nonmonetary effects of financial crises abstract this paper empirically examines the nonmonetary effects of financial crises it exploits the special nature of the great depression in canada to test propositions linking financial structure and aggregate economic activity canada s large domestic debt and shrinking banking system had little impact on the course of the depression in comparison with results for the united states this implicates bank failures as a prime factor in the real effects of financial crises

nonmonetary effects of the financial crisis in propagation of the great depression this paper examines the effects of the financial crisis of the 1930s onthe path of aggregate output during that period our approach is complementary to that of friedman and schwartz who emphasized the monetary impact of the bank failures we focus on non monetary primarily credit related aspects of the financial sector output link and consider the problems of debtors as well as those of the banking system we argue that the financial disruptions of 1930 33 reduced the efficiency of the credit allocation process and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand evidence suggests that effects of this type can help explain the unusual length and depth of the great depression this abstract was borrowed from another version of this item

social norms and csr performance some institutional investors e g pensions universities and religious charitable and not for profit institutions are exposed to social norms and public scrutiny prior research indicates that these norm constrained institutions engage in negative screening and invest less in firms operating in sin industries we examine whether social norms also motivate these institutions to engage in positive screening where they invest more in firms with better corporate social responsibility csr performance and csr related activism where they promote improvements in the csr of existing investees we find that firms with superior csr performance have greater ownership by norm constrained institutions consistent with positive screening and we use a natural experiment to establish causality we also find that increases in the shareholdings of norm constrained institutions are associated with subsequent improvements in csr consistent with activism further we rule out an alternative explanation for our results where the positive screening and activism are profit driven rather than driven by social pressure thus our results suggest that the influence of social norms on stock markets is more pervasive than documented in the prior literature

an antitakeover amendment for stakeholders the non financial effects nfe antitakeover amendment addresses the duties of company directors and management when faced with a possible takeover bid the nfe amendment either permits or requires managers to consider the interests of the company s stakeholders during takeover bids other types of antitakeover devices have been viewed as protecting either stockholder or management interests the nfe amendment would appear to protect a broad spectrum of interests including those of company employees creditors and the community in which the company operates positive market returns to the adoption of nfe amendments provide some evidence that investors approve the percent of both management and institutional ownership are positively related to the market reaction to the nfe amendment adoption to the extent that institutional ownership proxies for the broad spectrum of stakeholder interest nfe devices unlike some other amendments that have been studied appear to be in the interests of more than a single interest group

antitakeover charter amendments and stockholder wealth abstract many large corporations have recently adopted antitakeover charter amendments which make the transfer of corporate control more difficult this paper develops and tests competing theoretical explanations for the passage of these amendments in one view antitakeover provisions are adopted because incumbent management seeks job protection at stockholders expense the alternative hypothesis is that antitakeover provisions benefit stockholders perhaps by extracting greater payment in exchange for corporate control although inconclusive the evidence provides weak preliminary support for the hypothesis that antitakeover amendments are best explained as a device for managerial entrenchment

price flexibility credit availability and economic fluctuations evidence from the united states 1894 1909 the importance of disturbances in financial markets for real economic activity and the positive association between price level and output movements typically are explained by appeal to a combination of nominal aggregate demand shocks particularly money supply shocks and rigid prices we argue that this view is inconsistent with evidence for short run responsiveness of prices and gold flows to nominal disturbances during the pre world war i gold standard era we offer an alternative explanation that connects financial markets and real activity through disturbances to the availability of credit this approach links comovements in prices and output through real effects in credit markets associated with price level shocks empirical analysis using monthly data for the pre world war i period supports the assumption of rapid price adjustment and the credit supply interpretation of the transmission of financial shocks disturbances to credit availability including price shocks contribute substantially to our empirical explanation of output fluctuations during this period

