marshall s scale economies using panel data this paper estimates plant level production functions for machinery and high tech industries that allow for scale externalities from other plants in the same industry locally and from the scale or diversity of local economic activity outside the own industry the paper finds that the count of other own industry plants representing a count of local information spillover sources has strong productivity effects in high tech but not machinery industries single plant firms both benefit more from and generate greater external benefits than corporate plants given their greater reliance on external environments on dynamic externalities high tech single plant firms benefit also from the scale of past own industry activity i find little evidence of economies from the diversity or scale of local economic activity outside the own industry

measuring the unmeasurable a country s non r d expenditure on product and service innovation knowledge about non r d innovation expenditure such as patenting and licensing design trial production tooling up manpower training market research and investment in fixed assets is extremely sparse and questions about the latter were very poorly answered in the recent community innovation survey cis using information regarding the quality of replies we reach a tentative national estimate of 1992 innovation expenditure for all manufacturing and service industries in the netherlands expenditure on product related r d represents about one quarter of total product and service innovation expenditure roughly half of the latter consists of investment in fixed assets the latter being more important in services than in manufacturing

does trade credit play a signalling role some evidence from smes microdata using micro data on small and medium sized enterprises this paper empirically investigates the signalling hypothesis formulated on the role of trade credit biais and gollier in rev financ stud 10 903 937 1997 burkart and ellingsen in am econ rev 94 569 590 2004 the research method adopted allows evaluation of the impact of suppliers credit on bank debt accounting for the strength duration of bank firm relationships our main finding is that trade credit seems to have an information content for banks especially when the latter do not dispose of adequate soft information on firms which is likely the case at the beginning stages of bank firm relationships an implication of our results is that the availability of suppliers credit might be crucial to foster access to institutional funding for new firms entering the market our evidence also suggests that banks seem to consider suppliers a reliable source of information on firms financial conditions even after several years of lending relationships

real options agency conflicts and optimal capital structure abstract we examine the impact of a stockholder bondholder conflict over the timing of the exercise of an investment option on firm value and corporate financial policy we find that an equity maximizing firm exercises the option too early relative to a value maximizing strategy and we show how this problem can be characterized as one of overinvestment in risky investment projects equityholders incentive to overinvest significantly decreases firm value and optimal leverage and significantly increases the credit spread of risky debt numerical solutions illustrate how the agency cost of overinvestment and its effect on corporate financial policy vary with firm and project characteristics

skills in the city this paper documents the allocation of skills across cities and estimates the impact of agglomeration on the hedonic prices of worker skills we find that large cities are more skilled than are small cities but only to a modest degree we also show that the increase in productivity associated with agglomeration as measured by the urban wage premium is larger for workers with stronger cognitive and people skills in contrast motor skills and physical strength are not rewarded to a greater degree in large cities urbanization thus enhances thinking and social interaction rather than physical abilities these results are robust to a variety of estimation strategies including using nlsy variables that control for worker quality and a worker msa fixed effect specification

the effect of business risk on corporate capital structure theory and evidence under corporate and personal taxation we demonstrate that the relation between optimal debt level and business risk is roughly u shaped this result follows from the fact that the tax liability is an option portfolio that is long in the corporate tax option and short in the personal tax option therefore the net effect of a change in business risk on the optimal debt level depends upon the relative magnitudes of the resultant marginal changes in the values of these two options results of empirical tests offer support for the predicted u shaped relationship

geography industrial organization and agglomeration this paper makes two contributions to the empirical literature on agglomeration economies first the paper uses a unique and rich database in conjunction with mapping software to measure the geographic extent of agglomerative externalities previous papers have been forced to assume that agglomeration economies are club goods that operate at a metropolitan scale second the paper tests for the existence of organizational agglomeration economies of the kind studied qualitatively by saxenian 1994 this is a potentially important source of increasing returns that previous empirical work has not considered results indicate that localization economies attenuate rapidly and that industrial organization affects the benefits of agglomeration

