain can be substantial finally we find resetting has a strong negative relation with firm performance even after correcting for industry performance

short sale restrictions and market reaction to short interest announcements according to the diamond verrecchia hypothesis if increases in short interest are correlated with information that is not yet public they should precipitate a price adjustment stocks with unexpected increases in short interest are found to generate statistically significant but small negative abnormal returns for a short period around the announcement date when the sample is divided into stocks with and without tradable options nonoptioned stocks closely mimic these results but the optioned stocks do not in a cross sectional analysis of individual firms the short term negative abnormal returns are found to be 1 more negative the higher the degree of unexpected short interest and 2 less negative if the firm has tradable options

the timing of option repricing we investigate whether executive stock option repricings are systematically timed to coincide with favorable movements in the company s stock price for a sample of 236 repricing events we observe sharp increases in stock price in the 20 day period following the repricing date in addition repricing dates tend to either precede the release of good news or follow the release of bad news in the quarterly earnings announcements since information about stock option repricing is not generally released to the public around the repricing date these findings suggest that ceos opportunistically manage the timing of the option repricing date

the feldstein horioka puzzle revisited a monte carlo study abstract this study revisits the feldstein horioka fh puzzle by employing a variety of asymptotically efficient cointegration estimators and by using the critical values obtained from monte carlo simulations to test the hypothesis of a unit retention coefficient this leads to a lower rejection of the null than standard critical values would have implied despite ample evidence supporting the fh result there appears to be considerable heterogeneity in terms of the savings investment association and only 25 of the 23 oecd countries we examine can be characterised as open economies in the fh sense whether or not one subscribes to the fh interpretation the fh result does not appear to be robust

voting power in the proxy process abstract the likelihood that a firm will enact a management sponsored antitakeover charter amendment depends on ownership structure this implies that the adoption of antitakeover amendments may be anticipated then announcement returns provide a biased estimate of wealth effects an estimator that corrects for the bias induced by anticipation indicates that the enactment of an antitakeover amendment is associated with a statistically significant decrease in shareholder wealth the voting power of employee stock ownership plans and the chief executive officer plays a prominent role in determining whether a firm will adopt this type of takeover defense

entry in foreign markets under asymmetric information and demand uncertainty author affiliation rafael moner colonques department of economic analysis and eri ces university of valencia campus dels tarongers avda dels tarongers s n 46022 valencia spain rafael moner uv es corresponding authorvicente orts dagger department of economics and international economics institute university jaume i castellon campus riu sec avda sos baynat s n 12006 castellon spain orts eco uji esjose j sempere monerris double dagger department of economic analysis and eri ces university of valencia campus dels tarongers avda dels tarongers s n 46022 valencia spain jose j sempere uv es acknowledgment we would like to thank christos constantatos amparo urbano the editor laura razzolini and two referees for their useful comments and suggestions we gratefully acknowledge the financial support from spanish ministerio de educacion y ciencia and feder projects sej2004 07554 econ and sej2005 08764 econ 1 introductionentry into foreign markets entails a number of difficulties one such difficulty is a lack of knowledge of the market characteristics which may persuade foreign firms to not enter the domestic market this paper elaborates on the idea that domestic firms hold an informational advantage over foreign firms see hirsch 1976 scherer 1999 in a two period model of entry mode choice we offer a complementary explanation for a foreign firm s choice between foreign direct investment fdi and exports when fdi is the entry mode that provides better knowledge of local demand then our contribution focuses on a firm s incentive to become multinational and exploit the advantages of being close to the market market seeking fdi rather than to exploit cost advantages in different locations efficiency seeking fdi the foreign expansion of firms through exports and fdi is very likely to involve uncertainty since the environment in their home market is different from the one they will face in foreign markets in fact dissimilarities of any kind create obstacles to successful entry buckley and ghauri 1999 informational asymmetries between local and foreign brands that can eventually affect the mode of entry may be particularly significant in consumer goods industries such as consumer electronics pharmaceuticals software automobiles household appliances and personal computers the hypothesis in our paper is reasonably intuitive yet to the best of our knowledge it has not received much attention in the literature a couple of notable exceptions are horstmann and markusen 1996 and jain and mirman 2001 in particular we analyze the role of differential information in determining the foreign firm s entry mode decision the model that we examine assumes that inverse demand is linear and stochastic specifically the demand intercept consists of an unknown recurrent term which captures the idiosyncratic features of local economy and an additive period specific random shock the host firm which is only informed about the recurrent term is the sole producer in the initial time period and this generates a noisy market signal 1 then the foreign firm uses the information conveyed by the observation of the first period output choice and price to update its prior beliefs about the stochastic demand in a bayesian fashion the second period unfolds in two stages in the first stage the foreign firm selects its mode of entry which has some implications if it enters as an investor then it incurs a fixed cost whereas it incurs a variable unit cost if it enters as an exporter furthermore if investment takes place then the foreign firm learns the recurrent term of the stochastic demand otherwise it employs its updated beliefs in the second stage decisions there is cournot competition in the second stage which amounts to either solving a duopoly under symmetric information and identical marginal costs when entry occurs through direct investment or solving an asymmetric duopoly both in terms of information and marginal costs when entry is via exports

