housing market responses to transaction taxes evidence from notches and stimulus in the uk we investigate housing market responses to transaction taxes using administrative data on all property transactions in the u k from 2004 to 2012 combined with quasi experimental variation from tax notches and tax stimulus we present two main findings first transaction taxes are highly distortionary across a range of margins causing large distortions to the price volume and timing of property transactions secondly temporary transaction tax cuts are an enormously effective form of fiscal stimulus a temporary elimination of a 1 transaction tax increased housing market activity by 20 in the short run due to both timing and extensive responses and less than half of the stimulus effect was reversed after the tax was reintroduced due to re timing because of the complementarities between moving house and consumer spending these stimulus effects translate into extra spending per dollar of tax cut equal to about 1 we interpret our empirical findings in the context of a housing model with downpayment constraints in which leverage amplifies the effects of transaction taxes

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

information school choice and academic achievement evidence from two experiments we examine a natural experiment and a field experiment that provided direct information on school test scores to lower income families in a public school choice plan receiving information significantly increases the fraction of parents choosing higher performing schools parents with high scoring alternatives nearby were more likely to choose nonguaranteed schools with higher test scores using random variation from each experiment we find that attending a higher scoring school increases student test scores the results imply that school choice will most effectively increase academic achievement for disadvantaged students when parents have easy access to test score information and good options from which to choose

do better schools matter parental valuation of elementary education the evaluation of numerous school reforms requires an understanding of the value of better schools given the difficulty of calculating the relationship between school quality and student outcomes i turn to another method and use house prices to infer the value parents place on school quality i look within school districts at houses located on attendance district boundaries houses then differ only by the elementary school the child attends i thereby effectively remove the variation in neighborhoods taxes and school spending i find that parents are willing to pay 2 5 percent more for a 5 percent increase in test scores this finding is robust to a number of sensitivity checks

the impact of supply constraints on house prices in england we test the theoretical prediction that house prices respond more strongly to changes in local earnings in places with tight supply constraints using a unique panel dataset of 353 local planning authorities in england between 1974 and 2008 exploiting exogenous variation from a policy reform vote shares and historical density to identify the endogenous constraints measures we find that regulatory constraints have a substantive positive impact on the house price earnings elasticity the effect of constraints due to scarcity of developable land is largely confined to highly urbanised areas and uneven topography has a quantitatively less meaningful impact

capitalization and the theory of local public finance the tiebout literature is incomplete this paper argues because it has not fully accounted for the capitalization of local fiscal variables into house values the paper explains why capitalization arises why it persists in long run equilibrium how it affects both residential location and the outcome of local voting and why it interferes with the efficiency of a system of local governments the analysis which is based on the main tiebout assumptions plus a property tax combines a model of household bids in a housing market with a median voter model of local public service determination

income and democracy revisiting the evidence abstract in an influential paper acemoglu et al 2008 find that the positive correlation between income per capita and the level of democracy across countries vanishes once country specific effects are accounted for in this paper we find evidence of a non linear effect from income to democracy even after controlling for country specific effects in particular our findings point to the existence of a positive effect only in low income countries

the incidence of transaction taxes evidence from a stamp duty holiday this paper exploits the 2008 09 stamp duty holiday in the united kingdom to estimate the incidence of a transaction tax on housing the average reduction in the after tax sale price is found to be around 900 against the backdrop of an average tax reduction of about 1500 while we estimate an increase in transactions of properties affected by the tax holiday around 8 most of this effect appears to have reversed rapidly after the policy was withdrawn suggesting mostly a short term retiming of transactions the findings are calibrated to a simple bargaining model to show they imply that about sixty percent of the surplus generated by the holiday accrued to buyers

