management buyouts evidence on taxes as a source of value this paper estimates the value of tax benefits in 76 management buyouts of public companies completed in the period 1980 to 1986 the median value of tax benefits estimated at the time the buyout company goes private has a lower bound of 21 and an upper bound of 143 of the premium paid to pre buyout shareholders the estimated value depends on the rate buyout debt is repaid and the tax rate applied to the interest deductions the paper also presents evidence on the actual taxes paid and debt repayment rates by these companies after the buyout the results in this paper suggest that tax benefits are an important source of the wealth gains in management buyouts

an earnings prediction approach to examining intercompany information transfers abstract we assess potential information transfers by examining the association between the earnings announcements of early and late announcers in an industry our earnings prediction models are statistically significant much more frequently than would be expected by chance the models suggest potential positive information transfers on average but there is substantial cross industry variation in the strength of this relation we find that the greatest price reactions by nonannouncers to same industry earnings announcements occur in industries with the greatest earnings comovement

discussion of voluntary disclosure choice and earnings information transfer pownall and waymire s paper prompted a general discussion of information transfer research particularly its motivation and methodology this summary begins with a brief introduction to information transfer research it then considers motivation and methodology since the discussion related both to pownall and waymire s research specifically and to information transfer research generally these discussion comments extend to both as well

labor market competition among youths white women and others we estimate substitution possibilities among a set of age race sex groups in the labor force the estimates are based on cross section data from smsas in 1969 and they allow us to consider how substitutable adult women are for young women or young men the estimates are used along with assumptions about the extent of wage rigidity and elasticities of labor supply to simulate the direct and indirect effects of the growth of the female labor force on job opportunities for youth assuming rigid wages for young workers and on the wage rates of adult males assuming these wages are flexible this abstract was borrowed from another version of this item

event risk covenants and bondholder returns in leveraged buyouts abstract prebuyout bondholders on average suffer statistically significant wealth losses in leveraged buyouts bonds with strong covenant protection however gain value while those with no protection lose value the disposition of bonds after buyouts e g remained outstanding called tendered defeased is also strongly linked to type of covenant protection we also document that covenant use declines for bonds issued after 1980 finally the losses to bondholders are small compared with the gains accruing to shareholders

a comment on excess asset reversions and shareholder wealth this study re examines the earlier finding of alderson and chen 1986a that financial markets do not consider excess pension assets in determining share prices and that significant increases in shareholder wealth occur when an overfunded pension plan is terminated the results document that specific event time contamination corporate restructuring announcements provides the driving force for all the earlier findings alderson and chen ac 1986a attempt to empirically determine whether the reversion of the excess pension assets represented by overfunded definedbenefit pension plans leads to increases in the market value of the reverting firms ac s results suggest support for those who maintain that the assets of a firm s pension funds are separate and distinct from the assets of the sponsoring firm the separation hypothesis rather than those who maintain that pension assets are priced prior to reversion the integration hypothesis this comment modifies ac s study for the purpose of strengthening their approach in terms of its agreement with both known corporate behavior and conventional event study methodology following these modifications no evidence remains that share prices are significantly affected by pension terminations

the timing and substance of divestiture announcements individual simultaneous and cumulative effects this paper examines differences in announcement day effects among firms engaged in voluntary sell offs while on average an initial sell off announcement results in a significant positive excess return not all divestiture announcements are accompanied by positive price movements dividing the sample into two subsamples based on whether the transaction price is announced shows that the announcement day effect is significantly positive for the price group but not statistically different from zero for the noprice group in addition a positive relation is found between the relative size of the selloff and the announcement day return recent published studies of spin offs show evidence of positive announcement day and pre announcement day stock price effects however empirical studies on voluntary sell offs have not produced uniform positive or negative price movements 2 instead they show positive or zero announcement day cumulative average returns cars and mixed i e positive negative or zero preand post announcement day share price changes the purpose of this paper is to examine the discrepancies in announcement day excess returns for the selling firms engaged in voluntary sell offs and to isolate factors behind the differences in share price responses as we show two such factors are the relative size of the divestiture and whether the sales transaction price is initially announced examining the samples of recent divestiture event studies support these findings previous papers that restrict their samples to initial announcements containing transaction price or relatively large divestitures report significantly positive announcement day returns studies that do not discriminate among price or relative size find smaller or insignificant announcement days returns this of course does not imply that price disclosure and size are the sole factors in determining announcement day effects however these findings are consistent with the results reported in this paper this study is divided into six sections section i presents the research design