on corporate governance a study of proxy contests abstract this paper examines a sample of firms experiencing proxy contests for seats on their board of directors dissident shareholders usually fail to obtain a majority of board seats nevertheless they capture some seats via mechanisms such as cumulative voting in over half of the sample contests regardless of proxy contest outcome positive and statistically significant share price performance is associated with the contest that finding is predicted by the standard economic analysis of proxy contests in which the challenges benefit shareholders by improving corporate performance the finding runs counter to the claim of berle 1962 that the economists view of proxy contests is a wholly imaginary picture a portion of the positive share price changes taking place in the early stages of some proxy contests is not permanent however and as suggested by manne 1962 is at least partially attributable to temporary increases in the market value of the vote attached to corporate shares

the consequences of the fasb s 1998 proposal on accounting for stock option repricing abstract we examine repricing activity surrounding the fasb s 1998 announcement regarding accounting for repriced options we find that repricing increases during and decreases after the 12 day window between the announcement and proposed effective dates consistent with firms timing repricings to avoid recording an expense we find that firms experiencing increasing earnings patterns firms with earnings around zero and growth firms are more likely to reprice in the window but having repriced recently decreases the likelihood of doing so the evidence suggests that firms trade off financial reporting benefits against reputation costs in decisions to time repricings to get favorable accounting treatment

changes in organizational structure and shareholder wealth the case of limited partnerships this paper analyzes the consequence for shareholders of a change in organizational form the conversion of a corporation or the spin off of a unit into a limited partnership theory suggests that prior to the tax reform act of 1986 the tax benefits of conversion to a limited partnership and the creation of a new entity separate from the parent corporation should have a positive effect on shareholder wealth on the other hand the increase in agency costs of such an organizational change should decrease the wealth of shareholders empirical results lend support to hypotheses that predict an increase in stock price at the announcement of the conversion but cannot identify the source of the gain

managerial ownership of voting rights abstract managers of firms with dual classes of common stock can choose different quantities of votes for a given cash flow interest by choosing different quantities of the two securities we study managerial stock holdings in 45 dual class firms and find that vote ownership per se is an important motivation for these holdings in that corporate officers and their families hold a median 56 9 of the votes and 24 0 of the common stock cash flows we also find significant family involvement in many sample firms and document four case studies in which explicit acquisition premiums were paid for superior voting shares

shareholder wealth effects of directors liability limitation provisions the adoption of liability limitation provisions llps is associated with insignificant stock price reactions for all firms but with positive stock price reactions for poorly performing firms this result is consistent with the hypothesis that the net benefit of llps is larger for financially troubled firms than for other firms because outside directors are valuable to the distressed firm and llps substantially affect experts expected costs of serving as directors

the social construction of market value institutionalization and learning perspectives on stock market reactions this study advances a social constructionist view of financial market behavior the paper suggests that the market s reaction to particular corporate practices such as stock repurchase plans are not as financial economists contend simply a function of the inherent efficiency of such practices rather stock market reactions are also influenced by the prevailing institutional logic and the degree of institutionalization of the practice the theory first predicts that the emergence of the agency perspective on corporate governance in the mid 1980s represented a powerful new institutional logic that would lead the market to reverse its prior aggregate reaction to stock repurchase plans in the united states the paper then considers the potential for institutional decoupling of repurchase plans and develops competing hypotheses about how the market value of these policies might have changed as more firms formally adopted but did not implement the plans over time in contrast to a financial economic pers