contagious speculation and a cure for cancer a nonevent that made stock prices soar a sunday new york times article on a potential development of new cancer curing drugs caused entremed s stock price to rise from 12 063 at the friday close to open at 85 and close near 52 on monday it closed above 30 in the three following weeks the enthusiasm spilled over to other biotechnology stocks the potential breakthrough in cancer research already had been reported however in the journal nature and in various popular newspapers including the times more than five months earlier thus enthusiastic public attention induced a permanent rise in share prices even though no genuinely new information had been presented a central tenet of f inancial economics is that an asset should trade at the risk adjusted present value of its expected future cash f lows these expected future cash f lows exist in people s minds and do not normally lend themselves to direct observation an equilibrium price in a frictionless market does not tolerate disagreements among market participants if some people deem the price too low they will buy the asset if others think it is too high they will sell it short if necessary although the efficient markets hypothesis predicts that price changes are unpredictable it associates them with changes in traders beliefs about future cash f lows or the appropriate discount rate beliefs change with the arrival of new information thus in hindsight at least we should be able to ascribe price changes to the arrival of specific new information we examine this view in the context of a series of news reports in the media pertaining to entremed enmd a biotechnology company and other members of its sector the sunday may 3 1998 edition of the new york times reports on a recent breakthrough in cancer research and mentions enmd a company with licensing rights to the breakthrough kolata 1998 the story s impact on the stock prices was immediate huge and to a large extent permanent the new news content of the times story was nil though the substance of the story had been published as a scientific piece in nature boehm et al 1997 and in the popular press including the times itself wade 1997 more than five months earlier in november 1997

the value of voting rights to majority shareholders evidence from dual class stock unifications we study 84 dual class stock unifications where superior vote shareholders gave up their superior voting status all firm stocks became one share one vote and received in most cases compensation in the form of additional shares unifications are essentially intrafirm transactions of voting rights and afford observation of the intrafirm assessed price of vote the price of vote in unifications 1 increases with the percentage vote lost by the majority shareholders 2 is higher in family controlled firms 3 decreases with institutional investor holdings and 4 is similar to the outside price of vote implicit in the market prices of stocks the value of voting rights is an intriguing topic that has attracted extensive academic and practitioner interest before most of the existing evidence comes from examinations of dual class stocks in the dual class stock system the firm issues two classes of common stock superior and inferior vote stocks previous research documents a price premium of superior vote over inferior vote stocks which illustrates the positive value of voting rights 1 inrecent years manydual classfirmsdecidedtorecapitalizetheirequity into single class stocks this was done by transforming all common stock classesinto oneshareonevote the unification ofstockclassestrendis evidenced in canada amoako adu and smith 2001 and is gaining momentum in europe as well nokia and lufthanza are recent examples we examine 84 dual class share unifications on the tel aviv stock exchange unifications are essentially sales of voting power from one class of investorstoanother bymonitoringtheprices ofthesetransactions thatis by examining the compensation paid for the loss of the superior vote status we hope to provide relatively direct inferences on the value of vote

dual class shares a review the majority of firms traded in the world s three largest stock exchanges london new york and tokyo follow the one share one vote principle however in other countries dual classes of shares are common place for example 50 percent of the publicly traded dutch firms have non voting equity and approximately 75 percent of the publicly traded danish finnish and swedish firms have shares that differ in their voting rights this paper reviews the arguments as to why firms create dual classes of shares their effect on firm value and the relative prices of shares that differ only in their voting rights copyright 1992 by oxford university press

on the choice of funtional form for hedonic price functions this study examines how errors in measuring marginal attribute pric es vary with the form of the hedonic price function in simulations consumers with known utility functions bid for houses with given attributes various forms of the hedonic function are estimated using equilibrium housing prices errors in estimating marginal attribute prices are calculated by comparing each consumer s equilibrium marginal bid vector with the gradient of the hedonic function when all attributes are observed linear and quadratic box cox forms produce lowest mean percentage errors however when some attributes are unobserved or are replaced by proxies linear and linear box cox functions perform best copyright 1988 by mit press

