market structure and performance in european banking it is a peculiar feature of european banking markets that in almost every country a handful of large banks tend to emerge over time whether through government encouragement or the workings of the market mechanism from a general perpec tive however it is difficult to evaluate the competitive implications of increased concentration the traditional structure conduct performance scp paradigm would suggest that increased concentration fosters collusion and anti competitive practices whereas the efficiency hypothesis suggests otherwise this paper presents tests of the two hypotheses with respect to the european banking industry using pooled and annual date for the period 1986 to 1989 the results generally support the traditional scp paradigm as an explanation for the market behaviour of european banks

credit risk measurement developments over the last 20 years abstract this paper traces developments in the credit risk measurement literature over the last 20 years the paper is essentially divided into two parts in the first part the evolution of the literature on the credit risk measurement of individual loans and portfolios of loans is traced by way of reference to articles appearing in relevant issues of the journal of banking and finance and other publications in the second part a new approach built around a mortality risk framework to measuring the risk and returns on loans and bonds is presented this model is shown to offer some promise in analyzing the risk return structures of portfolios of credit risk exposed debt instruments

do unionized firms hire better workers i introduction many economists firmly believe that union firms offset higher union wages by hiring better workers the contrasting view that union employers react to higher union wages by hiring poorer quality workers is regarded as impossible 1 yet this contrasting view is highly plausible in the context of standard economic modeling and with what is known about labor markets there is evidence supporting this view the standard story for unionized firms hiring better workers goes like this a union raises wages and the firm foils the union by hiring better quality workers the problem with this myopic story is that it ignores what happens in the future it assumes that unions will sit idly by and let union firms whittle away any union wage differential by hiring better quality workers i would argue that it is more likely that unions would respond to better quality workers by raising wages even more employers anticipating this may respond by hiring lower quality workers this article is the first to consider how unionized firms choose worker quality when they anticipate the future consequences of quality on wages under reasonable conditions these consequences cause employers to hire lower quality workers while i do not contend this always occurs i do argue that there are reasonable grounds for rejecting the better quality proposition in addition there is evidence that unionization often does result in lower quality workers the results presented here suggest that economists should look again at how unions affect wages productivity equality and society this is not the first paper to suggest unions lead to lower quality workers it is however the first to suggest this result is due to employers making profit maximizing decisions when they anticipate the future consequences of their actions there are two other articles that also suggest unions can lead to lower quality workers first robinson 1989 assumes that unionized employers do want higher quality workers but do not hire them because nonunion firms pay them more as the nonunion firms are assumed to have better monitoring technology and a more flexible reward system second bronars and lott 1989 show that unions that seek the maximum dues will want poorer quality workers while these models focus on factors that may prove to be important the model presented here is theoretically more forceful first it is based upon standard economic modeling second using ochkam s razor it assumes the least added factors and finally its central assumption that people anticipate the future has a large body of economic evidence behind it by demonstrating that the better quality proposition is not supported by conventional economic analysis this article shows the better quality proposition should not be given a greater weight in the priors of economists having done this these other models then should and hopefully will be examined more closely ii the case for unions leading to better quality workers in discussing the wage gap between union and nonunion workers h gregg lewis 1986 46 concisely presents the case that union firms select better workers i have strong priors on the direction of the selectivity bias let a union through collective bargaining impose on an employer higher wages for his workers than he otherwise would pay them with worker quality not tightly specified in the collective bargaining agreement the higher wages will lengthen the queue of the applicants for the unionized jobs including some applicants of greater productiveness than otherwise would have applied the employer has an incentive to evade the increase in his labor costs by employing workers of greater quality the evasion will take time and will be impeded by the cost of screening workers imperfect substitution in production among worker quality and employment constraints in the collective bargaining agreements

sensitivity analysis of efficiency and malmquist productivity indices an application to spanish savings banks abstract hypothesis testing and statistical precision in the context of non parametric efficiency and productivity measurement have been investigated since the early 1990s recent contributions focus on this matter through the use of resampling methods i e bootstrapping techniques however empirical evidence is still practically non existent this gap is more noticeable in the case of banking efficiency studies where the literature is immense in this work we explore productivity growth and productive efficiency for spanish savings banks over the initial post deregulation period 1992 1998 using data envelopment analysis dea and bootstrapping techniques results show that productivity growth has occurred mainly due to improvement in production possibilities and that mean efficiency has remained fairly constant over time the bootstrap analysis yields further evidence as for many firms productivity growth or decline is not statistically significant with regard to efficiency measurement the bootstrap reveals that the disparities in the original efficiency scores of some firms are lessened to a great extent