the translog approximate function substitution among inputs in manufacturing evaluated at sample means abstract this paper shows the translog function can approximate any first degree homogeneous function around any expansion point estimates for 1987 manufacturing confirm no weak separability of labor from capital but do not confirm lower production than non production worker substitution with capital

a comparison of event study methodologies using daily stock returns a simulation approach accounting research studies commonly use measures of abnormal security returns to test hypotheses about accounting information and policies alternative methods are used in these studies to detect abnormal performance and thereby examine the information content of identified events the ability of these methods to detect abnormal returns using simulation techniques is examined by brown and warner 1980 1984 morse 1984 addresses this issue analytically the analytical approach presumes that the event study data is generated by the process modeled while the simulation approach uses the security return data generated by the market simulation provides a tractable means of dealing with situations where an analytical approach may yield results suggesting direction but not magnitude or where such techniques are unusually cumbersome both limitations face us in this study brown and warner 1980 use monthly data to examine the comparative abilities of several combinations of return generating models and

a theory of disclosure in speculative markets this paper presents a theory of disclosure in a market where investors have heterogeneous beliefs and face short sale constraints assets trade above fundamentals reflecting the value of the option to sell to more optimistic investors in the future the initial seller has an incentive to commit to an imprecise disclosure policy despite the negative effect this has on the fundamental value of the asset in order to increase the potential for disagreement and hence the magnitude of the speculative premium i show that there is a strategic complementarity between sellers in their disclosure decisions this explains why financial misreporting and episodes of speculation occur together in waves and demonstrates that the endogenous choice of imprecise disclosure amplifies the extent to which assets are overpriced this paper was accepted by amit seru finance

stock market valuation of joint venture sell offs this article examines the stock market performance implications of joint venture jv partner sell offs using a resource based view and an event study methodology more specifically it proposes hypotheses putting into evidence the stock market valuation of different reasons for jv sell offs refocusing of a business debt reduction and jv failure abnormal returns ars from jv sell offs are estimated for a sample of 151 european selling partners first the results show that stock market reactions observed around the date of announcement are significant and positive this finding is consistent with that of finance research literature on stock market reactions to ordinary asset sales this leads us to discount the idea that stock markets place a specific valuation on jv sell offs second the results indicate that the reasons for jv sell offs are a determinant of ars of selling partners

predisclosure information firm capitalization and security price behavior around earnings announcements several studies on the relationship between earnings reports and security price behavior provide evidence suggesting that a significant portion of the information revealed through earnings reports is reflected in security prices prior to the report month e g ball and brown 1968 and brown and kennelly 1972 this has been attributed at least partly to the existence of other more timely sources of information which allow market agents to forecast earnings prior to their release the evidence above reflects an average finding across all firms one question of interest is whether there are significant systematic crosssectional differences in the security price reactions to earnings announcements of firms which are associated with specific firm characteristics that lead to differential amounts of predisclosure information this study focuses on firm size capitalization as one such characteristic a firm

the effect of long term performance plans on corporate sell off induced abnormal returns this study examines the association between long term performance plans and wealth effects accruing to stockholders of divesting firms at announcements of sell off proposals the results indicate that divesting companies with long term performance plans experience a more favorable stock market reaction at the announcement of sell off proposals relative to firms without long term performance plans the findings imply that long term performance plans serve as an effective mechanism to motivate managers to make better decisions substantial research has been undertaken on restructuring corporate assets liabilities and ownership of publicly traded corporations with regard to asset restructuring most of the literature analyzes mergers and tender offers but recently attention has been given to divesting activities divestiture is a modification of the firm s productive assets and comes in the form of sell offs or spin offs in sell offs the parent company sells part of its assets for cash assets or securities of the acquiring firm spin offs involve transfers of assets to a newly organized firm whose shares are distributed to stockholders of the parent firm or involve the distribution of shares of a subsidiary to the parent firm s shareholders while recent studies1 provide evidence that spin off announcements are associated with significant positive abnormal returns to parent firms around the day of the event the studies on voluntary sell offs report mixed results 2 these results raise questions about management s motivation to sell part of the firm s assets prior research assumes that corporate sell offs are activities consistent with stockholders interests however sell offs can be motivated by managerial selfinterest particularly when sell offs increase reported profits and hence management compensation recent articles in the financial press3 suggest that firms