relative prices of dual class shares empirical studies of dual class shares indicate that superior voting shares svs sell at a premium relative to their counterpart restricted shares rvs this paper uses toronto stock exchange data to show that svs price premium over rvs reflects the expected takeover premium paid to shareholders outside the control block thus marginal shareholders pay a higher svs price in anticipation of receiving a differential takeover bid as suggested by the extra merger hypothesis further analysis indicates that voting power increases the price premium while ownership size and the higher trading liquidity of rvs are inversely related to the premium

economic evaluation of voting power of common stock this paper presents an economic evaluation of common stock voting rights an index of relative voting rights inequality for different classes of stock of the same corporation is constructed and the empirical relationship between the market premium on a superiorvoting stock and the voting inequality index is examined in only three out of the 25 cases could investors have arbitraged between the two classes of stock although in one case the arbitrage opportunity persisted for several months ownership and control of large corporations are two separate functions each shareholder typically holds a relatively small number of shares and hence lacks significant voting power as a result shareholders interest in the management of the firm is typically limited and a majority of them do not participate in the corporation s general meetings 1 thus the investment and financial decisions of the firm are made by a small group the management which effectively controls the firm the possible conflict of interest between these two groups and other various aspects of the separation of control and ownership are the subject of several studies 2 grossman and hart 5 show that even if the directors of the firm do not act in the best interest of the shareholders 3 it may be impossible for them to be disciplined and replaced by a takeover bid this raises the issue of whether theright to control the firm s activities has any economic value to focus the issue suppose a firm issues two classes of stock one with voting rights and the other with no voting rights and assume further that the two classes are entitled to the same pecuniary payoff in every state of the world according to traditional financial theory that asserts that two assets promising the same payoff in every state of nature must sell for the same price the voting rights would be worthless and we should expect the same market price for the two classes of stock however

the capitalization of interest subsidies evidence from sweden we analyze by far the most extensive database yet employed in estimating capitalization of below market interest rates into asset prices nearly 300 000 sales of owner occupied homes in sweden from 1981 to 1993 with 27 000 including government subsidized interest rates our estimates indicate very clearly that interest subsidies are capitalized into house prices the below market financing parameter is consistently significant in all model specifications irrespective of assumptions about the degree of foresight representation of the age structure and interest rate measure for all ten regions that we have studied in our favored model specification the estimated capitalization coefficients center on unity indicating full capitalization of after tax interest rate subsidies

when does economic growth reduce poverty and strengthen the middle class a state level sector specific analysis of peru using novel state level data of peru from 1997 to 2010 we investigate how growth in different sectors affects poverty rates and the middle class our results indicate that only the manufacturing sector seems to robustly decrease poverty growth in the service sector emerges as a meaningful predictor of a rising middle class allowing for regional differences we find substantial variation across the 25 peruvian states with large shifts in magnitudes signs and statistical importance beyond the immediate implications for peru these findings highlight the importance of analyzing the link between economic performance and poverty rates on a subnational level policy implications are likely to differ substantially depending on the source of economic growth and regional particularities

takeover bids and the relative prices of shares that differ in their voting rights the relative prices of shares that differ only in their voting rights are modelled in our model voting rights become valuable when a control contest is decided through takeover bids for outside votes the study shows how the value of the voting right depends on the initial ownership distribution the share structure and the ability of the incumbent manager versus a rival for control empirical support for the model is provided using swedish stock market data

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

the value of the corporate voting right evidence from switzerland abstract this paper analyzes the value of voting power of swiss firms which usually issue high voting rights stock low voting rights stock and non voting stock two variables measuring voting power inequality are constructed they are both useful in explaining the voting rights premia also the allocation of the voting rights is analyzed it is shown that majority shareholders hold the high voting rights stock

the mortgage interest deduction and its impact on homeownership decisions abstract this paper examines the impact of the combined u s state and federal mortgage interest deduction mid on homeownership attainment using data from 1984 to 2007 and exploiting variation in the subsidy arising from changes in the mid within and across states over time we test whether capitalization of the mid into house prices offsets the positive effect on homeownership we find that the mid boosts homeownership attainment only of higher income households in less tightly regulated housing markets in more restrictive places an adverse effect exists the mid is an ineffective policy to promote homeownership and improve social welfare