spatial evolution of the computer industry in the usa abstract this paper examines the spatial evolution of computers across 317 metro areas in the usa since the introduction of the personal computer we start by examining the relative distribution of employment across cities examining how that distribution changes in 1977 1992 and how cities move through the distribution for computers transition matrices are stationary with the industry exhibiting no tendency to settle down nor any tendency of retrenchment during periods of national high tech employment decline there is no tendency of the relative size distribution of computer employment to collapse go bimodal etc overall computers exhibit some turbulence with dramatic big winners and losers among cities as well as persistence for some cities in employment shares in attracting or repelling an industry urban heterogeneity is important large well educated cities near san jose have a much greater chance of attracting high tech employment much lower mean first passage times moving up states and less chance of losing it in assessing the determinants of persistence in local employment patterns we examine sources of productivity growth we find strong evidence of significant dynamic own industry externalities for single plant firms and little evidence of urbanization jacobs knowledge type externalities corporate plants in computers seem to be self reliant and not really influenced by externalities

bankruptcy risk and optimal capital structure this study finds shortcomings in empirical tests of the capital structure irrelevance hypothesis the alternative hypothesis is that firms choose value maximizing mixes of debt and equity on account of bankruptcy costs and the tax deductibility of interest payments based upon the cross sectional implications of the tax shelter bankruptcy cost hypothesis an alternative test of the irrelevance hypothesis is performed the test examines the relationship between failure rates and leverage ratios for 36 lines of business the results are inconsistent with the irrelevance hypothesis in their landmark paper modigliani and miller 26 demonstrate that under certain assumptions the market value of a firm is independent of its capital structure these assumptions include the absence of taxes transactions costs and bankruptcy costs recently miller 24 has argued that the introduction of corporate and personal taxes does not alter the capital structure irrelevance result in the absence of bankruptcy costs 1 the inclusion of bankruptcy costs generally considered in conjunction with the tax deductibility of interest payments has led others to conclude that capital structure will affect the value of the firm 2 in this case value maximizing firms may choose optimal capital structures consisting of both debt and equity there have been numerous attempts to discriminate empirically between the miller irrelevance mi hypothesis and the tax shelter bankruptcy cost ts bc hypothesis several are discussed in section i of this paper there it is argued that studies attempting to measure directly the effect of changes in capital structure on firm values are subject to serious complications and are unable to discriminate between the mi and ts bc hypotheses other studies focus on cross sectional implications of the mi and ts bc hypotheses the cross sectional tests are based on the assertion that bankruptcy costs may tend to induce firms with greater business risk to include less debt in their capital structures whereas the mi hypothesis does not predict such a relationship unfortunately the existence of positive bankruptcy costs is not sufficient to ensure that the ts bc hypothesis will predict the inverse relation

law enforcement and firm financing theory and evidence this paper investigates the economic effects on firms policies of differences in law enforcement we find that in judicial districts where trials are longer bank financing is more costly and firms are smaller however we do not find any significant relation between law enforcement and firms leverage ratio we rationalize our results within a two region dynamic general equilibrium model with asymmetric information and collateralized credit contracts we find that a stronger enforcement of creditors rights not only improves credit conditions partial equilibrium effect but also fosters individual capital accumulation general equilibrium effect in line with this theoretical prediction we find a positive relation between individual savings and quality of legal enforcement

how does financial distress affect small firms financial structure this paper provides new evidence on the financial structure of small firms by emphasizing the role played by financial distress we specify a model of debt adjustments that allows us to investigate the specific nature of the adjustment process towards target debt levels in small firms which is then extended to account for the effect of financial distress on financial structure decisions our models were estimated by the generalized method of moments on a data panel of small portuguese firms during a period of recession in which a substantial proportion of the companies analyzed faced a financial distress situation we find that small firms do adjust their debt ratios towards target levels the speed of adjustment being faster in the shorter term our results also indicate that there are major differences in the determinants of long term and short term debt highlighting the role played by debt maturity in explaining a firm s financial structure finally random behavior is observed in financially distressed firms who seem to be disoriented when making their financial structure decisions

financing the small firm this study presents a framework to delineate financing the small firm special consideration is given to small firms unique financing sources such as trade and bank credit entrepreneur s own resources informal investment and venture capital the small firm has limited or no access to many traditional debt and equity markets that supply long term financing to the corporate world and therefore operates in segmented and imperfect financial markets the links between small firms financing opportunities and managerial goals are traced from the start up stage through establishing a mature firm as the small firm matures it operates in a broader financial market this study establishes the foundation for future empirical research