corporate investment with financial constraints sensitivity of investment to funds from voluntary asset sales we examine the importance of financial constraints for firm investment by looking at the relationship between investment expenditures and proceeds from voluntary asset sales asset sales provide a cleaner indicator of liquidity than cash flows since it appears not to be positively correlated with investment opportunities the cross sectional differences in firm investment are examined using an endogenous switching regression model with unknown sample separation we find that cash obtained from asset sales is a significant determinant of corporate investment and that the sensitivity of investment to proceeds from asset sales is significantly stronger for firms that are likely to be financially constrained

invited remarks ball and brown 1968 it is a great honor for me to be at this conference and speaking to you today nick dopuch was not all that explicit when it came to a topic for this last session nick said talk about anything you like i interpreted that to mean i should talk in general terms about my early work with ray ball and its influence on the accounting literature and in particular about a paper we wrote about 20 years ago which is now commonly referred to simply as ball and brown 1968 i begin by covering the paper itself the antecedent conditions why the paper was written what we attempted to do in the paper and what was novel as far as we were concerned next i give my view of the main strands in the accounting literature since 1968 that are related to our work i conclude by offering a few thoughts on directions that the capitalmarkets based accounting literature might take in the years ahead

the market for interfirm asset sales partial sell offs and total liquidations abstract we investigate the valuation consequences of voluntary proposals to sell part or all of a corporation s assets for partial sell offs successful sellers and buyers reap statistically significant abnormal returns of 1 66 and 0 83 respectively unsuccessful sellers realize gains at the bid announcement of 1 41 that are lost at the offer termination in contrast proposals to liquidate the firm are associated with significant average abnormal returns of 12 24 we interpret these findings as evidence that asset sales are associated with the movement of resources to higher valued uses rather than as evidence of market mispricing before the divestiture announcements

managerial reputation and divisional sell offs a model and empirical test abstract this paper presents a reputation model of divestiture activity that yields a sharp cross sectional implication for event studies of sell off announcements a decision to divest a division that is known to be successful conveys good news about the division in contrast a decision to divest a division that is known for underperformance conveys no news about the division we test these hypotheses on a sample of sell off announcements for which we find stories in the wall street journal unambiguously characterizing the division being sold as either a winner or a loser the stock price reaction to the sell off of losers is indistinguishable from zero while the stock price reaction to the sell off of winners is a statistically significant 2 5 these results are strengthened when we expand the sample to include divisions whose profitability was announced in the company s annual report for this expanded sample the average stock price reaction to the announcements of sell offs of losers remains indistinguishable from zero while returns from the sell offs of winners average a highly significant 3 4

auditor reputation the impact of critical reports issued by government inspectors in recent years u k department of trade investigations into the affairs of a specific company have sometimes been critical of the work done by its auditors and reporting accountants this article assesses the impact of this criticism on the auditor s reputation in particular it examines the stock price performance of the auditor s listed clients the results show a small wealth loss for the audit clients the article also examines the impact of the department of trade criticism on an audit firm s number of listed clients and its future audit fees compared to a control group the criticized auditors appear to suffer a small loss in market share based on number of listed clients and on audit fees the evidence suggests that criticized auditors incurred economic losses from the damage to their reputations this is consistent with models of reputation advanced in the industrial organization literature