house price responses to a national property tax reform abstract we show that house prices in general did not respond to a substantial cut in the national property tax in sweden the estimates are based on rich register data covering more than 100 000 sales over a time period of two and a half years because the swedish property tax is national and thus unrelated to local public goods our setting is ideal for causal identification of the property tax on house prices we observe price increases only in a small segment of the market containing properties with very high tax values we discuss but can admittedly not empirically discriminate between several potential explanations for why we find no evidence of capitalization except for the top segment of the market

price differences between equity classes corporate control foreign ownership or liquidity abstract this paper is the first comprehensive study of price differences for dual class equity at the oslo stock exchange it analyzes the relative importance of corporate control foreign ownership restrictions and stock market liquidity for the price differences the norwegian market has the peculiar feature that in part of the sample period non voting shares were trading at a premium to voting shares i e what is usually termed the voting premium was negative this result can be rationalized by restrictions on foreign ownership in the later part of the period with no regulatory restrictions on foreign ownership the voting premium is positive and related to corporate governance and liquidity

the value of the voting right a study of the milan stock exchange experience i study the large premium 82 percent attributed to voting shares on the milan stock exchange the premium varies according to the ownership structare and the concentration of the voting rights and it can be rationalized in the presence of enormous private benefits of control a case study seems to indicate that in italy private benefits of control can easily be worth more than 60 percent of the value of nonvoting equity a tentative explanation for these findings is provided traditional finance theory disregards the value of voting rights in pricing common stock in most cases this omission does not seem harmful many studies of differential voting stocks in different countries have indicated that voting rights are generally worth between 10 percent and 20 percent of the value of common stock the italian evidence i present differs sharply from this view in italy voting shares that have inferior dividend rights trade at an average premium

does the market value value added evidence from housing prices after a public release of school and teacher value added value added data are an increasingly common evaluation tool for schools and teachers many school districts have adopted these methods and released the results publicly in this paper we study the release of value added data in los angeles by the los angeles times newspaper to identify how measured value added is capitalized into housing prices this analysis is the first in the us school valuation literature to examine property value responses to a value added information shock which is of interest as this measure is less correlated with demographics than typical school quality measures unique to this setting as well is the release of both school and teacher level value added data which allows us to examine how property values respond to both types of information using a difference indifferences methodology surrounding the release we find that neither school nor teacher value added scores are capitalized into home prices our results suggest that despite the contentiousness following these data releases homeowners do not consider value added models as currently constructed to be a relevant school quality measure on the margin

the market value of corporate votes theory and evidence from option prices this paper proposes a new method using option prices to estimate the market value of the shareholder voting rights associated with a stock the method consists of synthesizing a nonvoting share using put call parity and comparing its price to that of the underlying stock empirically we find this measure of the value of voting rights to be positive and increasing in the time to expiration of synthetic stocks the measure also increases around special shareholder meetings periods of hedge fund activism and m a events the method is likely useful in studies of corporate control and also has asset pricing implications

school quality and residential property values evidence from vancouver rezoning abstract this study utilizes changes in the catchment areas of public schools in vancouver british columbia to measure the residential price capitalization of school quality specifications that employ repeat sales methods to control for time invariant neighborhood effects and disaggregated price indexes to capture time varying neighborhood price appreciation reveal significant effects of secondary school performance on residential prices however when we add controls for long run price trends in rezoned areas only prices of residences likely to be purchased by high income families appear to have been affected by changes in school quality induced by rezoning

income and democracy a smooth varying coefficient redux summary acemoglu et al american economic review 2008 98 808 842 find no effect of income on democracy when controlling for fixed effects in a dynamic panel model work by moral benito and bartolucci economics letters 2012 117 844 847 and cervellati et al american economic review 2014 104 707 719 suggests that the original model might have been misspecified and proposes alternative specifications instead we formally test these parametric specifications by implementing lee s journal of econometrics 2014 178 146 166 dynamic panel test of linear parametric specifications against a general class of nonlinear alternatives robustly and reject all these specifications however using a more flexible model proposed by cai and li econometric theory 2008 24 1321 1342 we find that the relationship between income and democracy appears to be mediated by education but results are not statistically significant copyright 2016 john wiley sons ltd