evidence on the impact of the agency costs of debt on corporate debt policy in the last several years there has been increased theoretical emphasis on the agent principal problem as it applies to corporate finance this paper is an attempt to empirically test for the presence of the agency costs and their relation to the debt policy of corporations we find that firms with higher insider ownership have greater debt ratios than firms with lower insider ownership which may be explained by the agency costs of debt and or the agency costs of equity other regression results tend to confirm the theoretically optimal relationships put forth by myers we find that high growth firms use less debt rather than more debt high operating risk firms use more debt rather than less debt and firm size appears to be uncorrelated to the level of debt

a model of capital structure when earnings are mean reverting a multiperiod model of optimal capital structure is developed under the assumption that earnings follow an autoregressive process firm value and leverage vary through time and at each date the firm achieves an optimal debt level that is a function of the full state contingent debt policy the reversion parameter of the earnings series is shown to be positively related to various measures of variability and negatively related to leverage if earnings processes are not homogeneous across firms then standard earnings risk measures in capital structure studies do not adequately represent crosssectional differences in variability in firm value

on the interaction of real and financial decisions of the firm under uncertainty this study analyzes the interaction between the optimal level of investment and debt financing for this purpose a model is structured in which a firm facing an uncertain price has to decide on its optimal level of investment and debt the amount of investment sets a limit on output whose optimal level is determined after price is realized the debt involved is risky there exists a possibility of bankruptcy the analysis proves that investment and its optimal financing have to be simultaneously determined and that a negative relationship exists between operating and financial leverage we also demonstrate that as the tax rate increases optimal capacity decreases and optimal leverage increases an analysis of the impact of changes in the expected price shows that under some conditions an increase in expected price would lead to an increase in optimal investment firm size and a decrease in optimal debt

the propensity to patent abstract this paper analyzes the relationship between 1974 rd among the exceptions the tendency was toward diminishing returns variables measuring overseas sales federal r d support diversification scope of invention use and invention type had only modest explanatory power there was no significant evidence of disproportionate patent accumulation in the more highly concentrated industries

bankruptcy and agency costs their significance to the theory of optimal capital structure we support and generalize our original results 1978 in light of potential impediments to a pure market solution to agency problems and potential causal links between liquidation and bankruptcy in the case of bankruptcy costs market impediments are easily elimi nated through the inclusion of simple provisions in corporate charters and bond inden tures further we demonstrate that recent attempts to link liquidation costs to capital structure are without merit if the firm is to be liquidated on the basis of a rule other than one that maximizes the total value of all the claimants arbitrage profits arise and informal reorganization will discipline management to follow the liquidation rule that is optimal for existing securityholders also we find that the pure market solution is not readily generalizable to other classes of agency problems particularly the risk incentive problem how ever the alternative solution of the risk incentive problem through complex financing contracting may be useful in explaining complexities in contemporary financial contracts in a previous paper 1978 we employed arbitrage arguments to show that in a well functioning market bankruptcy costs are an insignificant determinant of a firm s capital structure we also pointed out that the decision to liquidate and its associated costs can be separated from the event of bankruptcy moreover any costs actually associated with the event of bankruptcy must be limited to the costs associated with an informal reorganization of the capital structure in the capital market prior to default these results were argued to hold under a com plex environment with multiple periods multiple securities and heterogeneous expectations we concluded that bankruptcy costs would be a significant deter minant of capital structure only in the face of irrationality on the part of market participants or unavoidable impediments to the arbitrage process since the publication of our paper there has been an accumulation of the

are firms underleveraged an examination of the effect of leverage on default probabilities a commonly held view in corporate finance is that firms are less leveraged than they should be given the potentially large tax benefits of debt in this paper i study the effect of firms leverage on default probabilities as represented by the firms ratings using an instrumental variable approach i find that the leverage s effect on ratings is three times stronger than it is if the endogeneity of leverage is ignored this stronger effect results in a higher impact of leverage on the ex ante costs of financial distress which can offset the current estimates of the tax benefits of debt