jump bidding in ascending auctions the case of takeover contests this paper analyses jump bidding in ascending auctions in the case of takeover contests the free riding condition explains that some jumps can occur driven by the own bidders free rider condition we also show that ascending auction can be inefficient

regional growth and finance in europe is there a quality effect of bank efficiency abstract in this study we test whether regional growth in 11 european countries depends on financial development and suggest the use of cost and profit efficiency estimates as quality measures of financial institutions contrary to the usual quantitative proxies of financial development the quality of financial institutions is measured in this study as the relative ability of banks to intermediate funds an improvement in bank efficiency spurs five times more regional growth then an identical increase in credit does more credit provided by efficient banks exerts an independent growth effect in addition to direct quantity and quality channel effects

takeover contests toeholds and deterrence we consider a setting in which two potential buyers one with a prior toehold and one without compete in a takeover modeled as an ascending auction with participating costs the toeholder is more aggressive during the takeover process because she is also a seller of her own shares the non toeholder anticipates this extra aggressiveness of the toeholder thus he is deterred from participating unless he has a high valuation for the target company this leads to large inefficiency losses for many configurations expected target returns are first increasing then decreasing in the size of the toehold

auction guarantees for works of art abstract this paper addresses the question of whether auction guarantees change the bidding environment and whether they cause a change in price once the value of an item is taken into account we analyze both the cases of third party guarantees and in house guarantees we use two datasets one of christie s and sotheby s contemporary and impressionist evening sales from january 2010 to february 2012 and another larger dataset consisting of all items auctioned at christie s from 2001 to may 2011 while more expensive items are more likely to have guarantees we find little empirical evidence to suggest an effect on price from the guarantee itself once the value of the item is taken into account

job queues and the union status of workers this paper develops a model of the determination of the union status of workers that allows for the possibility of queuing for union jobs the empirical results derived using a sample from the university of michigan panel study of income dynamics are supportive of the queuing hypothesis the no queue model can be rejected using a likelihood ratio test this suggests that a simple probit or logit model for union status is misspecified because it is not based on any consistent behavioral theory an important implication of the model is that because most new entrants to the labor market prefer union jobs but cannot get them and because accrual of nonunion seniority makes workers progressively less likely to desire union jobs the union status of workers is largely determined by their success in being selected from the queue early in their working life

the impact of institutional investors on mergers and acquisitions in the united kingdom abstract in this paper we investigate the impact of institutional ownership on uk mergers and acquisitions we employ a comprehensive sample of m as conducted by uk acquirers from 2000 to 2010 thus including a full cycle of peak and trough in m a waves we find that institutional investors increase the likelihood of an m a to be a large cross border deal opting for full control moreover institutional ownership concentration and foreign institutional ownership increase the likelihood of cross border m as in addition we assess the influence of institutional shareholders investment horizon and find that while investment horizon have a negative influence in encouraging cross border m as the presence of long term investors encourages larger m as finally even after controlling for the 2007 08 financial crisis the market reacts negatively to the announcement of cross border m as

causes and consequences of layoffs using probit analysis this article finds that differential treatment accounts for a substantial portion of the higher layoff rates of blacks in comparison to whites however women are found to be considerably less prone to layoffs than men with similar characteristics among those who obtained subsequent employment taking into account the possible selectivity bias in such a subsample white males are hurt more by layoffs than black males in terms of both short term and long term earnings growth women s earnings are not necessarily affected by layoff at all however whites and males are found to be more likely to be reemployed than blacks and females respectively

asymmetric price benefits auctions abstract this paper studies the performance of two auction procedures for allocating the assets of a dissolving partnership when partners valuations for the assets are independent and asymmetrically distributed with one partner reputed to be more interested in the assets to be divided we provide results on existence and uniqueness of the equilibrium induced by these auctions comparative statics are developed especially the differences between relative efficiency and revenue from the two auctions journal of economic literature classification numbers c72 d39 d44 d52 d74 d82