differences in income elasticities and trends in real exchange rates abstract one might expect that differences in income elasticities in trade and or differences in growth rates among countries would give rise to strong secular trends in real exchange rates for example fast growing countries might need steady depreciation to get the world to accept their growing exports in fact however income elasticities are systematically related to growth rates by the 45 degree rule under which fast growing countries appear to face high income elasticities of demand for their exports while having low income elasticities of import demand the net effect of this relationship between elasticities and growth rates is that secular trends in real exchange rates are much smaller than one might otherwise have expected relative ppp holds fairly well this paper documents the existence of a 45 degree rule and suggests an explanation in terms of increasing returns and product differentiation

relative price effects and the demand for imports this paper addresses the issue of data selection in the estimation of import demand functions little attention is generally devoted to the choice of price and activity variables in empirical work yet this question is of crucial importance when estimated elasticities are used for instance to assess the effect of import price changes in a partial equilibrium framework or when elasticity estimates drawn from different sources are compared with each other throughout the paper imports are treated as intermediate products and the relationship between price and quantity elasticities corresponding to various specifications is established for constant and variable returns to scale prix relatifs etfonctions d importations ce m6moire examine le probleme du choix des donnees quand on veut faire la calibration de fonctions d importations le choix des indicateurs de prix et de niveau d activite ne regoit habituellement que peu d attention dans les travaux empiriques cette question est pourtant de grande importance quand on veut utiliser les mesures d elasticit6 qu on en tire pour evaluer les effets d un changement des prix a l importation dans le cadre d un modele d equilibre partiel ou lorsqu on d6sire comparer entre elles des mesures d elasticite construites a partir de sources differentes dans ce m6moire les importations sont considerees comme des biens intermediaires et l on etablit a la fois pour les cas de rendements a 1 echelle constants et variables la relation qui existe entre l lasticite par rapport au prix et l 6lasticite par rapport aux quantites pour un 6ventail de specifications du modele

optimal exercise prices for executive stock options although exercise prices for executive stock options can be set either below or above the grant date market price in practice virtually all options are granted at the money we offer an economic rationale for this apparent puzzle by showing that pay to performance incentives for risk averse undiversified executives are typically maximized by setting exercise prices at or near the grant date market price we provide an operationally useful alternative to black scholes 1973 for the purpose of both valuing executive stock options and measuring the incentives created by options our framework has implications not only for exercise price policies but also for indexed options option repricings exchanges of cash for stock based compensation and the design of bonus plans

the impact of antitrust litigation on shareholder return the hypothesis that antitrust litigation will redistribute economic power is examined using an event study framework district and appellate court findings involving firms litigating antitrust issues and the telex v ibm case are examined the results indicated that shareholders of firms involved in the litigation experienced decreases increases in return when either court finding was unfavorable favorable the telex v ibm results indicated that the district court s finding against ibm resulted in significant positive abnormal returns for computer industry firms abnormal negative returns were also found in the period surrounding the appellate court reversal copyright 1989 by blackwell publishing ltd

the outsourcing of r d through acquisitions in the pharmaceutical industry abstract we examine the performance of 160 pharmaceutical acquisitions from 1994 to 2001 and find evidence that on average acquirers realize significant positive returns these returns are positively correlated with prior acquirer access to information about the research and development activities at target firms and a superior negotiating position a unique desperation index is employed to determine the current status of a firm s internal productivity we find that firms experiencing declines in internal productivity or which are more desperate are more likely to engage in an outsourcing type acquisition in an effort to replenish their research pipelines

ceo stock option awards and the timing of corporate voluntary disclosures abstract we investigate whether ceos manage the timing of their voluntary disclosures around stock option awards we conjecture that ceos manage investors expectations around award dates by delaying good news and rushing forward bad news for a sample of 2 039 ceo option awards by 572 firms with fixed award schedules we document changes in share prices and analyst earnings forecasts around option awards that are consistent with our conjecture we also provide more direct evidence based on management earnings forecasts issued prior to award dates our findings suggest that ceos make opportunistic voluntary disclosure decisions that maximize their stock option compensation