on the existence of an optimal capital structure theory and evidence one of the most contentious issues in the theory of finance during the past quarter century has been the theory of capital structure the geneses of this controversy were the seminal contributions by modigliani and miller 18 19 the general academic view by the mid 1970s although not a consensus was that the optimal capital structure involves balancing the tax advantage of debt against the present value of bankruptcy costs no sooner did this general view become prevalent in the profession than miller 16 presented a new challenge by showing that under certain conditions the tax advantage of debt financing at the firm level is exactly offset by the tax disadvantage of debt at the personal level since then there has developed a burgeoning theoretical literature attempting to reconcile miller s model with the balancing theory of optimal capital structure e g deangelo and masulis 5 kim 12 and modigliani 17 the general result of this work is that if there are significant leverage related costs such as bankruptcy costs agency costs of debt and loss of non debt tax shields and if the income from equity is untaxed then the marginal bondholder s tax rate will be less than the corporate rate and there will be a positive net tax advantage to corporate debt financing the firm s optimal capital structure will involve the trade off between the tax advantage of debt and various leverage related costs the upshot of these extensions of miller s model is the recognition that the existence of an optimal capital structure is essentially an empirical issue as to whether or not the various leverage related costs are economically significant enough to influence the costs of corporate borrowing the miller model and its theoretical extensions have inspired several timeseries studies which provide evidence on the existence of leverage related costs trczinka 28 reports that from examining differences in average yields between taxable corporate bonds and tax exempt municipal bonds one cannot reject the miller hypothesis that the marginal bondholder s tax rate is not different from the corporate tax rate however trczinka is careful to point out that this finding does not necessarily imply that there is no tax advantage of corporate debt if the personal tax rate on equity is positive indeed buser and hess 1 using a longer time series of data and more sophisticated econometric techniques estimate that the average effective personal tax rate on equity is statistically positive and is not of a trivial magnitude more importantly they document evidence that is consistent with the existence of significant leverage related costs in the economy

on the asset substitution problem in their seminal paper modigliani and miller 11 12 demonstrate that if capital markets are perfect and investment policy is held constant the market value of the firm is independent of its financial decisions furthermore if capital markets are perfect stockholders have incentive to choose the investment policy which maximizes the market value of the firm see 6 motivated by this assumption the firm has been viewed as a black box namely as one homogeneous unit whose clear objective is to maximize its market value however in a growing body of recent literature see 1 2 7 9 13 and 14 researchers recognize that the firm in an imperfect capital market is a collection of groups whose interests can and do conflict jensen and meckling 9 study the roles of three important groups the owner manager the stockholders and the bondholders focusing on the potential costs resulting from divergence of interests among them they provide a theory of optimal capital structure in terms of reducing the costs of these conflicts

innis lecture equity and equality is horizontal equity he the most widely accepted principle of equity or does it stand in opposition to the advancement of human welfare this paper argues that the case for the he principle is not as straightforward as is usually thought and that it requires advanced notions of justice and well being the most likely ethical basis for he appears to combine a rawlsian maximin principle and a view of well being that allows for relative local comparison effects the paper also explores some of the dimensions of equality and well being along which the he principle can be applied and presents a number of examples showing how he considerations can provide an important input into policy analysis le principe d d equite horizontale he constitue t il le principe ethique le plus largement admis ou est il un frein a l avancement du bien etre cet article explique pourquoi les assises ethiques du principe d eh ne sont pas aussi claires qu il est parfois suggere et demontre que ce principe fait plutot appel a des notions avancees de justice et de bien etre les assises morales les plus susceptibles d appuyer le principe d eh semblent combiner un argument de type maximin rawlsien et une perspective du bien etre qui tient compte des effets locaux relatifs de comparaison le papier explore egalement certaines des dimensions de l egalite et du auxquelles le principe d eh peut etre applique et presente un certain nombre d exemples montrant en quoi de considerations de type eh peuvent influencer l analyse de politiques

the financing of business start ups abstract this article investigates the determinants of capital structure and types of financing used around business start ups utilizing a survey that reduces the confounding effects of survivorship bias in particular the influence of start up size asset structure organization type growth orientation and owners characteristics are examined both in the choice and in the magnitude of finance use the results are consistent with the theoretical models incorporating issues such as information asymmetries agency theory and transaction costs the results also demonstrate linkages among providers of finance maturity of assets and the capital structure of start ups while the results provide insights into business finances near the time of creation some recommendations for future research are discussed

interaction of debt agency problems and optimal capital structure theory and evidence e oeg more leverage always wcfsen tbe debt ageocy problem this paper ptesents a unified analysis that acconntb for both risk shifting and nixler iiivestiiient ddbt agency problems for firms with positive marginal volatility of investment defined as the change in cash flow volatility cone ponding to a change of itwestment scale equity holders risk shifting incentive will midgate the under investment problem this inqdies that coturary to ccmventional views the total agency cost of debt does not unifcsmly increase with leverage this model fiiither predicts tbat for mg growth firms in which the under investment problem is severe the optimal debt ratio is positively related to the marginal volatility of investmenl empirical results suppmt this prediction