default premiums in commodity markets theory and evidence we model the effect of nonperformance risk on forward and futures pricing and look for evidence of nonperformance risk in precious metals futures prices from the hunt brothers episode changes in default premiums are measured and related to the sequence of events in the metals markets during this period results suggest first that ex ante costs of nonperformance can be a significant priced factor in commodity markets and second that the arrival of new information is often associated with changes in these costs the evidence has implications for both theoretical and empirical research on commodity markets organized commodity markets offer traders an efficient medium in which to execute their hedging and speculative strategies in particular the markets have developed mechanisms that reduce the costs of nonperformance which would be substantial in the absence of an organized exchange devices such as margin requirements position limits daily marking to market price limit moves and the clearinghouse reduce the expected costs of distress and default in commodity markets while organized exchanges greatly reduce expected costs of nonperformance they do not eliminate such costs throughout the history of organized futures trading there have been many instances of markets collapsing or coming to the brink of collapse after a period of unusual trading activity the most prominent example in recent times is the near collapse of the new

raiders or saviors the evidence on six controversial investors abstract carl icahn irwin jacobs carl lindner david murdock victor posner and the late charles bluhdorn are usually portrayed as corporate raiders the evidence here however shows that between 1977 and 1982 when it was first announced that they had purchased stock in a given firm stock prices on average increased significantly the investors activities in target firms for the two years following the initial stock purchase are likewise inconsistent with raiding we discuss two hypotheses that are consistent with the evidence first these investors improve the management of target firms second they are systematically able to identify under priced stocks

too risky to hold the effect of downside risk accumulated equity wealth and firm performance on ceo equity reduction although the alignment effect of equity ownership is often studied with emphasis on changes in firm strategy the exposure of ceos firm specific wealth to firm risk is more easily controlled by changing their level of equity holdings than by changing firm strategic risk we rely on prospect theory and the behavioral theory of the firm to examine the antecedents of ceo equity reduction and investigate whether it serves to decouple ceo wealth from firm risk given its central role in loss avoidance we underline the effect of the firm s downside risk and distinguish the total loss potential on equity holdings from the loss potential due to firm specific factors allowing for own performance referents we also consider firm performance and the value of a ceo s equity holdings in the analysis based on a sample of 208 u s ceos for the years 1997 1999 we find empirical support for the role of downside risk and firm performance in ceo equity reductions implications on incentive alignment through equity ownership are presented

corporate financial policy and corporate control abstract this paper presents evidence that stockholder wealth declines on average when managers respond to attempted hostile takeovers with defensive changes in asset and ownership structure the data also indicate that these corporate restructurings are typically quite large and that many are attempts by managers to create barriers specific to the hostile bidder and or to consolidate a block of voting securities in the hands of management allies the evidence suggests that defensive motives whether beneficial or harmful influence corporate asset and ownership structure

the effects of proximate determinants of the money supply in the interwar period recent studies of the role of monetary policy in the interwar period and the great depression of 1929 33 typically focus on the money supply or the monetary base for several reasons however it is instructive to study the separate impact of money s three proximate determinants in this paper we focus on the interwar period and present empirical evidence on the importance of the three proximate determinants of the money supply in explaining fluctuations in output and prices we define the interwar period as july 1922 june 1938 for reasons explained in beard and mcmillin 2 as developed by friedman and schwartz 15 and extended by cagan 10 changes in the m2 stock of money can be attributed arithmetically to changes in three proximate determinantsthe monetary base the ratio of currency to deposits the currency ratio and the ratio of reserves to deposits the reserve ratio 2 the three proximate determinants are affected by different economic forces or react differently to the same variables each is under the immediate control of different economic agents changes in any one of the three proximate determinants can have and have had important effects on the stock of money cagan 10 analyzed in detail the contribution of changes in each of the three proximate determinants to cyclical fluctuations in the rate of change in the money stock over the long period 1877 to 1954 the base and the reserve ratio were each responsible for about one fourth of these variations the currency ratio was the most important single contributor being responsible for roughly one half of the variations while the contribution of the currency ratio varied from cycle to cycle major deviations occurred at times of financial panics when it often played a dominant role cagan found that the establishment of the federal reserve reduced the relative importance of changes in the reserve ratio and increased the relative importance of changes in the base while the amplitude of cyclical movements in the reserve ratio fell after 1914 and the ratio itself trended downward there was a sharp increase in the reserve ratio in the 1930s