the rationale behind interfirm tender offers information or synergy this paper investigates the rationale behind interlirm tender offers by examining the returns realized by the stockholders of lirms that were the targets of unsuccessful tender offers and lirms that have made unsuccessful offers our results suggest that the permanent positive revaluation of the unsuccessful target shares documented by dodd and ruback 1977 and bradley 1980 is due primarily to the emergence of and or the anticipation of another bid that would ultimately result in the transfer of control of the target resources we also find that the rejection of a tender offer has differential effects on the share prices of the unsuccessful bidding firms depending upon whether the tender offer process results in a change in the control of target resources on the basis of these results we conclude that acquisitions via tender offers are attempts by bidding firms to exploit potential synergies not simply superior information regarding the true value of the target resources

on corporate governance a study of proxy contests abstract this paper examines a sample of firms experiencing proxy contests for seats on their board of directors dissident shareholders usually fail to obtain a majority of board seats nevertheless they capture some seats via mechanisms such as cumulative voting in over half of the sample contests regardless of proxy contest outcome positive and statistically significant share price performance is associated with the contest that finding is predicted by the standard economic analysis of proxy contests in which the challenges benefit shareholders by improving corporate performance the finding runs counter to the claim of berle 1962 that the economists view of proxy contests is a wholly imaginary picture a portion of the positive share price changes taking place in the early stages of some proxy contests is not permanent however and as suggested by manne 1962 is at least partially attributable to temporary increases in the market value of the vote attached to corporate shares

free trade and income redistribution in a three factor model of the u s economy the move toward free trade promises to alter the distribution of income in the u s labor groups generally do not favor the move toward free trade which can be characterized by the continuing decline in the price of manufactured goods relative to business services the present study predicts that unskilled labor in the u s will lose under a program of free trade using a general equilibrium model of production factor shares industry shares and estimates of substitution for skilled labor unskilled labor and capital are used to examine comparative statics the interplay of factor intensity and factor substitution in the three factor production structure has proven a considerable analytical challenge building on the textbook production model with two factors the third productive factor allows technical complementarity and creates a more complex pattern of factor intensity both factor intensity and factor substitution affect the qualitative nature of the comparative statics little is known about the model s quantitative properties a 3 x 3 model with outputs of the three major sectors agriculture manufacturing services is specified and a 3 x 2 model without agriculture is also examined factor substitution is estimated with production function across states skilled labor separated by various census categories cannot be aggregated with unskilled labor in any sector and constant returns to scale cannot be rejected as a null hypothesis additionally the three inputs capital labor skilled labor are all technical substitutes comparative static results follow a pattern suggested by factor intensity changing prices of goods generally have elastic effects on factor prices stolper samuelson results in other words have a quantitative weight price changes due to a program of free trade will significantly affect income distribution similarly rybczynski type results are quantitatively significant in that factor endowment changes have elastic effects on outputs the implication is that output patterns will differ significantly across freely trading partners elasticities of factor prices with respect to endowment changes on the other hand are very inelastic this inelasticity suggests that there would only be small long run effects of international migration capital flows or endowment differences on the international pattern of factor income this inelasticity is called near factor price equalization nfpe under nfpe freely trading countries will experience a vector of factor prices nearly equal to each other nfpe suggests that the qualitative effects of changing or different factor endowments

managers earnings forecasts and intra industry information transfers abstract the effect that voluntarily disclosed managers earnings forecasts have on the security prices of the announcing firms and other firms in the same industry is examined the results are consistent with information content in managers forecasts and with information transfer between forecast firms and other firms in the industry these inferences are drawn from firms abnormal returns computed from single and two index pricing models where the latter includes market and industry indexes interestingly while a positive information transfer is evident with market model residuals once industry cross sectional covariation in firms returns is removed no directional relation is apparent

on smart sanctions abstract we construct a game theoretic model of an oligarchic economy that potentially could be targeted by smart international sanctions oligarchs in this economy provide support for their leader a strong man and potentially an autocrat in return for favors that results in having income higher than the average income in the country we derive the conditions under which smart sanctions lead to compliance by the target country moreover we draw some comparison between the effectiveness of smart and dumb sanctions for these economies