the promise and pitfalls of using imprecise school accountability measures in recent years most states have constructed elaborate accountability systems using school level test scores however because the median elementary school contains only 69 children per grade level such measures are quite imprecise we evaluate the implications for school accountability systems for instance rewards or sanctions for schools with scores at either extreme primarily affect small schools and provide weak incentives to large ones nevertheless we conclude that accountability systems may be worthwhile even in states with aggressive financial incentives the marginal reward to schools for raising student performance is a small fraction of the potential labor market value for students

information shocks and the dynamics of the housing market in this paper we analyze housing market reactions to the release of previously unpublished information on school quality using high quality housing data which precisely bracket the timing of the information shock we investigate housing price dynamics within school catchment areas we find a robust short term housing market reaction to the publication of school quality indicators suggesting that this information was new to the households and that households are willing to pay for better schools the publication effect does not seem to be permanent as prices revert to pre publication levels after two to three months

ownership of equity in dual class firms abstract the paper investigates the hypothesis that large shareholders use shares with differential voting rights for the purpose of expropriating minority shareholders consistent with several theoretical arguments but inconsistent with the expropriation hypothesis we find that large shareholders own much more equity than required for control we also show how the law can construct a regulation which reduces the opportunity for expropriation and at the same time allows for the possible benefits of differential voting rights

differentiated bids for voting and restricted voting shares in public tender offers abstract this paper develops a model for takeover bid premiums of voting and restricted voting shares when the bidder wants 100 of the target firm for this special case a higher bid premium may be offered either to the voting or to the restricted voting shareholders we also analyze consequences of the equal offer and one share one vote principles and investigate the model s explanatory power on swedish data

corporate groups dual class shares and the value of voting rights abstract it is known that deviating from the one share one vote principle through the issue of non voting stock increases the value of outsiders voting rights we argue that the creation of a business group is another way to deviate from one share one vote and we show that it produces a larger voting share premium in holding companies as a consequence having both subsidiaries and non voting stock produces a multiplier effect on the voting premium the puzzling size of the premium in italy was never related to the interaction of pyramiding and non voting stock our empirical study confirms that the premium is larger for holding companies issuing non voting stock than for similar operating companies without non voting equity

income and democracy existing studies establish a strong cross country correlation between income and democracy but do not control for factors that simultaneously affect both variables we show that controlling for such factors by including country fixed effects removes the statistical association between income per capita and vari ous measures of democracy we present instrumental variables estimates that also show no causal effect of income on democracy the cross country corre lation between income and democracy reflects a positive correlation between changes in income and democracy over the past 500 years this pattern is con sistent with the idea that societies embarked on divergent political economic development paths at certain critical junctures jel d7 e 1