standstill agreements privately negotiated stock repurchases and the market for corporate control abstract standstill agreements are voluntary contracts which limit a substantial stockholder s ownership interest in a corporation for a specified number of years they are often accompanied by repurchase of the substantial stockholder s shares at a premium above the market price standstills and premium buybacks reduce competition for corporate control and provide differential treatment of large block stockholders the analysis indicates a statistically significant negative average effect on non participating stockholder wealth associated with standstill agreements negotiated premium repurchases are also associated with negative but less significant stockholder returns the evidence is inconsistent with the hypothesis that these management actions are in the best interests of non participating stockholders

contested tender offers an estimate of the hazard function in this article we estimate the hazard function takeover probabilities for firms that are targets in unsolicited tender offers the data support a weibull gamma specification and imply a hazard rate that increases sharply in the initial period following the bid announcement after which it declines steadily in explaining the hazard we find that the initial bid premium has no explanatory power but the onset of an auction and the proportion of institutional ownership in the target firm significantly enhance the hazard legal and financial restructuring actions by target management are effective in reducing the hazard thereby prolonging the contest

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

the relationship between firm growth size and age estimates for 100 manufacturing industries this study uses a sample of all firms operating in 100 manufacturing industries to examine some aspects of firm dynamics it finds that firm growth the variability of firm growth and the probability that a firm will fail decrease with firm age it also finds that firm growth decreases at a diminishing rate with firm size even after controlling for the exit of slow growing firms from the sample gibrat s law therefore fails although the severity of the failure decreases with firm size copyright 1987 by blackwell publishing ltd

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

institutional investor stability and crash risk monitoring versus short termism this study tests two opposing views of institutional investors monitoring versus short termism we present evidence that institutional investor stability is negatively associated with 1 year ahead stock price crash risk consistent with the monitoring theory of institutional investors but not the short termism theory our findings are shown to be robust to alternative empirical specifications estimation methods and endogeneity concerns in addition we find that institutional ownership by public pension funds bank trusts investment companies and independent investment advisors is significantly negatively positively associated with future crash risk consistent with findings that pension funds more actively monitor management than other types of institutions

product market competition and the cost of bank loans evidence from state antitakeover laws abstract the extant literature documents a positive relationship between a firm s takeover vulnerability and its agency cost of debt using state antitakeover laws as an exogenous measure of variation in takeover vulnerability i investigate whether product market competition has a disciplinary effect that can lower a firm s cost of bank loans after taking into account the industry composition of borrowers i find that banks charge higher spreads to borrowers that are vulnerable to takeovers but only in concentrated industries in the absence of disciplinary competitive pressure the effect of takeover vulnerability on the cost of bank loans is mitigated for larger firms firms followed by analysts firms with existing credit ratings non family firms and for borrowers with shorter maturity loans or loans with covenants and collateral in place taken together the results suggest that the effect of governance on the cost of financing is not homogenous across all industries and that concentrated industry firms may need to use supplementary governance mechanisms to mitigate debt holder agency problems

atheoretical macroeconometrics a critique abstract the spurious nature of the restrictions used to identify many macroeconometric models has led some researchers to advocate a style of econometric inquiry that is less dependent on prior theoretical restrictions of the sort that were central to the approach of the cowles commission this development which we call atheoretical macroeconometrics is summarized and evaluated in the current paper it is contrasted with an updated version of the cowles commission approach we conclude that while some of the exercises of atheoretical macroeconometrics are valid those that have attracted the most attention and appear the most innovative exogeneity testing impulse response analysis and policy analysis using estimated vector autoregressions are based on incorrect analysis

corporate capital expenditure decisions and the market value of the firm abstract this paper is an event time study of the common stock prices of a sample of 658 corporations around the dates on which they publicly announced their future capital expenditure plans for industrial firms announcements of increases decreases in planned capital expenditures are associated with significant positive negative excess stock returns for public utility firm neither increases nor decreases in planned capital expenditures are associated with significant excess stock returns we interpret the evidence as being consistent with the hypothesis that managers seek to maximize the market value of the firm in making their corporate capital expenditure decisions

the role of esops in takeover contests this article examines both the shareholder wealth effects of employee stock ownership plans esops announced by firms subject to takeover pressure and the takeover incidence of targets with and without esops although we do not find that defensive esops significantly reduce shareholder wealth on average we identify two factors the change in managerial and employee ownership due to the esop and the simultaneous announcement of other defensive tactics that are associated with negative stock price reactions we find that esops are strong deterrents to takeover esop targets that are acquired earn higher returns than targets without esops but the difference is not statistically significant copyright 1994 by american finance association