technological specialization and variety in urban invention o huallachain b and lee d s technological specialization and variety in urban invention regional studies urban economic theory distinguishes between knowledge spillovers that occur within specializations and those that cross technologies empirical analysis has sought to gauge their relative strength but the results are inconclusive metropolitan specialization and variety at different aggregation levels of a us patent classification system are assessed using theil s relative entropy index the results show that specialization and variety are not competing features of urban technological structure cities can have both the invention rate positively associates with specialization in diverse technologies the cross fertilization of ideas among skilled professionals with different expertise and the interaction between specialists of narrow fields of knowledge are both important in technological advance the most inventive cities have deep specializations in different technologies the results also sho

technology debt and the exploitation of growth options abstract this paper analyzes the effect of the firm s technology on the agency costs of debt it is shown that for an important class of technologies agency costs are not a uniformly rising function of leverage for these technologies relatively high leverage can be consistent with a small tax subsidy the effect of technology on the exploitation of real options by a levered firm is examined the analysis provides a framework for a direct test of the agency cost of debt hypothesis using cost data

spatial wage disparities sorting matters spatial wage disparities can result from spatial differences in the skill composition of the workforce in non human endowments and in local interactions to distinguish between these explanations we estimate a model of wage determination across local labour markets using a very large panel of french workers we control for worker characteristics worker fixed effects industry fixed effects and the characteristics of the local labour market our findings suggest that individual skills account for a large fraction of existing spatial wage disparities with strong evidence of spatial sorting by skills interaction effects are mostly driven by the local density of employment not controlling for worker heterogeneity leads to very biased estimates of interaction effects endowments only appear to play a small role

demographic variables in demand analysis in this paper the authors discuss five procedures for incorporating demographic variables into theoretically plausible demand systems translating scaling and the gorman reverse gorman and implicit prais houthakker procedures these five procedures are used to incorporate a single demographic variable the number of children in a household into the generalized ces demand system using household budget data for the united kingdom for the period 1966 1972 excerpt

debt agency costs and industry equilibrium we show that risk characteristics of projects cash flows are endogenously determined by the investment decisions of all firms in an industry as a result in reasonable settings financial structures which create incentives to expropriate debtholders by increasing risk are shown not to reduce value in an industry equilibrium without taxes capital structure is irrelevant for individual firms despite its effect on the equityholders incentives but the maximum total amount of debt in the industry is determinate allowing for a corporate tax advantage of debt capital structure becomes relevant but firms are indifferent between distinct alternative debt levels the effect of firms financial structures on subsequent investment and output decisions has recently received considerable attention in the finance literature the central insight that equityholders control the firm s investment and production decisions and in general do not maximize the value of a levered firm has been applied to the analysis of risk shifting underinvestment and firms abilities to enter into optimal contracts with their customers existing models of firms financial structures and their effect on investment decisions are generally based on a single firm framework and do not take into account the relationship between project cash flows and the investment decisions of all firms in the industry 2 in this paper we allow the distribution of investment projects within an industry to adjust and show that this generates new insights and reverses several key results of single firm agency cost models the new predictions conform with well documented

asset substitution and the agencycosts of debt financing agency costs of debt have been advanced in the literature as an important consideration foroptimal corporate debt policies recently there have been some doubts concerning the theoretical foundations of the notion that these costs increase as the firm employs more debt in this paper we examine explicitly the incentive for asset substitution by solving endogenously for the optimal risk policy the results support the notion that more debt aggravates shareholders incentives to take risk we also investigate the marginal agency cost function and discuss conditions for interior optimal capital structure

capital structure decisions during a firm s life cycle the study reported here examines the financing choices of small and medium sized firms i e those most vulnerable to information and incentive problems through the lens of the business life cycle we argue that the controversy in the empirical literature regarding the determinants of capital structure decisions is based on a failure to take into account the different degrees of information opacity and consequently firms characteristics and needs at specific stages of their life cycles the results show that in a bank oriented country firms tend to adopt specific financing strategies and a different hierarchy of financial decision making as they progress through the phases of their business life cycle contrary to conventional wisdom debt is shown to be fundamental to business activities in the early stages representing the first choice by contrast in the maturity stage firms re balance their capital structure gradually substituting debt for internal capital and for firms that have consolidated their business the pecking order theory shows a high degree of application this financial life cycle pattern seems to be homogeneous for different industries and consistent over time

