labor market polarization the decline of routine work and technological change a quantitative analysis abstract a common hypothesis for labor market polarization is that technological progress has decreased the price of machines which are substitutable with middle skilled jobs and complementary to higher and lower skilled jobs i quantitatively evaluate this hypothesis in a dynamic general equilibrium model i find that the near constant elasticities of labor demand in the standard technology hypothesis and the observed dynamics of the price of machines are inconsistent with rapid polarization pre 2000 and its slower dynamics thereafter extending the model to allow for a separate investment sector requiring only high skilled workers generates a much closer fit to data

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 great reversal in the demand for skill and cognitive tasks this paper argues that several of the poor labor market outcomes observed in the great recession can be traced back to a change in the demand pattern for skilled workers that started with the tech bust of 2000 in particular we show that around the year 2000 the demand for cognitive tasks underwent a reversal in response high skilled workers moved down the occupational ladder and increasingly displaced lower educated workers in less skill intensive jobs while these effects were present before the financial crisis of 2008 they became more obvious after jobs associated with the housing bubble disappeared

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

proxy contests and corporate democracy abstract a proxy contest is a fight between two management teams to gain proxies from shareholders the management team which accumulates a majority of votes wins the competition for corpo rate control this paper attempts to construct a formal model of proxy contests and analyze their implications for the shareholders benefit and power of control over the firm

economic growth and development towards a catchup model we develop a model for economic growth applicable to a group of countries constituting around half of the gross global production that have been consistently catching up to the us since 1960 or so this group can be termed the convergence club the model has a theoretical basis developed in other publications cited but the present work is essentially empirical it demonstrates that there is a very strong correlation between catchup growth with respect to the us and an energy proxy ep the energy proxy that works best is a linear combination of domestic electric power consumption petroleum oil consumption per capita compared to the us levels the results presented here do not constitute a theory of growth but they are consistent with theory presented elsewhere on a practical level we argue that consistent catchup trends over the past 40 years can safely be extrapolated for a few more decades for scenario construction purposes we also believe that the observed catchup trends can be regarded as potential mid term or long term growth trajectories for transition economies and others that have recently been adversely affected by conflict or mismanagement

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

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

energy aesthetics and knowledge in complex economic systems it is argued that the fact that economic systems are dissipative structures must be taken fully into account in economics if we are to understand the nature of the economic ecological interface and how to deal with emergent environmental problems such as global warming such problems are a product of economic growth which is widely accepted to be the outcome of the acquisition and application of knowledge drawing upon disparate literatures within and outside economics it is argued that economic growth should be more properly viewed as the outcome of a co evolutionary process that involves the autocatalytic interaction of new knowledge and access of increasing amounts of free energy to do increasingly specialized forms of work specifically the relevance of the energy hypothesis associated with erwin schrodinger and more recently revived by eric schneider and his collaborators is assessed this hypothesis states that all dissipative structures have as their primary objective the reduction of accessible free energy gradients it is concluded that such a hypothesis cannot be rejected in the context of economic behaviour and that this opens up an important research agenda for economists

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

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

useful work and information as drivers of economic growth abstract a semi empirical endogenous growth theory was proposed by the authors in 2005 it is based on a model of the economy as a two stage materials energy processing system growth is simulated by a two parameter production function with two traditional factors labor and capital and a non traditional factor namely useful work the non traditional factor is calculated from primary energy inputs multiplied by an empirically estimated average energy conversion efficiency which is a function of changing technology over time this model explains past us growth from 1900 through 1973 74 with satisfactory accuracy but it slightly underestimates subsequent growth i e it leaves a small unexplained but increasing residual for the period after 1975 however by subdividing capital stock into traditional and ict components we are able to extend the theory to explain us economic growth accurately in this paper we also extend the results to japan the revised production function has only three independent parameters the new model also has implications for future economic growth energy and environmental policy that differ significantly from the traditional growth theory these implications are discussed briefly

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

capital skill complementarity sectoral labor productivity and structural transformation abstract in the postwar u s economy labor productivity has been growing faster in the goods sector versus the service sector this paper argues that this sectoral labor productivity growth gap can largely be explained by the fact that capital intensity also increases faster in the goods sector i build a two sector neoclassical growth model in which capital substitutes low skilled labor but complements high skilled labor and the goods sector is more intensive in low skilled labor relative to the service sector as observed in the data as capital becomes more abundant relative to labor along economic growth low skilled labor is substituted by capital leading to faster growth of capital intensity and hence labor productivity in the goods sector using a calibrated model i find that two thirds of the sectoral labor productivity growth gap can be explained by capital accumulation and its interaction with capital skill complementarity