financial intermediation business failures and real business cycles in this paper a general equilibrium business cycle model is construct ed that when subjected to real disturbances mimics observed qualita tive comovements among real output money business failures risk pr emia intermediary loans and prices in contrast monetary disturban ces generate cycles that have several inconsistencies with empirical evidence thus providing support for real business cycle theory at th e expense of monetary theories of the business cycle financial inter mediation arises endogenously in the model and intermediation matters for business cycle behavior a credit supply mechanism acts in tande m with an intertemporal substitution effect in propagating stochastic disturbances copyright 1987 by university of chicago press

firm heterogeneity internal finance and credit rationing this paper assesses the role of internal net worth holding constant investment opportunities in the allocation of credit in the presence of asymmetric information in the capital market the authors consider an economy in which both symmetric information and information intensive entrepreneurs seek funds from the capital market and they develop a simple general equilibrium model of credit allocation their emphasis is on shocks to borrower net worth depending on levels of net worth the symmetric information allocation a credit collapse or intermediate allocations are possible the model yields predictions corresponding to accelerator effects on investment and output as well as real effects of collateral redistributions copyright 1990 by royal economic society

gross job flows and the evolution of size in u k establishments this paper analyzes a relationship between establishment size and gross job creation and destruction in the u k during the 1980 s i find that the gross job creation rate is highest in small plants and lowest in large ones in contrast the gross job destruction rate is lowest in small plants and highest in large ones in absolute numbers however large plants create but also destroy most jobs i test convergence in plant size by computing markov transition matrices the advantage of this approach is that it avoids galton s fallacy of regression towards the mean and that it reflects job creation and destruction between size classes i find no evidence of convergence hence no regression towards the mean

asymmetric information financing constraints and investment the results of a number of theoretical papers lead to the hypothesis that financial variables affect capital sp ending because of asymmetric information in capital markets the auth ors review the relevant theory and test this hypothesis with a large sample of firm data the results show that financial variables such a s cash flow and interest expense add significant explanatory power to investment equations based on dale jorgenson s neoclassical model w ith a capm specification for the firm s cost of capital and a sales accelerator model the analysis therefore links recent theoretical work on capital markets to long standing empirical debates in the inv estment literature copyright 1987 by mit press

framing controversial actions regulatory focus source credibility and stock market reaction to poison pill adoption we contribute to the research on organizational accounts by examining the role of different framing languages and the credibility of the frame articulator on justifying controversial organizational actions drawing on regulatory focus theory and the literature on source credibility we develop novel arguments as to how a gains versus nonlosses framing and the perceived credibility of the speaker influence stakeholder responses as well as how the effectiveness of these aspects is influenced by context we test our arguments using data on the framing of the adoption of poison pills by u s firms between 1983 and 2008 using content analysis and an event study we find that a gains framing aligned with the dominant institutional logic leads to a positive stock market reaction while statements emanating from speakers with potentially self serving interests negatively affect the stock market reaction our findings further show that the effectiveness of framing and source credibility are dependent on contextual attributes such as speaker visibility prior performance and practice prevalence