initial shareholdings and overbidding in takeover contests within the context of takeovers this paper shows that in private value auctions the optimal individually rational strategy for a bidder with partial ownership of the item is to overbid i e to bid more than his valuation this strategy however can lead to i an inefficient outcome and ii the winning bidder making a net loss further the overbidding result implies that the presence of a large shareholder increases the bid premium in single bidder takeovers at the expense of reducing the probability of the takeover actually occurring

preemptive bidding and pareto efficiency in takeover auctions this paper extends the fishman 1988 model of preemptive jump bidding in private value takeover auction to auctions with common and affiliated values we show that in the presence of a common value component jump bidding equilibrium results in higher social surplus furthermore we show that under certain conditions allowing for preemptive jump bidding in common value auctions results in ex ante pareto improvement

systematic departures from the frontier a framework for the analysis of firm inefficiency departures from a production or cost frontier may reflect the systematic effect of conditions that contribute to inefficiency to test whether some portion of frontier function departures can be systematically explained the frontier inefficiency error component is modeled as a function of various causal factors and a random component the functional form of the inefficiency error term model is chosen to assure strict one sidedness preliminary empirical results generated from electric utility data suggest the superiority of including both systematic and random components in the inefficiency error term

agency conflicts in public and negotiated transfers of corporate control we analyze control transfers in firms with a dominant minority blockholder and otherwise dispersed owners and show that the transaction mode is important negotiated block trades preserve a low level of ownership concentration inducing more inefficient extraction of private benefits in contrast public acquisitions increase ownership concentration resulting in fewer private benefits and higher firm value within our model the incumbent and new controlling party prefer to trade the block because of the dispersed shareholders free riding behavior we also explore the regulatory implications of this agency problem and its impact on the terms of block trades

optimal toeholds in takeover contests abstract we offer an explanation for why raiders do not acquire the maximum possible toehold prior to announcing a takeover bid by endogenously modeling the target firm s value following an unsuccessful takeover we demonstrate that a raider may optimally acquire a small toehold even if the acquisition does not drive up the pre tender target price this occurs because although a larger toehold increases profits if the takeover succeeds it also conveys a higher level of managerial entrenchment and hence a lower firm value if the takeover fails we derive new predictions regarding the optimal toehold and target value following a failed takeover we also examine the impact of a rival bidder and dilution

merger negotiations and the toehold puzzle abstract the substantial control premium typically observed in corporate takeovers makes a compelling case for acquiring target shares a toehold in the market prior to launching a bid moreover auction theory suggests that toehold bidding may yield a competitive advantage over rival bidders nevertheless with a sample exceeding 10 000 initial control bids for us public targets we show that toehold bidding has declined steadily since the early 1980s and is now surprisingly rare at the same time the average toehold is large when it occurs 20 and toeholds are the norm in hostile bids to explain these puzzling observations we develop and test a two stage takeover model where attempted merger negotiations are followed by open auction with optimal bidding a toehold imposes a cost on target management causing some targets to rationally reject merger negotiations optimal toeholds are therefore either zero to avoid rejection costs or greater than a threshold so that toehold benefits offset rejection costs the toehold threshold estimate averages 9 across initial bidders reflecting in part the bidder s opportunity loss of a merger termination agreement in the presence of market liquidity costs a threshold of this size may well induce a broad range of bidders to select zero toehold as predicted the probability of toehold bidding decreases and the toehold size increases with the threshold estimate the model also predicts a relatively high frequency of toehold bidding in hostile bids as observed overall our test results are consistent with rational bidder behavior with respect to the toehold decision

unemployment insurance job queues and systematic job search an equilibrium approach the labor market effects of unemployment insurance ui have been viewed in several contexts by economists on the one hand the ui system of jobless benefits and experiencerated taxation of firms is seen as influencing firms decisions to lay off workers 9 10 24 2 key in such analyses is the degree to which firms layoffs are subsidized by an imperfect experience rating a tax system in which employers ui taxes increase by less than their workers benefits increase on the other hand many other studies of ui place primary focus on the worker although employer concern for worker well being plays a role even in the work on the impact of ui on firm layoff decisions each of these worker based studies is concerned with one of two issues 1 ui and compensating wage differentials 14 24 or 2 u i and the job search process first hutchens assumes that workers face a choice in the labor market between high wage high layoff probability firms and low wage low layoff probability firms 14 by reducing the cost of being laid off ui increases one s likelihood of choosing the former kind of job along these lines topel finds evidence that ui generosity substitutes for wages and therefore lowers the compensating differential associated with a high layoff job 23 second several authors have studied the effect of ui on job search this work recognizes that ui lowers the cost of searching and therefore raises the reservation wage expected unemployment duration and expected post unemployment wages 2 previous work on the impact of ui on firm layoff decisions has assumed either a layoff subsidy 9 or demand uncertainty 2 in order to generate layoffs and therefore a u i impact on layoffs in contrast to such work this paper views layoffs in an equilibrium context they occur in our model even with no layoff subsidy and or with no demand uncertainty layoffs are of value to the firm in our model since they correspond to workers rejected from a queue of potential trainees from the firm s point of view a queue of applicants may be desirable in order to lower