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

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

oil consumption and economic efficiency a comparative analysis of advanced developing and emerging economies abstract this paper investigates the economic efficiency oil consumption relationship in 42 countries during the period 1986 2006 in a first stage by using dea window analysis countries economic efficiencies are obtained in a second stage an econometric analysis based on robust gmm estimators reveals an inverted u shape relationship between oil consumption and economic efficiency in order to capture heterogeneities among countries development stages the analysis has been separated into two groups advanced economies and developing emerging economies the results show that advanced economies have much higher turning points compared to emerging and developing economies it appears that oil consumption increases countries economic efficiency in addition the consumption patterns of oil products and its derivatives have changed through years and among countries the different turning points from the econometric analysis indicate the dependence of oil consumption in advanced economies higher turning points is driven mainly by household purchasing activities and their standards of living transport housing and water food etc finally it appears that oil consumption is the main driver behind the progress of industrialization and urbanization regardless of the country s development stage

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

stock market reaction to capital investment decisions evidence from business relocations we investigate the stock market reaction to 447 announcements of business relocation decisions in the 1978 1990 period we find that the stock market reaction to such decisions is tied to the motive for the relocation and the implied prospects for the firm with the type of facility being relocated playing an insignificant role our finding reconciles several results in the literature concemmg the stock market reaction to announcements of capital investment decisions

balanced growth despite uzawa i use an event study approach to present novel evidence on the impact of trade liberalization on firm level profits using the uncertainty surrounding the negotiation and ratification process of the canada united states free trade agreement of 1989 cusfta i estimate the impact of different types of tariff reductions on the abnormal returns of canadian manufacturing firms i find that canadian import tariff reductions lead to lower and reductions in canadian intermediate input tariffs to higher abnormal returns the impact of u s tariff reductions is less clear and depends on the size of the affected firms i also calculate the total profit increase implied by my estimates overall cusfta increased per period profits by around 1 2 this was mainly driven by intermediate input tariff reductions which more than offset the negative effect of canadian import tariff reductions

productivity in the united states trends and cycles productivity growth in the us has taken a sharp downturn in recent years two experts provide a new body of comparative data on productivity since 1948 by major sector and industry the book analyzes 20 industries to highlight trends and fluctuations in productivity and to provide a better context for the discussion of policy options the authors set forth the causes of productivity advances based on growth accounting for the business economy as a whole they detail interindustry regressions with particular reference to the productivity slowdown since 1966 they look at both the traditional measure of productivity labor output per hour and the more recently developed measure of total factor productivity which takes into account capital as well as labor inputs the quarterly and annual data are used to relate changes to other basic variables such as factor prices unit costs and product prices an appendix presents data for 35 industries 42 references 8 figures 30 tables

changes in labor force participation in the united states the labor force participation rate in the united states increased almost continuously for two and a half decades after the mid 1960s pausing only briefly during economic downturns the pace of growth slowed considerably during the 1990s however and after reaching a record high of 67 3 percent in the first quarter of 2000 participation had declined by 1 5 percentage points by 2005 this paper reviews the social and demographic trends that contributed to the movements in the labor force participation rate in the second half of the twentieth century it also examines the manner in which developments in the 2000s reflect a break from past trends and considers implications for the future

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

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

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

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

on the dynamics of corporate size and illegal activity an empirical assessment this research relying on companies continuously listed on the fortune 500 over a five year period n 384 provides an empirical assessment of two hypotheses based on 334 violations over the period the results indicate 1 gross differences in illegal activity based on corporate size and 2 similar differences in corporate recidivism also based on size discussion includes a number of size related dynamics which may account in part for such results

the costs of inefficient bargaining and financial distress abstract this study provides the first large sample analysis of the stock market reactions to interfirm litigation when a suit is filed the common stock of the typical defendant declines by about 1 while the plaintiff experiences no significant gains for the average pair of firms the combined drop in value upon filing is 21 million much of the loss is regained if the suit is settled the findings suggest that bargaining among firm claimants sometimes leads to very inefficient outcomes part of the leakage is explained by the costs of increased financial distress imposed on the defendant

sticky wages and sectoral labor comovement abstract a defining feature of business cycles is the comovement of inputs at the sectoral level with aggregate activity standard models cannot account for this phenomenon this paper develops and estimates a two sector dynamic general equilibrium model that can account for this key regularity my model incorporates three shocks to the economy monetary policy shocks neutral technology shocks and embodied technology shocks in the capital producing sector the estimated model is able to account for the response of the u s economy to all three shocks using this model i argue that the key friction underlying sectoral comovement is rigidity in nominal wages

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

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

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

stock market reactions to announced corporate illegalities extending the work of davidson and worrell 1988 we further investigate the stock market s reaction to announced corporate illegalities we examine a sample of 535 announcements of corporate crime and obtain an overall insignificant stock market reaction however when the sample is divided by type of crime we find that the stock market reacts significantly to announcements of bribery tax evasion and violations of government contracts we also find a significantly negative reaction to announcements of corporate crime when the company had been previously accused of other illegal activity for companies accused of crime in the 1970s 51 of them were accused again in the 1980s

