estimation of production technology when the objective is to maximize return to the outlay abstract this paper deals with estimation of production technology where endogeneous choice of input and output variables is explicitly recognized to address this endogeneity issue we assume that producers maximize return to the outlay we start from a flexible translog transformation function with a single output and multiple inputs and show how the first order conditions of maximizing return to the outlay can be used to come up with an estimating equation that does not suffer from the econometric endogeneity problem although the output and input variables are chosen endogenously this is because the regressors in this estimating equation are in ratio forms which are uncorrelated with the error term under the assumption that producers maximize return to the outlay the analysis is then extended to the multiple outputs and multiple inputs case with technical inefficiency although the estimating equations in both single and multiple output cases are neither production nor distance functions they can be estimated in a straightforward manner using the standard stochastic frontier technique without worrying about endogeneity of the regressors thus we provide a rationale for estimating the technology parameters consistently using an econometric model which requires data on only input and output quantities

a reexamination of the conglomerate merger wave in the 1960s an internal capital markets view one possible explanation for bidding firms earning positive abnormal returns in diversifying acquisitions in the 1960s is that internal capital markets were expected to overcome the information deficiencies of the less developed capital markets examining 392 bidder firms during the 1960s we find the highest bidder returns when financially unconstrained buyers acquire constrained targets this result holds while controlling for merger terms and for different proxies used to classify firms facing costly external financing we also find that bidders generally retain target management suggesting that management may have provided companyspecific operational information while the bidder provided capital budgeting expertise

merger failure and merger profitability the focus of the paper is the effect of merger proposals on the expected profitability of the bidder and the target we illustrate how an unsuccessful bid may increase the profitability of the target but reduce the profitability of the bidding firm relative to the profitability of the firms before the merger offer the profitability of a merger proposal is lowered due to learning from rejection we use our theoretical model to explain empirical work on this issue theoretical work on the profitability of takeovers has rarely focused on the problem of unsuccessful merger proposals or tender offers this is unfortunate because the decision that is generally available to a firm is not whether it should merge with another firm but rather whether it makes a merger proposal or tender offer in this paper we contend that failure to take account of this may bias estimates of the profitability of takeover attempts the focus of the paper is the effect of merger proposals on the expected profitability of the bidding firm and the target firm we describe a theoretical model to show how an unsuccessful bid may increase the profitability of the target but reduce the profitability of the bidding firm relative to the profitability of the firms before the merger offer this is independent of any effect of potential future takeovers on the value of the firm consequently the profitability of a merger proposal will be lower than in the absence of any effect conditional on rejection the assumption causing this result is that a target firm has private information about its profitability which is not available to the bidding firm assume that there is uncertainty about the profitability of the target and that the bidder offers x dollars for the target the target accepts if its profits from not being merged are less than x and is rejected otherwise hence the response of the target to a merger proposal reveals information on the competitiveness or profitability of the target we further assume that the two firms the bidder and target compete in a duopolistic market and play a cournot game in quantities if a merger does not occur therefore we are restricting attention to horizontal mergers in the equilibrium of our model bidding firms that suffer rejection of their we would like to thank peter cramton norman ireland alvin klevorick and james mirrlees and two anonymous referees for helpful comments this is true for e g salant switzer and reynolds 1983 davidson and denekere 1983 perry and porter 1985 and grossman and hart 1980

rational expectations analysts forecasts of earnings and sources of value gains for takeover targets abstract value gains to target firm shareholders in takeover bids may be due to potential synergy between bidder and target and or potential target restructuring based on new information released by the bid since these two models have different implications for the anticipated earnings of the target as a stand alone entity analysts earnings forecast revisions afr for the target during the bid may provide evidence for the new information hypothesis for 326 uk targets of takeover bids during 1987 1993 we estimate analysts earnings forecast revisions using the institutional brokers estimate system ibes and relate them to bid premia paid to target shareholders analysts revise their forecasts significantly up on bid announcement for failed especially failed hostile bids the earnings forecast revision and bid premium are more positively correlated than for successful and friendly bids this is consistent with the rational expectations behaviour of target shareholders modelled by grossman and hart s j grossman o d hart bell journal of economics 11 1 1980 42 s j grossman o d hart journal of finance 36 1981 253