a real options perspective on sequential acquisitions in china we examine how firms in an emerging market address their information disadvantage in takeovers one strategy is to complete the acquisition sequentially rather than as a one time deal in contrast to firms in developed economies that enjoy relatively easy access to information emerging market firms face differential access to information on target firms owing to institutional weaknesses and constraints in those markets sequential acquisitions are conceptualized as a real option based strategy whereby the sequential acquirer resolves valuation uncertainty through information gathering and learning after making a toehold purchase the value of a sequential acquisition strategy increases for firms that are at an information disadvantage statistical analysis based on 272 completed acquisitions of chinese listed firms between 1995 and 2003 shows that the sequential method is more likely to be chosen over a single transaction mode when the acquirer is a private firm or when the acquirer is diversifying into a new business area thus we offer a new way of viewing real option strategies in emerging economies by treating sequential acquisitions as information and learning mechanisms as opposed to tools for hedging

bank competition and firm creation we investigate the effects of competition in the financial sector on the creation of firms in the nonfinancial sector explicitly allowing for heterogeneous effects across borrowers characterized by different degrees of asymmetric information we find evidence of a bell shaped relationship between bank competition and firm creation in addition consistently with theories arguing that competition may reduce the availability of credit to informationally opaque firms we find that bank competition results less favorable to the emergence of new firms in industrial sectors where informational asymmetries are more important

the demand for labor market structure an economic approach this paper formulates and estimates a model for the determination of employer and union demand for multiemployer vs single employer bargaining units utility maximizing risk averse firms and unions are both assumed to weigh the impact of each type of bargaining unit on the expected level and variability of profits and wages respectively the model is tested on a 1975 sample of 3 486 individual collective bargaining agreements because either party can generally leave a multiemployer unit without the other party s consent a partially observed bivariate probit model is used to estimate demand for structure it is found that the forgone profits due to a multiemployer unit relative to a single firm unit lower firm demands for this type of unit while forgone wages in a multiemployer unit relative to a single firm unit lower union demand for this type of unit

the resolution of bankruptcy by auction allocating the residual right of design abstract in this paper we examine the value of the right to choose the method of sale of corporate assets we show that this right is valuable and that its value comes from recognizing conflicting incentives of claimants at the time of sale as with risky projects senior and junior claimants are shown to have distinct preferences on a set of common auction procedures they also differ on the issue of allocation of resources towards attracting bidders for the auction as a consequence the optimal allocation of the design right must depend on circumstances prevailing at the time of the sale while in general selling the firm by auction does not guarantee the use of optimal selling arrangements a suitable allocation of design rights may help mitigate inefficiency problems significantly

how not to raise money we show that standard winner pay auctions are inept fund raising mechanisms because of the positive externality bidders forgo if they top another s high bid revenues are suppressed as a result and remain finite even when bidders value a dollar donated the same as a dollar kept this problem does not occur in lotteries and all pay auctions where bidders pay irrespective of whether they win we introduce a general class of all pay auctions rank their revenues and illustrate how they dominate lotteries and winner pay formats the optimal fund raising mechanism is an all pay auction augmented with an entry fee and reserve price

toeholds and signalling in takeover auctions abstract this paper presents a model of preemptive bidding in takeover auctions with toeholds it shows that when the first bidder owns a fraction of the target firm he is more likely to deter competition and a smaller jump bid is required to do so it also shows that in the presence of the toehold the signalling equilibrium reduces the social surplus while it has no effect on the social surplus in the absence of the toehold