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

understanding the decline in the u s labor share evidence from occupational tasks abstract in this paper i provide empirical evidence linking the decline in the labor share to the replacement of occupations with substantial routine task content using cross industry variation i show that the overall labor share decline is driven by the replacement of occupations specializing in routine tasks i further find that the accelerated decline in the labor share since 2000 is associated with the replacement of higher skill occupations with substantial routine task content finally i estimate the effects of increased import competition on the labor share decline and how this relates to the replacement of occupational tasks while increased import competition plays a significant role in explaining the overall labor share decline and works through replacing routine occupations it cannot account for the accelerated labor share decline and replacement of higher skill occupations post 2000

corporate takeover bids methods of payment and bidding firms stock returns this study explores the role of the method of payment in explaining common stock returns of bidding firms at the announcement of takeover bids the results reveal significant differences in the abnormal returns between common stock exchanges and cash offers the results are independent of the type of takeover bid i e merger or tender offer and of bid outcomes these findings supported by analysis of nonconvertible bonds are attributed mainly to signalling effects and imply that the inconclusive evidence of earlier studies on takeovers may be due to their failure to control for the method of payment recent studies on corporate takeovers provide inconclusive results on the valuation effects of acquisitions on the common stock of bidding firms 1 substantial differences are reported between the studies that analyze acquisitions initiated as tender offers and those that confine their samples to merger proposals the existence of mixed empirical findings for the bidding firms makes it difficult to interpret existing evidence and to draw conclusions about the managers acquisition motivations nevertheless the reason for the substantial difference between empirical findings on mergers and tender offers still remains an unresolved issue it is observed however that mergers are usually common stock exchange offers whereas tender offers are usually cash offers given that different methods of financing a project have different signalling implications myers and majluf 39 the differential stock returns of bidders in mergers and tender offers may be due to the method of acquisition financing

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

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

wealth effects of regulatory reform abstract this paper investigates the effect of california s proposition 103 on the market value of publicly traded property and liability insurance companies the passage of this referendum on november 8 1988 moved california from a market oriented to a heavily regulated insurance pricing system during the period surrounding the election the average stock price of insurance companies doing business in california declined by 6 91 the decline is positively related to the proportion of a firm s premiums affected by the referendum and the proportion generated in other states where insurance regulation is likely to change and negatively related to the firm s profitability

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

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

long run implications of investment specific technological change an attempt is made to disentangle its effects from the more traditional hicksneutral form of technological progress the balanced growth path for the model is characterized and calibrated to u s national income and product account nipa data the quantitative analysis suggests that investment specific technological change accounts for the major part of growth jel e13 030 041 047

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

a market based evaluation of the election versus appointment of regulatory commissioners this paper examines the elected versus appointed commissioner dichotomy from a market value perspective previous empirical analysis tends to concentrate on rates rather than examining the impact on shareholders wealth we examine life insurance industry data during the period surrounding the passage of california s proposition 103 the primary impact of the referendum on life insurers is to change the method of commissioner selection from appointment to popular vote we find that this change significantly reduced the value of life insurers doing business in california this result is consistent with the recent findings of boyes and mcdowell 1989 and smartt 1994 using alternative evaluation procedures for firms in other regulated industries this implies that the change to a popular election of commissioners either increases the level of risk and or decreases the expected cash flows of regulated firms

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

disappearing routine jobs who how and why abstract we study the deterioration of employment in middle wage routine occupations in the united states in the last 35 years the decline is primarily driven by changes in the propensity to work in routine jobs for individuals from a small set of demographic groups these same groups account for a substantial fraction of both the increase in non employment and employment in low wage non routine manual occupations observed during the same period we analyze a general neoclassical model of the labor market featuring endogenous participation and occupation choice in response to an increase in automation technology the framework embodies a tradeoff between reallocating employment across occupations and reallocation of workers towards non employment quantitatively we find that this standard model accounts for a relatively small portion of the joint decline in routine employment and associated rise in non routine manual employment and non employment

buying shares and or votes for corporate control we explore how allowing votes to be traded separately of shares may affect the efficiency of corporate control contests our basic set up and the nature of the questions continue the work of grossman and hart 1980 harris and raviv 1988 and blair golbe and gerard 1989 we consider three cases with respect to the allowable price offers for shares and for votes when they can be traded separately unrestricted price offers quantity restricted price offers and price offers contingent on winning our main results are characterizations of the equilibria and of the circumstances under which vote buying is harmful we show that allowing votes to be traded separately of shares results in inefficiencies in all the cases we study similarly allowing quantity restricted offers is also harmful but allowing conditional offers is not in itself detrimental to efficiency the paper also makes a methodological contribution to the analysis of takeover games with atomless shareholders it provides a way of dealing with asymmetric equilibria that must be dealt with for a complete analysis and it proves existence of an equilibrium copyright 2012 oxford university press

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