ceo compensation in financially distressed firms an empirical analysis this paper studies senior management compensation policy in 77 publicly traded firms that filed for bankruptcy or privately restructured their debt during 1981 to 1987 almost one third of all ceos are replaced and those who keep their jobs often experience large salary and bonus reductions newly appointed ceos with ties to previous management are typically paid 35 less than the ceos they replace in contrast outside replacement ceos are typically paid 36 more than their predecessors and are often compensated with stock options on average ceo wealth is significantly related to shareholder wealth after firms renegotiate their debt contracts however managers compensation is sometimes explicitly tied to the value of creditors claims

vertical product differentiation and the import demand function theory and evidence in this paper we use a model of vertical product differentiation to cast doubt on the general validity of the import demand function as specified in macroeconomic models the empirical importance of our theoretical concerns is then established according to our first hypothesis the share of a good s imports in total imports is non increasing in domestic wages if the country has comparative advantage in high quality varieties of this good the second hypothesis states that the share of a good s imports is increasing in non wage domes tic income if the country has comparative advantage in high quality varieties of this good

on the optimality of resetting executive stock options the practice of resetting strike prices on underwater executive stock options has drawn criticism for weakening managerial incentives our model shows that although the anticipation of resetting can negatively affect initial incentives resetting can still be an important value enhancing aspect of compensation contracts even from an ex ante standpoint in fact we find that some resetting is almost always optimal the relative advantages of resetting diminish with greater ability of managers to influence the resetting process greater relative importance of external factors on stock performance and lower costs of replacing incumbent managers

the effect of private antitrust litigation on the stock market valuation of the firm the authors study the implications for shareholder wealth of interfirm antitrust litigation and how the costs of the dispute affect the propensity to settle upon filing defendants experience significant wealth losses that are ten million dollars larger than the wealth gains of plaintiffs financial distress behavioral constraints and follow on suits are sources of wealth leakage and influence settlement behavior since the threat of a monetary transfer has little power to explain either wealth effects or the likelihood of settlement the central concern of defendants may be the potential prohibition of profitable business practices copyright 1995 by american economic association

private information in executive stock option trades evidence of insider trading in the uk uk executives stock option exercises and associated sell decisions are motivated by private inside information executives use their inside information to lock in short term gains and to sell stock acquired prior to negative abnormal stock returns this informed trading is robust to the alternative factors that might motivate the exercise of executive stock options including option moneyness and value of exercise we suggest that the disparity in informed trading between us and uk executives option trades is related to important differences in the proportion of executive remuneration linked to options the regulation of options and the taxation of option gains

inequality and the us import demand function in this paper we build a model of trade in vertically differentiated products and find that income inequality can affect the demand for imports even in the presence of homothetic preferences the empirical importance of changes in inequality on the demand for imports is then assessed by examining panel data for 36 developing and developed countries for the 1980 1997 period we find significant evidence supporting our prediction that inequality has a large influence on the demand for imports moreover we find that in line with the predictions of our theoretical model this influence is positive for high income countries countries that produce the high quality variety of the vertically differentiated product and negative for low income countries countries that produce the low quality variety of the vertically differentiated product

inequality nonhomothetic preferences and trade a gravity approach we construct the first direct classification of goods as luxuries or necessities that is compatible with international trade data we then use it to test an idea that has not been tested directly in the literature countries income distributions are important determinants of their import demand and in particular of the difference in their import demands of luxuries versus necessities we interpret this result with the aid of a model in which preferences are nonhomothetic thus relaxing a long held and standard but empirically dubious assumption in the theory of international trade our model is strongly borne out by the results imports of luxuries increase with the importing country s inequality and imports of necessities decrease with it our calculations imply that if income distribution in the united states became as equal as in canada the united states would import about 9 13 fewer luxury goods and 13 19 more necessities

demand and supply factors in the determination of nie exports a simultaneous error correction model for hong kong this paper considers the issue of whether a small developing economy such as hong kong faces a perfectly elastic demand for its exports of manufactured goods we construct a simultaneous demand and supply system which is estimated using full information maximum likelihood methods and which allows us to clearly identify demand and supply factors in determining export volumes and prices our empirical findings differ from previous studies conducted with this data set in that they suggest that even a small dynamic newly industrialized economy such as hong kong may not face infinitely elastic demand for its manufactured goods we also advance some reasons to explain why the small country assumption may not be applicable in the case of most industrialized economies