when does corporate venture capital investment create firm value abstract over the past decade billions of dollars have been invested by established companies in entrepreneurial ventures what is often referred to as corporate venture capital yet there is little systematic evidence that corporate venture capital investment creates value to investing firms scholars have suggested that established firms face underlying challenges when investing corporate venture capital namely structural deficiencies inherent in corporate venture capital may inhibit financial gains however firm value may still be created as a result of other benefits from investing primarily providing a window onto novel technology in this paper we propose that corporate venture capital investment will create greater firm value when firms explicitly pursue corporate venture capital to harness novel technology using a panel of cvc investments we present evidence consistent with our proposition the findings are robust to various specifications and remain unchanged even after controlling for unobserved heterogeneity in investing firms our results have important implications for corporate venture capital in particular and technology strategy in general

how did the notional interest deduction affect belgian smes capital structure the recently introduced risk capital allowance in belgium which allows a notional interest deduction to be denoted nid hereafter on a firm s adjusted equity for tax purposes has mitigated the tax discrepancy between equity and debt financing to our knowledge we provide the first empirical study of the extent to which this regulation has resulted in a strengthening of small and medium sized enterprises to be denoted smes hereafter solvency which was one of its most prominent objectives results from logit regressions reveal that the probability of adopting the nid is higher for lowly leveraged smes smes without experience with the tax exempt investment reserve and smes with a sound knowledge of the notional interest deduction regulation results on the impact of the nid on the capital structure of smes based on panel and first differences regressions reveal that this measure did not result in a significant change of smes leverage in view of the discussion regarding the optimal tax and legislative framework that governments should put in place poutziouris et al j small bus enterp dev 6 1 7 25 1999 these results cast doubt on the risk capital allowance as it stands now being the right government instrument to contribute at least in the short term to creating a pro enterprising tax and legislative climate for smes we conclude by providing some general suggestions for improving the effectiveness of the risk capital allowance

income distribution policies with endogenous fertility the implications of endogenous fertility for intra generational welfare comparisons of alternative policies with respect to income taxation and family allowances are considered the interactions among the choices between leisure options labor force participation and fertility are shown to be crucial to the determination of both the signs and the magnitudes of the optimal child allowances and income tax rates the implications of a negative marginal tax rate and a negative child allowance are considered annotation

does fdi bring environmental knowledge spillovers to developing countries the role of the local industrial structure this paper examines the environmental knowledge externalities of fdi within and across cities in an emerging economy context it argues that the extent of these environmental externalities is contingent upon local industrial agglomeration using a panel dataset of 280 chinese prefectural cities from 2003 to 2012 we employ a spatial economic approach although limited to evidence from soot and hbox so 2 pollutants our results suggest that fdi brings overall positive environmental knowledge externalities to a region and also spillovers to nearby regions specialised cities may lock into a particular technological path attenuating the absorption and diffusion of a variety of fdi environmental knowledge conversely diversified cities promote cross fertilisation of environmental knowledge and mitigate local pollution intensity at the aggregated city level this study adds to the literature by highlighting the importance of considering both the spatiality of fdi and industrial structure in understanding fdi environmental knowledge spillovers

risks and financing decisions in the energy sector an empirical investigation using firm level data using a sample of 102 uk energy firms over the period 1981 2009 this paper empirically examines the effects of uncertainty on firms leverage decisions the results indicate that both firms specific and macroeconomic uncertainty have negative sizeable and statistically significant impacts on the uk energy sector firms target leverage the results also indicate that the profitability of energy firms plays an important role in uncertainty leverage relationship by changing the total effect of uncertainty on leverage while more profitable firms appear to reduce their leverage by a relatively large amount in response to increased macroeconomic uncertainty they are less likely to be affected by firm specific uncertainty these results suggest that stability in macroeconomic conditions and business activity is important to the stability of the capital structure of firms in the energy sector which would in turn be conducive to stability in their investments and production

small new firms and the return to alternative sources of finance this study analyses the returns to alternative sources of finance in the small new firm sector prior work in this area has concentrated on large established firms and has been subject to significant problems of interpretation many of these problems are absent when considering small new firms and this paper suggests that the various forms of finance used differ in terms of the return on capital employed they are associated with in particular sources of bank finance for small new firms are associated with higher returns than other available sources of finance