output based allocation of emissions permits for mitigating tax and trade interactions the allocation of tradable emissions permits has important efficiency as well as distributional effects when tax and trade distortions are taken into account we compare different rules for allocating carbon allowances within sectors lumpsum grandfathering output based allocation oba auctioning and among sectors historical emissions or value added shares the output subsidies implicit in oba mitigate tax interactions unlike grand fathering oba with sectoral distributions based on value added is similar to revenue recycling with auctioning oba based on historical emissions supports heavier polluters more effectively counter acting carbon leakage but at higher welfare costs less energy intensive sectors are also sensitive to allocation rules

oil revenue shocks and government spending behavior in iran abstract oil revenues play an important role in the political economy of iran on average 60 of the iranian government revenues and 90 of export revenues originate from oil and gas resources current international sanctions on iran have mainly targeted the oil production capacity of iran and its exports to the global markets in this study we analyze the dynamic effects of oil shocks on different categories of the iranian government expenditures from 1959 to 2007 using impulse response functions irf and variance decomposition analysis vdc techniques the main results show that iran s military and security expenditures significantly respond to a shock in oil revenues or oil prices while social spending components do not show significant reactions to such shocks

the intra industry effects of going private transactions we demonstrate that bids to take firms private generate significantly positive valuation effects for industry rivals of target firms these valuation effects cannot reflect either synergy or monopoly since no consolidation of operating firms is involved in such transactions participation by buyout specialists in the bid does not significantly affect these gains bids by outsiders and bids by incumbent managers generate similar valuation effects for industry rivals the effect on share prices of industry rivals is inversely related to the capitalized values of rival firms relative to the target firm we also report valuation effects for target firms we examine the implications of going private bids for the valuation of horizontal rivals of target firms we hypothesize that going private transactions reflect in part private information held by the bidder about the target firm we argue that if the financial market perceives that elements of this private information are industry wide rather than firm specific the value of the target firm s horizontal rivals should change in response to the goingprivate bid announcement 1 unlike interfirm mergers and acquisitions going private transactions do not involve a consolidation of separate operating firms consequently changes in the value of rival firms induced by goingprivate bids are due neither to the demonstration of synergies associated with a consolidation of operating firms nor to the effects of induced monopoly or collusion 2 we also report valuation effects on target firms we find that announcements of going private bids generate statistically significant positive intra industry effects industry rivals of targets of goingprivate bids receive a positive 2 day average excess return of 1 32 which is statistically significant the average 2 day excess return to target firms is 17 35 and is statistically significant we test whether participation of

management buyout proposals and inside information this paper explores stock price behavior surrounding withdrawn buyout proposals to determine whether managers proposal announcements reveal any information which is unrelated to the efficiency gains associated with completed buyouts on average firms whose managers withdraw buyout proposals do not sustain significantly positive stock price effects unless they receive subsequent acquisition bids in addition managers of firms with completed buyouts are no more likely to have access to inside information than managers who withdrew proposals i interpret this evidence as inconsistent with the notion that inside information commonly motivates management buyout proposals management buyouts occur when a group of investors including some incumbent managers buy all of a firm s outstanding common stock with the intent of taking it private critics of management buyouts argue that managers access to inside information allows them to time their proposals to expropriate the wealth of outside shareholders these opponents generally cite anecdotal evidence that favorable inside information motivates management buyout proposals 1 managers themselves suggest that their proposals are motivated at least in part by their information advantage 2 however assistant professor of finance texas a m university this paper is based on my univer

voluntary corporate liquidations abstract this paper examines possible motives for and consequences of voluntary corporate liquidations specifically the procedural and tax differences between voluntary liquidations and other control changing transaction devices are analyzed an empirical investigation of successful liquidations shows that the announcement of liquidation reduces the risk of liquidating shares that the shareholders receive substantial gains from successful liquidations and that the average gains to the acquiring shareholders are not significantly different from zero these findings suggest that the liquidating firms assets have been underutilized before liquidation and that voluntary liquidations lead to higher valued reallocations of corporate resources