the competitive impact of air crashes stock market evidence abstract we examine stock market reactions to commercial air crashes to test the hypothesis that consumers respond by switching to rival airlines and or flying less we focus on the stock price reactions of airlines not involved in the crash if switching occurs noncrash airlines should benefit to the extent that they are direct competitors of the crash airline we develop a measure of market overlap and regress individual non crash airline abnormal returns on this measure allowing the constant term to capture any negative spillovers the evidence supports both a switching effect and a spillover

the role of exchange rates in a popular model of international trade abstract this paper examines the empirical relationship between the real effective exchange rate and the aggregate real trade balance for five major oecd countries in the post bretton woods era a variety of parametric and non parametric techniques are used there is little evidence that the exchange rate significantly affects the trade balance

why regulate insider trading evidence from the first great merger wave 1897 1903 we use event time methodology to study legal insider trading associated with mergers circa 1900 for mergers with prospective disclosures similar to today s we find substantial value gains at announcement implying participation by outside shareholders despite the absence of insider constraints furthermore preannouncement stock price runups relative to total value gain are no more than those observed for modern mergers insider regulation apparently has produced little benefit for outsiders with the inside information pricing function and related gains shifting to external information specialists other results suggest market penalties for nondisclosure i e insider trading is less successful in a restricted information environment

import competition from developed and developing countries separate demand equations for imports from less developed countries ldcs and imports from developed countries dcs were estimated for each of eleven representative product groups imports were found to compete quite readily with domestically produced goods with plausible own price and cross price elasticities whereas the quantity of each type of import was found to be quite responsive to changes in the price of us home goods each appears to be less sensitive to the price of the alternative import an explanation that is consistent with this observation and that finds support from detailed industry information is that dcs and ldcs supply goods that are at different stages in the product or technology cycle whereas us producers compete in all submarkets this suggests that trade creation rather than trade diversion provides the predominant inroad for ldcs into the us market 25 references 3 tables

empirical evidence on on vertical foreclosure i introduction prior to the 1980s the united states department of justice and the federal trade commission actively challenged vertical mergers on the theory that such mergers foreclosed unintegrated rivals in the downstream market from access to inputs supplied by the merged firm this policy changed when critics of the foreclosure theory claimed that vertically integrated firms have no incentive to transfer products between the upstream and downstream markets at a price other than the market price and therefore vertical mergers have no effect on the price charged to consumers 1 the arguments against attacking vertical mergers were also supported by research that demonstrated that vertical integration can enhance efficiency 2 as a result vertical mergers currently receive very little if any attention from the enforcement agencies recent contributions by ordover saloner and salop 1990 krattenmaker and salop 1986 and salinger 1988 1989 have reopened the debate about the competitive effects of vertical mergers they each use theoretical models to show that vertical foreclosures can raise costs to unintegrated rivals and lead to higher prices for consumers although these models demonstrate that foreclosure can be a profitable strategy that injures competition to date these theories have not been tested empirically if vertical foreclosure rarely occurs or if it occurs only in a narrow set of circumstances changes in current policy on vertical mergers may not be justified a necessary but not sufficient condition for anticompetitive foreclosure is that the vertical merger cause the unintegrated rivals to be less profitable this result from previous theoretical work is tested here on a sample selected from all vertical merger cases challenged by the justice department and the federal trade commission during the period 1963 to 1982 we find no evidence of anticompetitive market foreclosure for the sample of cases challenged by the antitrust agencies one possible explanation for our results is that the tests over the entire sample are significantly affected by a few weak cases brought by the government during a period of aggressive antitrust enforcement we test this by examining variables that have been identified by krattenmaker and salop 1986 and the department of justice merger guidelines as being conducive to foreclosure such as barriers to entry and industry concentration even the cases with high industry concentration and barriers to entry which potentially should exhibit substantial market power provide no evidence of foreclosure while this does not preclude anticompetitive foreclosure as a possibility it does call into question the cases brought by the antitrust agencies during the 1960s and the 1970s until the proponents of the more rigorous economic version of the foreclosure theory provide clearer guidelines about the conditions under which vertical mergers are likely to injure competition continuation of the current policy of not contesting these mergers seems justified ii theory of anticompetitive foreclosure the foreclosure arguments used to challenge vertical mergers during the 1950s and 1960s were easily discredited because no formal theory was used to support them more recent attempts to reconstruct the foreclosure theory have used economic models to demonstrate that vertical foreclosure can reduce competition the key to each of these models is that foreclosure raises the costs to the unintegrated rivals of the merged firm and this under certain conditions raises the price of the final product to the consumer the legal definition of foreclosure focuses on the ability of unintegrated firms to buy from or sell to integrated rivals while the economic definition of anticompetitive foreclosure focuses on whether prices to consumers increase salinger 1988 has provided a model that demonstrates the conditions under which anticompetitive foreclosure will occur