modelling companies debt and dividend decisions with company accounts data reliable empirical models of company financial decisions have proved hard to construct using aggregate data this paper uses company specific data drawn from the published accounts of a large sample of uk companies to estimate a model of debt and dividend decisions an attempt is made to assess the relative importance of costs of funds the tax system the balance sheet and profitability of the company and of statutory controls in determining these key financial decisions diversity of behaviour is analysed by allowing for unobserved company specific effects and by examining subsets of the full sample

horizontal equity income taxation and self selection with an application to income tax credits abstract this paper investigates the relationship between utilitarianism and horizontal equity in models of income taxation in particular and self selection in general an example involving well behaved individual preferences is constructed in which a maximization of a utilitarian social welfare function leads via income taxation to horizontal inequities sufficient conditions for utilitarianism to bring horizontal equity are derived the results are applied to the question of whether income tax credits are an appropriate way to treat differences in family size

the economic performance of cities a markov switching approach abstract this paper examines the determinants of employment growth in metro areas to obtain growth rates we use a markov switching model that separates a city s growth path into two distinct phases high and low each with its own growth rate the simple average growth rate over some period is therefore the weighted average of the high phase and low phase growth rates with the weight being the frequency of the two phases we estimate the effects of a variety of factors separately for the high phase and low phase growth rates growth in the high phase is related to both human capital and industry mix while growth in the low phase is related to industry mix only specifically the relative importance of manufacturing overall our results strongly reject the notion that city level characteristics influence employment growth equally across the phases of the business cycle

determinants of small firm debt ratios an analysis of retail panel data in this paper the relevance of some debt ratio determinants from the recent theory of finance is empirically investigated in a small business sector the data used in this study consist of average financial data of 27 shoptypes in 20 different years covering a period of 24 years the panel character of the data facilitates the use of analytical techniques aimed at reducing or avoiding the biasing effect of omitted variables on the outcomes the main conclusion is that the theoretical determinants appear indeed to be relevant for the small business sector investigated here but the influences encountered in the analyses are far less straightforward than the hypothesized effects in the theory influences on total debt are frequently found to be the net effects of opposite influences on long and short term debt and some variables show large time and industry specific effects further distinct patterns in the time specific effects were found

corporate financing an artificial agent based analysis we examine corporate security choice by simulating an economy populated by adaptive agents who learn about the structure of security returns and prices through experience through a process of evolutionary selection each agent gravitates toward strategies that generate the highest payoffs despite the fact that markets are perfect and agents maximize value a financing hierarchy emerges in which straight debt dominates other financing choices equity and convertible debt display significant underpricing in general the smaller the probability of loss to outside investors the more likely the firm is to issue the security and the smaller the security s underpricing

unionization incomplete contracting and capital investment this article examines empirically the hypothesis that incomplete contracts and resulting opportunistic behavior over the return to sunk assets reduces investment union firm contracts are incomplete because they 1 do not prevent all actions aimed at changing the existing contract 2 cover a relatively short time period and 3 do not extend to union members yet to be hired the primary response of firms is to reduce investment in specific durable assets and also to reduce employment growth and increase debt the authors find fairly strong evidence of these effects in a sample of large publicly traded firms using firm specific measures of unionization copyright 1993 by university of chicago press

urban diversity and economic growth at the risk of some simplification it is possible to identify four periods of intense study of cities by economists each of these has led to an increased understanding of the economics of urban areas and the unique role played by cities in the modem economy the first of these periods occurred in the decade after world war i only about ten years after the truck revolutionized the transport of goods within urban areas this period included the first systematic empirical analysis of the forces affecting the location of firms and households within cities robert murray haig 1926 and a number of other microeconomists at columbia analyzed the spatial pattems of manufacturing activity in lower manhattan and in the rest of new york city haig jmd his colleagues devoted considerable attention to where things belong in an urban area p 402 providing the first systematic economic analysis of urban spatial structure for example they analyzed the garment industry concluding that it was destined by nature to disperse north of 14th street and predicting that it would follow the estabhshed spatial pattem of the cooperage barrelmaking industry standardization in size and quality of barrels had meant that identical barrels could be made throughout the new york metropolitan area even in new jersey and the introduction of the truck meant that they could be transported cheaply throughout the region and exported the second of these periods though not in chronological order began in the mid 1960s it formalized many of the insights about location incentives within urban areas which had been uncovered a half century before mixed them with the logic of heinrich von thunen s 1826 ancient theories about agricultural crops and land values and applied them to the hotisehold sector the works of william alonso 1964