the evolution of buyout pricing and financial structure in the 1980s we examine changes in the pricing and financial structure of large management buyouts in the 1980s over time 1 buyout price to cash flow ratios rose in absolute terms particularly in deals financed using public junk bonds 2 required bank principal repayments accelerated leading to sharply lower ratios of cash flow to total debt obligations 3 private subordinated and bank debt were replaced by public junk debt and 4 management teams and dealmakers took more money out of transactions up front these patterns are consistent with an overheating phenomenon in the buyout market preliminary post buyout evidence lends some support to this interpretation

systematic and random search a synthesis this paper synthesizes two models of search in the labor market systematic and random we construct and test a theoretical model in which the searcher is endowed with information on some possibly zero or all individual firms in the labor market as well as the overall wage offer distribution we test the model using a special wave of the 1976 current population survey the major theoretical results of our model are as follows searchers with lower stocks of knowledge about individual firms higher discount rates or having lower coverage by unemployment insurance are more likely to engage in random search activities

on the relationship among efficiency capitalization and risk does management matter in local banking market abstractby employing a granger causality methodology in a panel data framework this article explores the relationship among efficiency capitalization and credit risk within the local italian banking system focusing the attention on cooperative banks we specifically test whether managers take more risks in highly concentrated markets i e monopoly than in partially competitive markets i e duopoly the evidence shows that in more concentrated markets management efficiency generates a decrease in risk taking rejecting the bad management hypothesis with respect to the partially competitive markets results are consistent with the idea that banks with less local competition are able to increase their profits by indulging more freely in rent seeking behaviour minimizing their risk taking and consequently improving the quality of their assets through additional screening processes the financial crisis does not seem to affect the conduct of management in terms of bank investment decisions and risk

competing bids target management resistance and the structure of takeover bids we examine the structure of initial takeover bids and the frequency of observing competing bids and target management resistance we find the use of cash is not consistently correlated with the frequency of competition or resistance and that the cost of acquiring information about a target is associated with the likelihood of competition and resistance a high bid premium appears to deter competing offers and is also associated with a lower likelihood of resistance finally target management resistance is associated with an increased likelihood of a competing offer arising and a larger increase in target shareholder wealth between the initial public announcement and outcome dates relative to the not resisted subsample for both successful and unsuccessful acquisition proposals article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

why higher takeover premia protect minority shareholders posttakeover moral hazard by the acquirer and free riding by the target shareholders lead the former to acquire as few sharcs as necessary to gain control as moral hazard is most severe under such low ownership concentration inefficiencies arise in successful takeovers moreover share supply is shown to be upward sloping rules promoting ownership concentration limit both agency costs and the occurrence of takeovers furthermore higher takeover premia induced by competition translate into higher ownership concen tration and are thus beneficial finally one share one vote and simple majority are generally not optimal and socially optimal rules need not emerge through private contracting

the design of bankruptcy law a case for management bias in bankruptcy reorganizations in an incomplete contracting environment bankruptcy is considered to be a renegotiation of the firm s financial contracts an optimal bankruptcy law is derived as optimal restric tions on the environment within which the claimants to a distressed firm bargain the law is used as a commitment device to ensure actions that are ex ante optimal but not subgame perfect we show that the bankruptcy court can use two types of mechanisms to implement the optimal bankruptcy outcome direct restrictions on the bargaining game between the claimants and the use of a restricted auction in both cases the restrictions prevent the strategic use of bankruptcy by firms not in financial distress provide for truthful revelation of information so that distress results in an ex post efficient allocation of resources and es tablish a bias toward the manager in reorganizations that provides correct ex ante decision making incentives

strategic merger waves a theory of musical chairs this paper proposes an explanation of merger waves based on the interaction between competitive pressure and irreversibility of mergers in an uncertain environment a set of acquirers compete over time for scarce targets at each point in time an acquirer can either postpone a takeover attempt or raid immediately by postponing the takeover attempt an acquirer may gain from more favorable future market conditions but runs the risk of being preempted by rivals first a complete information model is considered and it is shown that the above tradeoff leads to a continuum of subgame perfect equilibria in monotone strategies that are strictly pareto ranked all these equilibria share the feature that all acquirers rush simultaneously in merger waves the model is then extended to a dynamic global game by introducing slightly noisy private information about merger profitability this game is shown to have a unique markov perfect bayesian equilibrium in monotone strategies and the timing of the merger wave can thus be predicted last the comparative dynamics predictions of the model are related to stylized facts