event studies in management research theoretical and empirical issues we examined the use of event studies in management research and found that there was inadequate attention paid to theoretical and research design issues this lack of attention may lead to false in

aggregate demand shifts income distribution and the linder hypothesis the intraindustry trade literature emphasizes nonhomothetic preferences and incomes as important determinants of aggregate demand and trade patterns the authors provide evidence for such preferences particularly that the structure of income driven demand shifts is related to indices of linder type product characteristics and that income distribution is a significant factor in determining aggregate expenditures these results imply that as general income levels rise the relative volume of trade in manufactured consumer goods should rise and the total volume of trade should rise independent of changes in the intercountry difference between income levels copyright 1996 by mit press

import demand in heterogeneous panel setting to study the elasticities of import demand function a heterogeneous panel is built with data of 40 countries and using panel unit root tests im et al 1997 and panel cointegration tests pedroni 2004 the model is tested with two previously used activity variables gdp and gdp minus export for a performance comparison to estimate elasticities use is made of two modified panel versions of fmols and dols developed by pedroni 1996 2000 2001 the tests prove that gdp outperforms gdp minus exports as an activity variable in the cointegration context fmols and dols give close results when individual estimates are done when between dimension estimators are used conflicting results are obtained then the sample is split into developed and developing countries and it is shown that income elasticity in developing countries are not different than unity on average and are higher than in developed countries contradicting previous literature results

the effect of pre emptive right amendments on shareholder wealth abstract pre emptive rights allow existing shareholders to purchase a new offering of shares before the general public this paper investigates the effect on shareholder wealth of removing pre emptive rights from corporate charters two hypotheses are constrasted 1 shareholder wealth maximization suggests that management uses this extra degree of freedom to pick the least cost method for raising new equity hence the amendment increases shareholder wealth 2 management welfare maximization holds that management will use the passage of the amendment to maximize their own welfare sometimes to the detriment of shareholders hence the amendment decreases shareholder wealth the evidence indicates that the amendment decreases shareholder wealth

the role of power and politics in the repricing of executive options we explore how ceo power affects the repricing of executive options the spread between an option s exercise or strike price and the market value of a stock impacts the likelihood of repricing

do capital importing countries pay higher prices for their imports of goods abstract we examine the effects that a country s net capital flows have on the border prices that a country pays for its imports of goods using data from 2000 to 2009 for 11 euro area countries we utilize a pricing to market specification to study exporters pricing behavior to the rest of the countries in the sample at the industry level for 900 goods disseminated at the 4 digit standard international trade classification level this allows us to construct a panel dataset which contains observations across exporters importers industries and time we find a strong positive influence of the importing country s net capital inflows on the border prices of its imports of goods this result is robust across different specifications of the underlying model as well to different sample dis aggregations across types of capital flows product categories and exporters

estimating long run economic equilibria with stochastic trends an asymptotic theory is provided to analyze a menu of currently existing estimators of cointegrated systems we study in detail the single equation ecm seecm approach of hendry our theoretical results lead to prescriptions for empirical work such as specifying seecm s nonlinearly and including lagged equilibrium relationships rather than lagged differences of the dependent variable as covariates simulations support these prescriptions and point to problems of overfitting not encountered in the semiparametric approach of phillips and hansen 1990

a reexamination of the conglomerate merger wave in the 1960s an internal capital markets view one possible explanation for bidding firms earning positive abnormal returns in diversifying acquisitions in the 1960s is that internal capital markets were expected to overcome the information deficiencies of the less developed capital markets examining 392 bidder firms during the 1960s we find the highest bidder returns when financially unconstrained buyers acquire constrained targets this result holds while controlling for merger terms and for different proxies used to classify firms facing costly external financing we also find that bidders generally retain target management suggesting that management may have provided companyspecific operational information while the bidder provided capital budgeting expertise