corporate governance and equity prices evidence from the czech and slovak republics the 1992 czechoslavakia mass privatization program involving about 1 500 eneterprises and implemented through a voucher scheme with competitive bidding was a bold step in changing the ownership and governance of a large part of the economy it represents a clear test case of one approach and other countries may benefit from its lessons at the time much skepticisism was voiced about mass privatization it would lead to diffuse ownership and no effective corporate governance would result but innovative forces led to the emergence of investment funds that collected much of the individuals voucher points leading to a much more concentrated ownership structure it has been expected that this concentrated ownership would lead to improved corporate governance but the jury is still out so far only limited and largely anecdotal evidence is available on the impact investment funds have on the way firms are being managed too little time has passed and too many shocks have occurred for example the split of the czech and slovak republics to expect to find discernible changes in corporate governance on measures of actual firm performance an alternative approach is to investigate whether firms that ended up with more concentrated ownership and possibly improved governance sell for higher prices either in the last voucher round or in the secondary market since then in a forward looking financial market one can expect prices to incorporate the effects of better ownership on future firm performance and associated dividends to shareholders put differently one would expect that two firms with different shareholding structures but otherwise identical would trade at different prices with the firm with a more concentrated ownership and presumably better corporate governance trading at a higher price on a cross sectional basis ownership structure may thus be significant in explaining relative share prices the author explores this line of reasoning controlling for a number of firm and sector specific variables he finds 1 majority ownership by a domestic or foreign investor has a positive influence on firm prices 2 firms with many small owners have lower prices 3 ownership by many small scale investors makes it easier for any single investor to establish effective control but such control does not necessarily translate into higher prices the author also provides two possible explanations of why higher prices appear to be associated only with majority ownership by a single investor he finds 1 the corporate legal framework and the difficulty in collecting proxy votes in the czech and slovak republics may prevent a small investor from making the necessary changes in the way firms are managed thus keeping prices low and 2 commercial banks are both managers of invesment funds and creditors of individual firms funds managers may face conflicts of interest and not be interested in increasing the value of equity alone but also the value of credits this could explain why prices are relatively lower for those firms in which investment funds have effective control

income and democracy comment acemoglu et al 2008 document that the correlation between income per capita and democracy disappears when including time and country fixed effects while their results are robust for the full sample we find evidence for significant but heterogeneous effects of income on democracy negative for former colonies but positive for non colonies within the sample of colonies we detect heterogeneous effects related to colonial history and early institutions the zero mean effect estimated by acemoglu et al 2008 is consistent with effects of opposite signs in the different subsamples our findings are robust to the use of alternative data and estimation techniques jel d72 o17 o47

inattention to deferred increases in tax bases how michigan home buyers are paying for assessment limits abstract michigan s implementation of assessment limits gives rise to a wide variation in taxable basis across comparable homes exploiting the fact that the resulting differences in property tax liability are temporarily inherited by new homebuyers i estimate the degree of capitalization of these largely idiosyncratic tax differences to evaluate whether homebuyers understand the tax implications of their home purchases consistent with anecdotal evidence but in stark contrast to the traditional view of rational consumer behavior i find that homebuyers are woefully inattentive to the temporary nature of their initial tax obligations resulting in an overpayment of nearly 10 000 for the average home

portfolio management and appropriation of private benefits of control in many countries around the globe portfolio managers utilize well accepted models assuming that a partial stake of ownership is proportionally valued this assumption is incorrect in markets in which traded firms or publicly held firms are controlled by major owners who would take any possible measure to protect and maintain a lock on control so they can secure a sellable asset to another control seeker in this case estimation of key parameters such as volatility expected returns and diversification effect may be grossly distorted we would argue that a major trigger for the value of the benefits of control is the ability of control owners to transfer assets from their own portfolio to a controlled publicly traded firm while it is obvious that these transfers will take place if and only if it is beneficial to the control owners the impact on the minor shareholders may not necessarily be negative and may vary depending on several parameters thus the benefits of control are not entirely private i e appropriation and diversion of the resources of publicly traded firms for the benefit of the control owners this paper aims to model the effect of the benefits of control on the value of a minority held public firms it focuses on two related issues that are discussed in the literature on the benefits of control what drives the value of the benefits of control given the empirical evidence that control seekers are willing to pay a significant premium for control and secondly can these benefits be rationally modeled to better understand these issues it then models a specific drive on the part of control seekers who in addition to their stake in a publicly traded firm own a private portfolio it could be argued that they may transfer inferior investments to the public firms that they control exploiting less than perfect transparency however while they own this valuable option of transferring inferior investments into the public firm these actions may still be beneficial to the minority shareholders we establish a model and derive a simulation procedure that are applied to several cases in which transfers are made in exchange for cash or equity instances of full disclosure or partial transparency the likelihood that the control owners actions will be contested in court level of risk and other parameters then we will compare the results to empirical finding the final model will be greatly simplified so that the end formula can be easily used by practitioners