bank capitalization and cost evidence of scale economies in risk management and signaling we amend the standard cost model to account for the role of financial capital in banking the cost function is conditioned on the level of capital but we model the demand for financial capital so that it can serve as a cushion against insolvency for potentially risk averse managers and as a signal of risk for less informed outsiders scale economies are then computed without assuming that the bank chooses a level of capitalization that minimizes cost we find evidence of substantial scale economies and that bank managers are risk averse and use the level of financial capital to signal the level of risk

a generalized production frontier approach for estimating determinants of inefficiency in u s dairy farms this article investigates farm level efficiency of u s dairy farmers by estimating their technical and allocative efficiency technical inefficiency is assumed to be composed of a deterministic component that is a function of some farm specific characteristics and a random component by doing this we extend the stochastic frontier methodology in which determinants of technicial inefficiency are explicitly introduced in the model given the inputs variations in efficiency of farms are then explained by both deterministic and random components of technical inefficiency the empirical results indicate that a levels of education of the farmer are important factors determining technical inefficiency and b large farms are more efficient technically than small and medium sized farms both technical and allocative inefficiency are found to decrease with increase in the level of education of the farmer

evaluating the cost efficiency of the italian banking system what can be learned from the joint application of parametric and non parametric techniques abstract research on bank efficiency has developed in two separate streams econometric studies and data envelopment analysis a linear programming technique these two branches of literature have developed quickly but separately in this paper these two approaches have been tested on a common panel of 270 italian banks and this has suggested the following i econometric and linear programming results do not differ dramatically when based on the same data and conceptual framework ii when differences arise they can be explained by going back to the intrinsic features of the models moreover some findings on italian banks may be of interest also to the international reader i efficiency scores show a high variance ii the banking system is split in two between northern and southern banks iii there is a direct rather than inverse relationship between productive efficiency and asset quality iv the efficiency of italian banks did not increase over the period 1988 1992

ex ante efficiency of bankruptcy procedures abstract this paper suggests a framework to analyze the efficiency properties of bankruptcy procedures distinguishing between ex ante and ex post efficiency ex post efficiency consists in maximizing the ex post value of the insolvent firm whereas ex ante efficiency consists in maximizing the proceeds to creditors from the reorganization of the firm and providing incentives for the creditors to monitor the firm we show that the definition of creditors ownership rights over the company and the protection of the creditors seniority are crucial to asses the ex ante efficiency of a bankruptcy procedure

toehold strategies takeover laws and rival bidders abstract prior to the announcement of a tender offer the bidding firm is legally allowed to acquire shares in the open market subject to some limitations these pre announcement purchases are known as toeholds this paper presents a simple model that describes the bidder s optimal toehold acquisition strategy within an environment that closely parallels the present legal institutions the model shows that toeholds and bids interact in a complex manner even without the presence of asymmetric information by examining a simple environment the paper provides a useful alternative hypothesis for tests of other presumably more complex models one of the main implications of our model is that if no competing bidders are expected no toeholds should be purchased the paper also demonstrates that the correct specification of an empirical model can be critical for example under some parameter values toehold purchases may exhibit a negative cross sectional correlation with the pre announcement run up in the stock price this occurs even though prices are strictly increasing the size of the toehold several implications concerning various aspects of merger legislation are considered for example we demonstrate that a rule similar to a fair price provision has the desirable property that a second bidder arrives and wins if and only if he places a higher value on the target than the initial bidder

the measurement and sources of technical inefficiency in the indonesian weaving industry production function models are estimated with a time series of cross section data on indonesian weaving establishments the sources of technical inefficiency are investigated three firm attributes are identified as being potentially related to firm efhciency tbey are firm ownership age and size the importance of these attributes as sources of inefficiency in the indonesian weaving industry is investigated and the implications of the find ings discussed