the nonmonetary effects of financial factors during the interwar period i introduction in a monetary history of the united states friedman and schwartz 1963 attributed the enormous decline in real output and prices during the great depression of 1929 1933 to an unprecedented fall in the supply of money while there is much support today for the view that money played an important role in this episode many economists feel that this variable alone does not provide a sufficiently complete explanation of the link between the chaotic conditions in the u s financial sector and aggregate output and prices bernanke 1983 contended in an influential paper that financial shocks had important nonmonetary effects on aggregate economic activity in addition to their effects via the supply of money rather than consider the 1929 33 episode outside of its context bernanke widened his sample to include the entire interwar period which he defined as january 1919 december 1941 the major purpose of this paper is to present empirical evidence on the importance of the nonmonetary effects of financial factors in explaining fluctuations in real output and prices during the interwar period we define the interwar period as august 1922 june 1938 by omitting from our sample a few years immediately following world war i and immediately preceding world war ii we avoid the potential problems connected with war related government expenditures and autonomous gold flows discussed in joines 1985 our interwar period corresponds closely to the four peacetime cycles identified by firestone 1960 the theoretical literature on the nonmonetary effects of financial factors focuses on two related but distinct aspects 1 first studies by bernanke and blinder 1988 williamson 1987a 1987b bernanke and gertler 1987 and scheinkman and weiss 1986 demonstrate that the efficiency with which banks perform their intermediation function is an independently important determinant of the level of real economic activity second bernanke and gertler 1989 1990 gertler and hubbard 1988 and calomiris and hubbard 1990 focus on the effects of shocks to borrowers net worth positions on aggregate economic activity this approach suggests that exogenous shocks to borrowers net worth may be a source of economic fluctuations therefore for example to the extent that a deflation is unanticipated it is likely to erode borrowers net worth and thereby adversely affect aggregate economic activity beginning with fisher 1933 this deflation story has played an important role in studies such as bernanke 1983 hamilton 1987 and bernanke and james 1990 that attempt to explain the great depression in evaluating the effects of financial sector shocks during the great depression bernanke 1983 argued that in addition to the traditional monetary effects of adverse shocks to financial intermediation stressed by friedman and schwartz 1963 these shocks increased the cost of credit intermediation which in turn led to credit contraction rejection of otherwise profitable projects and subsequent falls in output to test this hypothesis bernanke included the deposits of failing banks and the liabilities of failing businesses as joint proxies for the cost of credit intermediation in a barro 1977 type output equation that also included unanticipated money both the deposits of failing banks and liabilities of failing businesses were found to be significant moreover dynamic simulations of the path of output for the period between mid 1930 and march 1933 accounted for substantially more of the actual decrease in output than was captured when only unanticipated money was included in the output equation in place of the joint proxies bernanke also used the yield differential between baa corporate and long term u s government bonds as a proxy for credit intermediation costs in all cases entry of the credit cost proxies significantly increased the percentage of the decline in output that was captured

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

an historical decomposition of the great depression to determine the role of money abstract the innovation accounting technique of historical decomposition seems ideally suited as a vehicle for a re examination of money s role during the depression its application using u s monthly data for 1919 to 1941 reveals that innovations in money exerted a considerable influence on prices and output after october 1929 although the depth of the depression and the extent of the subsequent recovery cannot be attributed solely to monetary factors an important albeit occasionally diminished monetary effect is also identified even when a passive contemporaneous response by money to price and output fluctuations is assumed not to contribute to the effect

firm growth and ownership in transition countries this paper uses data from firm level surveys to investigate firm performance for state owned privatized and de novo private firms in romania bulgaria and hungary after controlling for life cycle size and product market effects i find that de novo private firms outperform privatized and state owned ones c 1997 elsevier science s a

the effect of poison pill securities on shareholder wealth abstract this paper examines empirical evidence about the effect of poison pill takeover defenses on shareholder wealth i find evidence that announcements of the most restrictive forms of the pill defense are associated with stock price declines also the most restrictive forms of the pill defense are associated with abnormally high rates of defeat of unsolicited tender offers although this evidence is consistent with managerial entrenchment the evidence implies that on average poison pill defenses have seemingly had only a modest effect on firm valuation

managerial share ownership and the stock price effects of antitakeover amendment proposals studies that test for an average stock price effect of antitakeover amendments present different results disagreeing with respect to both the significance and the direction of the effect this study determines whether effects can be identified when managerial share ownership and amendment type are considered results suggest a negative relation between managerial share ownership and the stock price reaction to all but fair price amendment proposals managerial control over voting rights has been the focus of recent studies in the finance literature for example dann and deangelo 1988 present evidence on managerial actions taken to enhance voting control while stulz 1988 suggests ways that managers can increase control of voting rights by adopting antitakeover amendments or dual classes of common stock that reduce the voting power of outside shareholders since antitakeover amendments may be one way to effectively increase managerial control over voting rights this paper investigates the relation between managerial share ownership the type of antitakeover amendment proposed and the stock price reaction to the amendment proposal this study is motivated partially by existing evidence regarding the stock price effect of antitakeover amendments empirical studies are inconclusive regarding the amendments effects on shareholder wealth disagreeing with respect to both significance and direction deangelo and rice 1983 find statistically insignificant negative abnormal returns surrounding the amendment proposals while linn and mcconnell 1983 find statistically significant positive abnormal returns jarrell and poulsen 1987 find a statistically insignificant negative reaction to amendment proposals for exchange listed firms while mcwilliams 1988 finds an insignificant positive reaction at proposal announcement these results