a computable general equilibrium model of international sanctions in iran we detail recent international sanctions against the iranian economy and its government imposed by a subset of developed countries the effects of these sanctions on the iranian economy in general and upon upper and lower income rural and urban iranian households as well as the iranian government are modelled using a computable general equilibrium cge model we supplement the global trade analysis project 8 data set using income and expenditure shares from the urban and rural household income and expenditure survey from the statistical centre of iran sci the model is calibrated to simulate the effects of international sanctions as closely as possible we use endogenous trade taxes to simulate the effects of sanctions on iranian oil and petrochemical exports and iranian imports of petroleum products metal products and motor vehicles our study finds that international sanctions reduced aggregate iranian welfare by 14 15 rural households in iran suffered welfare losses which were almost double those experienced by urban households and the poorest urban and rural households experienced the largest welfare losses in the order of 5 10 but the government of iran sees a decrease in real revenue of 40 50 due to the large negative effect of sanctions on the iranian oil sector

the effect of corporate divestments on shareholder wealth the uk experience this is the first known study of stockmarket reaction to u k sell off announcements earlier u s studies have found positive market reaction to sell off announcements various of these have aimed to relate the magnitude of marketreaction to factors such as price declaration completion of agreement and financial strength of divestor this study also explores the impact of the above factors and their inter relationships typical event study methodology is used in estimating the size of the unexpected market reaction the so called abnormal return separate analysis of sub samples is undertaken in this study to help enhance our understanding of market response to corporate sell offs examples of such sub samples are price no price groups and completion intention groups this analysis provides explanations for some of the seemingly contradictory u s study results a measure of financial distress namely the z score is introduced to explore the bankruptcy avoidance hypothesis we find a degree of financial distress prior to divestment to be inversely related to abnormal return a result consistent with market approval for such distress sales relative size of divested part to parent is also shown to be positively related to abnormal returns price declaration seems to be vitally important in generating positive market response announcements of completed sell offs along with the price is even more welcome by the market announcement of completed sell offs with undisclosed price seems to induce market uncertainty and thus negative abnormal returns announcement of intended sell offs with price disclosure as well as our overall sample results both provide statistically significant positive shareholder gains this latter finding is in harmony with u s studies

optimal hedging under output price uncertainty abstract this paper provides a theoretical and empirical analysis of optimal hedging under output price uncertainty the theoretical analysis is facilitated by exploiting the duality between production and cost while the empirical implementation uses the envelope theorem and the indirect expected utility function empirically estimable equations are derived by approximating the indirect expected utility function by a taylor series approximation the model is tested by using live cattle data as output while using prices of corn soybeans and the feeder cattle as inputs the results support the theoretical predictions and the evidence shows that live cattle farmers exhibit decreasing absolute risk aversion

the effect of three mile island on electric utility stock prices a note the impact of events on the time series properties of common stock returns has been the subject of numerous articles in the finance literature most studies have shown that capital markets are highly efficient in the sense that prices quickly adjust to publicly available information as investors act to receive a return commensurate with the level of perceived risk this note examines the effect on the stock returns of public utility firms of the three mile island tmi nuclear accident in stock valuation models based on investor rationality permanent price declines are brought about either by a decline in expected cash flows or by an increase in the rate used to discount future cash flows such a nuclear accident may directly affect investors perceptions of both the expected cash flows of utilities and their risk these future cash flows are affected because a nuclear accident may cause additional costs due to extended shutdowns or abandonment of nuclear plants expenses of responding to a nuclear accident and costs of purchasing replacement power the response of utility returns to tmi is analyzed at three levels first the risk adjusted returns for the utility experiencing the nuclear accident general public utilities gpu are measured over monthly time periods surrounding tmi the same analysis is performed on an aggregate sample of electric utility firms to assess the direction and magnitude of tmi s impact on other firms in the industry lastly the sample is divided into utilities with significant nuclear generating capacity at the time of tmi and utilities with no nuclear generating capacity so that the differential impact of the nuclear accident on nuclear and non nuclear public utilities may be assessed both a single and two index market model are used to estimate risk adjusted returns the latter index model includes an interest rate index as well as an equity market index

the impact of taxes on the choice of divestiture method abstract this paper estimates the magnitude of tax costs and their impact on the decision to divest assets via a taxable sale rather than a tax free spin off we find that the tax costs are substantial averaging 8 of market value of the divested assets and that cross sectional variation in tax costs has a large impact on managers choice of divestiture method our results are consistent with two explanations first managers are willing to incur avoidable tax costs to gain earnings and cash flow benefits second managers choose taxable sales because the acquisition premia on the sales exceed the avoidable tax costs