conflicts of interest and market illiquidity in bankruptcy auctions theory and tests i develop and estimate a model of cash auction bankruptcy using data on 205 swedish firms the results challenge arguments that cash auctions as compared to reorganizations are immune to conflicts of interest between claimholders but lead to inefficient liquidations i show that a sale of the assets back to incumbent management is a common bankruptcy outcome sale backs are more likely when they favor the bank at the expense of other creditors on the other hand inefficient liquidations are frequently avoided through sale backs when markets are illiquid that is when industry indebtedness is high and the firm has few nonspecific assets the problem of designing an efficient bankruptcy law has received considerable attention in the last decade much of the debate has centered around the optimality of two different stylized bankruptcy procedures cash auctions such as the u s chapter 7 code and structured bargaining represented by the u s chapter 11 reorganization code recently several european countries including france germany and great britain have changed their bankruptcy regulation by introducing reorganization procedures similar to chapter 11 at the same time the chapter 11 code has been criticized by academics including baird 1986 emphasizing that the bargaining procedure frequently results in long and wasteful negotiations these critics argue that chapter 11 should instead be replaced with a mandatory auction procedure other researchers such as aghion hart and moore 1992 and shleifer and vishny 1992 have pointed out that a cash auction is likely to suffer from considerable inefficiencies arising from transaction costs and market illiquidity the nature and costs of the chapter 11 procedure are

posturing and holdup in innovation we show that the need to posture can help solve the holdup problem inherent in many multistage relationships including those between entrepreneurs and venture capitalists posturing arises when an informed party needs to send a strong signal to induce skeptical third parties like employees suppliers customers or competitors to develop maintain relationships with the firm or take other actions that increase firm value in the venture capital context this can be credibly achieved if the vc publicly invests at high prices in later rounds this tempers holdup by shifting ex post bargaining power toward the entrepreneur inducing him to exert greater effort

delegated bidding and the allocative effect of accounting rules this paper studies the efficiency and distributive effects of three prominent accounting methods in auction settings when bidders incentives are linked to accounting income the purchase price method pp requires the acquirer to book the acquisition at historical cost thereby underestimating the asset value by the amount of the acquirer s surplus in the transaction the exit value method ev is downward biased and forces the acquirer to book an accounting loss on the date of acquisition ev connects otherwise independent valuations inducing a reporting based winner s curse and can even lead to fire sale like values relative to pp ev implies lower asset prices a decrease increase in the surplus of the seller acquirer and an increase in the probability that the asset attains its best use when the market is sufficiently competitive finally i examine an alternative method in which the asset is valued at its perceived value in use vu under this method the acquirer bids more aggressively to in

the structure performance relationship for european banking abstract the relationship between market structure and performance has been studied extensively for american banking in contrast little work has been done to investigate this relationship for european banking two explanations of a positive correlation between profitability and concentration have been advanced the traditional structure performance hypothesis scp and the efficient structure hypothesis previous empirical tests of the alternative hypotheses have yielded mixed results but the tests were not robust because they did not incorporate measures of efficiency directly in the model this study applies a stochastic cost frontier as proposed by aigner et al 1977 to derive measures of x inefficiency and scale inefficiency under the assumption that the errors are distributed half normal we incorporate these measures of inefficiencies directly into the tests as proposed by berger and hannan 1993 we do not find a positive and significant relationship between concentration and profitability for a sample of banks across 11 european countries over a four year period 1988 1991 however we do find evidence to support one of the two versions of the efficient structure hypothesis for banks located in countries with low concentration of banks since little support is found for either of the scp hypotheses a simple policy of strict limitations on cross border acquisitions and growth is not warranted

the price concentration relationship in banking the commonly observed positive correlation between market concentration and profitability may be explained by noncompetitive pricing behavior as argued by the structure performance hypothesis or by the greater efficiency of firms with dominant market shares as argued by the efficient structure hypothesis by examining the price concentration relationship instead of the profit concentration relationship this paper tests the structure performance hypothesis in a manner that excludes the efficient structure hypothesis as an alternative explanation of the results the results strongly support the structure performance hypothesis and are robust with respect to model specification measurement of concentration and econometric technique copyright 1989 by mit press

erratumauction guarantees for works of art this paper addresses the question of whether auction guarantees change the bidding environment and whether they cause a change in price once the value of an item is taken into account we analyze both the cases of third party guarantees and in house guarantees we use two datasets one of christie s and sotheby s contemporary and impressionist evening sales from january 2010 to february 2012 and another larger dataset consisting of all items auctioned at christie s from 2001 to may 2011 while more expensive items are more likely to have guarantees we find little empirical evidence to suggest an effect on price from the guarantee itself once the value of the item is taken into account