an empirical investigation of the impact of antitakeover amendments on common stock prices abstract antitakeover amendments are amendments to a corporation s charter that impede the ability of an outsider to gain control of the firm a number of individuals and institutions have onjected to such amendments on the grounds that they are not in the best interests of the shareholders of the firms that adopt them this paper employs event time methodology to investigate the impact of antitakeover amendments on the common stock prices of firms that adopt them the results indicate that the announcement of such amendments is associated with a positive revaluation of stock price contrary to the concerns of their critics we conclude that antitakeover amendments are proposed by managers who seek to increase the value of the firm and are approved by stockholders who share that objective

insider ownership and financial flexibility this study examines the cash flow sensitivity of external financing financial flexibility ff of firms from the perspective of the agency by focusing on whether and how insider ownership has a modifying effect on the ff of firms given the documented relationship between corporate governance and cost of external financing insider ownership an important proxy of corporate governance should affect ff via the agency cost channel a review of the us nonfinancial firms from 1992 to 2009 indicates that insider ownership aids in determining the ff of firms more specifically results indicate the existence of optimal insider ownership and any deviation from it causes ff to decrease in addition ff is higher when ceo ownership is lower 0 08 and this phenomenon is more pronounced for financially unconstrained firms furthermore ff is higher when non ceo insider ownership is in the middle range 0 12 0 43 for financially constrained firms whereas non ceo insider ownership has minimal impact on ff fo

the association between outside directors institutional investors and the properties of management earnings forecasts we investigate the relation of the board of directors and institutional ownership with the properties of management earnings forecasts we find that firms with more outside directors and greater institutional ownership are more likely to issue a forecast and are inclined to forecast more frequently in addition these forecasts tend to be more specific accurate and less optimistically biased these results are robust to changes specification granger causality tests and simultaneous equation analyses the results are similar in the pre and post regulation fair disclosure reg fd eras additional analysis suggests that concentrated institutional ownership is negatively associated with forecast properties this association is less negative in the post reg fd environment which is consistent with reg fd reducing the ability of firms to privately communicate information to select audiences

an empirical analysis of oil price shocks in the interwar period i introduction post world war ii experience demonstrates that disturbances to aggregate supply are important determinants of aggregate economic performance a casual glance at the post 1970 data strongly suggests a correlation between shocks to the price of oil and recession hamilton 1983 formally demonstrates that this correlation arises from what appears to be a causal link that runs from oil price increases to reduced economic activity the sequence of oil price increases followed by recession characterizes every post world war ii economic downturn in the u s with the exception of 1960 61 other research confirms the critical role of supply shocks in explaining post world war ii macroeconomic performance burbidge and harrison 1984 employ vector autoregressions vars to examine the impact of oil price shocks over the 1962 82 period for several countries they conclude that these shocks played a large role in deepening the recessions of the 1970s with the impact on the 1973 74 recession much greater than that of 1979 80 tatom 1988 estimates the impact of the 1979 80 increase in the relative price of oil and reports that this shock reduced the amount of output that could be produced with available labor and capital by 5 7 percent thoma 1992 re examines the work of litterman and weiss 1985 and finds that the ex ante real interest rate is not exogenous to supply shocks contrary to what is reported in litterman and weiss using annual data over the 1948 82 period loungani 1986 shows that any correlation between an index of the dispersion of unemployment across industries and the aggregate unemployment rate is due to the dispersion index s collinearity with oil price shocks once this collinearity is accounted for the dispersion index has no explanatory power to account for movements in the aggregate unemployment rate while the evidence for the causal link between supply shocks and output appears most dramatic for the post 1970 data hamilton 1983 argues that the entire post war period be treated as a continuous whole the enduring regularity of the oil price shock recession relation in this period leads to a natural question is there any evidence that oil price shocks either positive or negative played any role in the cyclical fluctuations and secular expansion of the 1920s and the great depression figure 1 presents a plot of the relative price of oil defined precisely in section ii for the 1921 1 1938 6 period we observe a number of sharp movements in the relative price of oil that suggest an assessment of the empirical impact of oil price shocks during the interwar period is warranted accordingly we investigate the effects of oil price shocks during the interwar period within the context of a small macroeconomic model 1 the empirical framework is a var model that consists of output the price level the monetary base the m2 money multiplier the commercial paper rate government spending a financial intermediation variable and a measure of oil price shocks these are variables frequently found in small macroeconomic models monthly data for the period 1924 2 1938 6 are used to specify and estimate the model we evaluate the impact of oil price shocks on prices and output through computation of variance decompositions the standard errors reported are generated through monte carlo simulations historical decompositions for the 1929 9 1938 6 period are also computed so we can specifically examine the effects of oil price shocks over the sample period that includes the great depression we chose the var modeling approach because there is little agreement on the appropriate structural model and var estimation places few restrictions on the way in which the system s variables interact in the specification and estimation of the model all variables are treated as jointly determined no a priori assumptions are made about the exogeneity of any of the system s variables at this stage of analysis