index composition changes and the cost of incumbency abstract this paper provides evidence of information effects and portfolio rebalancing effects that occur when stocks are added to or excluded from the sp however the portfolio rebalancing effects dominate the industry information effects

do privatized banks in middle and low income countries perform better than rival banks an intra industry analysis of bank privatization abstract this paper presents a comprehensive analysis of the pre and post privatization operating performance and stock market performance of privatized banks and their rivals in middle and low income countries first we find that privatization announcements elicit negative abnormal returns for rival banks the effects are more pronounced for subsequent tranche sales where the proportion of government ownership in the privatized bank is reduced second we observe that the privatized banks underperformed the benchmark index in the long run investors who bought shares of the privatized banks on the first day of trading and held them for 5 years instead of investing in the market index lost 24 of their wealth the underperformance is consistent with the negative long run returns that have been documented for initial public offerings third we document marginal improvements in the post privatization operating performance of the privatized banks though the privatized banks in middle and low income countries are better capitalized than rival banks they carry higher problem loans and are overstaffed relative to other private banks in the post privatization period since most of the sample firms are partially privatized we submit that perhaps the continued government ownership of the privatized banks might have hindered managers ability to restructure the firms

do economic sanctions destabilize country leaders do economic sanctions destabilize the governments they target a form of foreign pressure sanctions are typically meant to alter the policies of other countries there is much pessimism on whether they ever work this article shows that economic pressure works in at least one respect it destabilizes the leaders it targets i present a theoretical argument that explains why destabilization is a necessary condition for successful coercion i find evidence that pressure destabilizes in a large panel of cross country time series data the destabilization finding indicates that sanctions may be more effective at altering policies than we think i conclude by noting that greater optimism regarding the effectiveness of sanctions should be balanced by a careful consideration of the policy s real and sizeable costs for those caught in the middle

security price reactions around corporate spin off announcements abstract we examine security price reactions around the announcements of 123 voluntary spin offs by 116 firms between 1963 and 1981 involving a pro rata distribution of the common stock of a subsidiary to the stockholders of the parent firm the median spin off in the sample is 6 6 of the original equity value and is associated with an abnormal return of 7 0 from 50 days prior to the announcement through completion of the spin off no evidence is found to indicate the gains to stockholders represent wealth transfers from senior securityholders over the entire event period we find positive gains for firms engaging in spin offs to facilitate mergers or to separate diverse operating units but negative returns to firms responding to legal and or regulatory difficulties in the two day interval surrounding the first press announcement we find positive average excess returns for all groups

intra industry information transfers associated with earnings releases abstract the impact that a firm s earnings releases have on the stock prices of other firms in its industry is examined for an identifiable sub set of firms the results are consistent with a significant information transfer occurring between the earnings release firm and the other firms in its industry this subset is identified by examining the impact of the release on the stock price of the announcing firm the magnitude of this impact is more significant for a sample of firms which have a larger percentage of their revenues in the same line of business as the earnings release firm vis a vis a sample with a lower percentage of their revenues from the same line of business alternative interpretations of the empirical results are also discussed the research findings have implications for information content and market efficiency research and for research on policy issues associated with disclosure regulation

additional evidence on the relation between divestiture announcements and shareholder wealth this paper presents estimates of the effect of voluntary divestiture announcements on shareholder wealth the results show that both spin off and sell off announcements tend to have a positive influence on the stock prices of the divesting firms and that the spin offs outperform the sell offs on the day of the event we also find that the economic gains to the shareholders of the selling and acquiring firms are nearly identical suggesting that the sell off decision is perceived by both investor groups as a positive net present value npv transaction

separability of capital and labor in us manufacturing abstract this paper investigates the separability of capital and six labor skill groups in u s manufacturing it is found that no pair of inputs is even weakly separable this result suggests that blackboard production functions with two inputs should be used primarily for exposition