estimation of complete demand systems from household budget data the linear and quadratic expenditure systems in this paper we explore two issues in empirical demand analysis the estimation of complete systems of demand equations using household budget data section i and the incorporation of demographic characteristics into such systems section ii although there are numerous studies which use time series data to estimate complete demand systems and many which estimate engel curves from household budget data there are virtually none which combine budget data from different periods to estimate complete systems since each budget study corresponds to a single price situation one might conjecture that estimation of complete systems would not be possible unless budget studies were available from a large number of periods this is incorrect in section i we argue that interesting complete demand systems can be estimated from a small number of budget studies despite the limited price variability represented in such data to demonstrate this we use budget study data for two periods to estimate a pair of related demand systems the familiar linear expenditure system les and a quadratic expenditure system qes a generalization of les in which the demand equations are quadratic in total expenditure the inclusion of demographic variables in the analysis of household consumption patterns is desirable because there are likely to be systematic differences in the consumption behavior of households with different demographic characteristics but the effects of demographic characteristics have seldom been studied within the framework of complete demand systems in section ii we propose translating as a general method for incorporating demographic variables into complete systems of demand equations this method has not previously been discussed as a general technique for bringing demographic variables into demand systems although it has been employed in several studies to improve the estimates of the les and the qes presented in section i we reestimate these two systems using translating to incorporate family size

equity and policy effectiveness with imperfect targeting abstract we propose a general approach that jointly integrates horizontal and vertical equity criteria in the assessment of poverty alleviation programs with the strength of each criterion being captured through its own inequity aversion parameter this contrasts with the assessment of poverty alleviation programs done with simple under coverage and leakage ratios or with other methods that do not take into account the heterogeneity of the poor and that do not address directly the social benefits of achieving normative criteria our methodology is illustrated using tunisian data and two alternative poverty alleviation policies we find inter alia that the social ranking of commodity and socio demographic targeting in tunisia depends on the policymaker s comparative preference for vertical and horizontal equity

utilitarianism and horizontal equity the case for random taxation this paper establishes that far from being able to derive the principle of horizontal equity from utilitarianism the principle is actually in consistent with utilitarianism in a variety of circumstances we derive conditions under which a it is optimal to impose random tax schedules ex post randomization and b it is optimal to randomize the tax schedules imposed on a set of otherwise identical individuals ex ante randomization the implications for optimal tax theory are discussed more generally it is shown that there are a number of potentially important economic situations with which the principle of horizontal equity may be inconsistent not only with utilitarianism but even with pareto optimality this abstract was borrowed from another version of this item

similarities and differences in small and large corporation beliefs about capital structure policy theoretical researchers posit many factors that affect a firm s capital structure decisions theory also suggests that these influences will have different impacts on small and large firms however empiricists face difficulties in testing these hypotheses due to problems of quantifying the motivations expectations and preferences prevalent in the various theories

equivalence scales horizontal equity and optimal taxation under utilitarianism abstract this paper analyzes the question of how differences in family size should be treated by the income tax system in order to achieve horizontal equity family size is incorporated into the demand system by the procedure of demographic scaling horizontal equity is defined as equal treatment of equals it is shown that when lump sum taxes are not available and the government has to rely on income taxation then the only way to entail equal utilities for household of different size is to equate the labor supplies and the per standard adult consumptions of these households

does debt affect firm value in taiwan a panel threshold regression analysis this article analyses whether leverage affects firm value and does so using a panel of 196 taiwanese listed companies during the 13 year 1993 2005 period we employ an advanced panel threshold regression model to test whether there is a threshold debt ratio which causes there to be asymmetrical relationships between debt ratio and firm value we adopt tobin s q as proxy for firm value we find that there are two threshold effects between debt ratio and firm value and these are 9 86 and 33 33 when the debt ratio is less than 9 86 tobin s q i e firm value increases by 0 0546 with an increase of 1 in the debt ratio when the debt ratio is between 9 86 and 33 33 we find tobin s q increases by only 0 0057 with an increase of 1 in the debt ratio but when the debt ratio is greater than 33 33 there is no relationship between debt ratio and firm value we therefore conclude that there must be a threshold debt ratio of less than 33 33 at which point firm value stops increasing these resul