large shareholders and the monitoring of managers the case of antitakeover charter amendments this paper examines the role of large shareholders in monitoring managers when they propose antitakeover charter amendments we attempt to distinguish between two competing hypotheses the active monitoring hypothesis and the passive voting hypothesis we find a statistically significant positive relation between institutional ownership and the stockholder wealth effects of various types of amendments after controlling for ownership concentration among institutions managerial ownership and firm size our empirical evidence lends support to the active monitoring hypothesis proposed by demsetz 1983 and shleifer and vishny 1986 that the existence of large shareholders leads to better monitoring of managers

takeover defenses ownership structure and stock returns in the netherlands an empirical analysis this study empirically examines the relationships between a firm s takeover defenses and its ownership structure and stock returns analyzing data of dutch listed companies we find that multiple antitakeover defenses are increasingly adopted when firms are characterized by relatively lower ownership concentration the evidence supports the hypothesis that more concentrated ownership of shares provides more effective monitoring of managers as defense by issuing preferred share has recently been the most widely adopted mechanism in the netherlands its impact on shareholders wealth is also analyzed we observe the presence of two opposing effects of this antitakeover measure

an empirical analysis of the reincorporation decision the literature suggests two competing explanations for reincorporations efforts at managerial entrenchment and attempts to improve contractual efficiency the empirical evidence to date is inconclusive to seek further evidence we examine a large sample of firms that changed their state of incorporation over the period 1980 1992 we find that shareholder wealth is decreased by reincorporations that erect takeover defenses but is increased by reincorporations that establish limits on director liability firms that claim they reincorporate to limit the personal liability of their board members and thereby attract better qualified outside directors do in fact expand the outside representation on their boards whereas firms citing other motives do not

institutional investors political connections and the incidence of regulatory enforcement against corporate fraud we investigate two under explored factors in mitigating the risk of corporate fraud and regulatory enforcement against fraud namely institutional investors and political connections the role of institutional investors in the effective monitoring of a firm s management is well established in the literature we further observe that firms that have a large proportion of their shares held by institutional investors have a lower incidence of enforcement actions against corporate fraud the importance of political connections for enterprises whether in a developed market such as the united states or an emerging market such as china has been established by previous studies however we find evidence of another positive effect of political connections they may reduce the incidence of enforcement action against corporate fraud we also find that political connections play a more significant role in reducing regulatory enforcement incidents against non state owned enterprises and firms in weaker legal environments whereas institutional ownership plays a more important role in reducing regulatory enforcement incidents against state owned enterprises

the structure of ownership and the theory of the firm the separation of ownership from control produces a condition where the interests of owner and of ultimate manager may and often do diverge and where many of the checks which formerly operated to limit the use of power disappear in creating these new relationships the quasi public corporation may fairly be said to work a revolution it has divided ownership into nominal ownership and the power formerly joined to it thereby the corporation has changed the nature of profit seeking enterprise 1