the significance of sell off profitability in explaining the market reaction to divestiture announcements abstract previous research on asset sales has emphasized the divestment motivation and the use of the proceeds from the sale as determinants of selling firm value gains in contrast this paper explores the extent to which the relevant information necessary to evaluate sell offs is embodied in the profitability of the sale i e the price received by the seller over the value in use of the divested assets where the latter is a function of past operating earnings and book value our empirical results show that sell off profitability is substantially more significant in explaining the market reaction to divestiture announcements than the previous literature has suggested we provide strong evidence of a positive relation between selling firm abnormal returns during sell off announcements and profit on the sale which remains significant after controlling for the motivation behind the sell off the use of the proceeds from the sale and the presence of agency costs of managerial discretion we conclude that sell off profitability explains a major portion of selling firm abnormal returns and is one of the most significant determinants of the market reaction to divestiture announcements

why hang on to losers divestitures and takeovers we study the divestiture decisions of managers who care about their reputations managers divestiture and investment decisions are publicly observable but managers privately observe signals with respect to the future payoff distribution of investments they have initiated we establish that in equilibrium there is too little divestiture these inefficiencies create the opportunity for wealth enhancing divestiture motivated takeovers a key result is that only managers of targets with middle of the road asset specificity should consider the takeover threat credible these findings suggest that uniqueness of assets is an important determinant of both agency costs and takeover activity our analysis leads to several empirical predictions overwhelming empirical evidence has documented large gains in shareholder wealth that arise from takeovers jarrell brickley and netter 1988 and jensen and ruback 1983 the source of these gains has remained elusive however although takeovers are followed by some infusion of new managerial talent we have not witnessed the kind of profound post takeover restructuring of the productive activities of target firms that would readily justify the documented wealth gains a commonly observed post takeover initiative is divestiture of some of the target s lines of business bhide 1989 and bhagat shleifer and vishny 1990 what is puzzling is that if the gains from takeovers stem from the anticipation of such divestitures then why were these divestitures not undertaken by the target firm s management in the first place the purpose of this paper is to provide a possible answer to this question our focus is on the divergence in incentives between managers and shareholders with respect to divestitures of ongoing projects we show that managers might rationally decide to hang on to projects that should be divested in

intra industry information releases a recursive systems approach abstract this paper investigates the extent of intra industry information transfers associated with the half yearly earnings announcements of a sample of australian firms the omitted factor interpretation of foster s 1981 results is examined using a recursive systems specification of the return generating process to model extra market return covariation in cross section although some aspects of the results do appear sensitive to the alternative methodologies the overall conclusion is consistent with foster 1981 and supports the existence of intra industry information transfers associated with firms earnings releases

differential intra industry information transfer associated with management earnings forecasts abstract this study proposes that the amount of information about one firm conveyed by management forecasts of another firm in the same industry depends on the earnings covariance between the two firms and the forecast firm s earnings variance the covariance reflects the competitive relation between the firms and the variance represents noise contained in forecasts when both variance and covariance are included in regressions nonforecast firms abnormal returns are associated with forecast firms abnormal returns when they are excluded no such association is observed the results are similar but much weaker when the independent variable is unexpected management forecasts

the effect of voluntary sell off announcements on shareholder wealth sell off activities arise when a firm sells part of its assets e g a segment a division etc but continues to exist in essentially the same form this study investigates the effect of voluntary sell offs on stock returns from a sample of over 1000 sell off events first public announcements the evidence shows that both sellers and buyers earn significant positive excess returns from these transactions the excess returns earned by buyers are smaller than those earned by sellers there is also evidence that sell off announcements are preceded by a period of significant negative returns for the sellers which suggests that the sellers on average performed poorly prior to their sell off activities substantial research has been undertaken in recent years on mergers acquisitions tender offers capital structure changes and other financial planning topics this research has considerably expanded our knowledge about the association of these decisions with the welfare of the stockholders involved in these transactions selling a portion of the firm s assets is another important financial planning decision 2 this paper investigates the effect of voluntary sell off announcements on shareholder wealth a sell off is defined as selling part of a firm s assets e g a segment a division etc while the firm continues to exist in essentially the same form as that prior to the sell off this study does not examine the effects of involuntary ordered by the government sell offs and other similar activities such as spin offs leveraged buy outs liquidations reorganizations etc 3