deficits and money growth in the united states 1872 1983 abstract this paper reports empirical evidence on the relation between government budget deficits and the growth of high powered money in the united states high powered money growth appears to be positively related to war spending during periods when such spending is a substantial fraction of gnp there is little evidence that the growth of high powered money is related to the non war government deficit measured either in cash or in real terms after controlling for the level of overall economic activity

worker turnover and job reallocation in taiwanese manufacturing the paper examines time series patterns of job and worker flows in a newly industrializing economy nie using plant level data from the taiwan manufacturing sector the cyclical behaviour of job reallocation and its relation with worker turnover is analysed it is found that job reallocation and labour turnover are procyclical at both the aggregate and two digit industry levels the share of worker turnover caused by gross job reallocation is 17 suggesting the majority of observed worker turnover reflects rotations of positions that are neither created or destroyed there is substantial heterogeneity in plant specific job and worker turnover patterns job creation and job destruction rates are higher among small plants and private sector plants the private plants are more dynamic than public plants in terms of worker turnover controlling for year and industry effects it is found that job creation and worker turnover are both higher in export oriented industries

monetary factors in the great depression this paper examines the role of monetary policy in the early stages of the great depression and considers the mechanism whereby this policy may have affected real activity i conclude that the depression was preceded by a dramatic shift towards a highly contractionary monetary policy the economic impact of this policy seems unlikely to have come through the conventional keynesian channels of a shortage of liquidity and high ex ante real interest rates but instead may have operated through unanticipated deflation and after 1930 through the disruption of financial intermediation as a consequence of the banking panics

do firms undertake self tender offers to optimize capital structure this study investigates capital structure around 286 self tender offers from 1980 to 1997 firms that undertake self tender offers generally have debt ratios below their predicted levels before the offers the debt ratios following nondefensive self tender offers are close to predicted levels while the ratios following defensive self tender offers are above predicted levels further 20 and 43 of the debt ratings are downgraded following nondefensive and defensive self tender offers respectively finally the increases in debt ratios around the offers are negatively related to the difference from the predicted debt ratio before the offers

the relative importance of foreign and domestic disturbances for aggregate fluctuations in the open economy switzerland 1964 1981 abstract this paper studies whether the advent of floating exchange rates served to insulate switzerland from economic shocks of foreign origin it estimates a vector autoregression comprising four swiss and three world aggregate time series and interprets the results in terms of the properties of the vector moving average representation implied by the estimates the chief finding is that foreign shocks explain most of the systematic variation of the swiss variables in both regimes

the growth of uk companies and their contribution to job generation 1985 1987 theories of firm growth are reviewed and various models examined the firm growth and job generation process in the uk over the period 1985 87 is examined empirically by using the very large data files of the dun and bradstreet credit rating organisation in the analysis four computer processes were carried out the sorting and matching of files the cleaning of the data the validation of the cleaned data and the scaling up the results the final adjusted data were grossed up to provide an overview of the growth and job generation potential of uk firms this is compared with past results for the periods 1971 81 and 1982 84 small firms performed well providing 48 of all new jobs although consisting of only 21 of all employment in 1985 the 1000 employee range provided only 13 of all new jobs over the period although consisting of 37 of all employment in 1985 an overall trend of positive performance in smaller firms and negative in larger firms was apparent the 20 49 employee cohort performed unusually poorly in firm and job creation against the expected pattern the effect of takeovers mergers and rationalisations on employment was examined as expected there was negligible restructuring of small firms but over 5 of employees in the largest 1000 cohort were involved in some form of reorganisation

the leading shareholder strategy takeover contests and stock price dynamics abstract this paper analyzes the attractiveness of the leading shareholder strategy control without majority ownership for a potential takeover bidder with a cost of raising funds additional purchases commit the bidder to more aggressive behavior in a takeover battle and thus discourage competing bids at the optimum the bidder thus trades off the cost of buying additional shares with the risk of losing control to another bidder small shareholders payoffs depend instead on the relative management skills of the bidders and on the premium they obtain when competing bidders enter the battle this model can also be interpreted in terms of equilibrium ownership of dominant shareholders facing costs of raising funds and risks of takeover attempts