consequences of deregulation for commercial banking in recent years many of the restrictions on banking activities adopted following the banking collapse of the 1930s have been eroded by improvements in technology and high interest rates which led to increasing direct competition from unregulated institutions beginning in the 1970s the regulatory agencies state legislatures and the congress have moved to liberalize these restrictions based on research on economies of scale and scope the experience of the conglomerate merger movement of the 1950s and 1960s the observed effects of changes in state laws governing branches and holding companies foreign experience and experience in other industries that underwent deregulation banking deregulation is likely to lead to reductions in the number of banks and increases in their efficiency geographic scope and product diversification such an outcome is consistent with the survival of a large number and variety of financial institutions and need not endanger the safety of the banking system over the past two decades the markets for financial services have provided a fascinating laboratory in which to observe the interplay of market forces political responses to crises and the maneuvering of interested parties in shaping public policy toward an entire industry in the process a regulatory framework put in place a half century ago has been partly dismantled and is likely to be modified further perhaps even more dramatically in the years to come this paper reviews the progress of deregulation to date attempts to discern its implications for the future shape of the financial system in particular commercial banking and poses several questions of public policy

the evolution of high incomes in northern america lessons from canadian evidence this paper uses tax statistics to construct new series on canadian top income shares from 1920 to 2000 and provides a systematic comparison with the u s experience as in the united states top income shares in canada display a ushaped pattern over the century with a precipitous drop during world war ii followed by a slower decline until 1970 since the late 1970s top income shares have been increasing dramatically and the very top shares are now as high as in the pre war era as in the united states the recent increase in top income shares is the consequence of a surge in top wages and salaries the canadian experience since the late 1970s does not appear to be well explained by tax changes suggesting that the upward trend in canada derives from the united states perhaps because many high income canadians have an emigration option this in turn suggests that the recent increase in u s personal income top shares is not merely a change in tax reporting behavior the recent sharp increase in top income shares in canada is of the same magnitude at the individual and family level and is not due to an increase in income mobility

occupations fields of study and returns to education this paper considers several possible channels behind the well documented effect of education on earnings the first channel is that education makes workers more productive on a given task as in a conventional human capital framework the second channel is based on the idea that education helps workers get assigned to higher paying occupations where output is more sensitive to skill a third and final channel is that workers are more productive and earn more when they are matched to a job related to their field of study using data from the 2005 national graduate survey and the 2006 canadian census i find that channels two and three account for close to half of the conventionally measured return to education the results indicate that the return to education varies greatly depending on occupation field of study and the match between these two factors

does acquisition of a cooperative generate profits for the buyer the dairyworld case this article examines the takeover of a cooperative dairyworld by an investor owned firm saputo that was not previously present in the industry determines if this takeover generates greater returns for the investor owned firms iof and on the basis of this evidence makes some inferences about the behavior and performance of cooperatives and iofs the empirical evidence strongly supports the conclusion that saputo s stock price rose with its takeover announcement this outcome is consistent with a number of explanations including that saputo was unaffected by hubris a factor often suggested as the reason that many firms overbid when they undertake acquisitions dairyworld s poor liquidity and capital shortage problems as well as a limited number of suitors may have weakened its bargaining position in its dealings with saputo the observed increase in saputo s stock price is also consistent with the possibility that by taking over a cooperative saputo was able to decrease competition and thus increase its profits a fruitful area for future research would be a rigorous theoretical and empirical determination of the impact that these various factors have on acquisition profitability such analysis is required before inferences about the behavior and performance of cooperatives and iofs can be fully answered

mergers and the market for corporate control the canadian evidence the proposition that a competitive market for corporate control effectively limits managerial divergence from shareholder wealth maximization implies that corporate takeovers are beneficial to shareholders of both firms involved in the transaction this paper presents the first systematic large sample study of the valuation effects of canadian mergers and concludes that these investments indeed create significant gains to shareholders of both bidder and target firms this evidence which is particularly interesting in light of extant evidence on the performance of u s bidder firms indicates that the canadian market for corporate control plays an important role in promoting an optimal resource allocation les fusions et le marche du controle des societes le cas canadien la proposition qui veut qu un marche concurrentiel du contr6le des societes limite effectivement les ecarts entre la strategie des gestionnaires et celle qui maximise la richesse des actionnaires a pour corrollaire que les prises de controle des societes sont benefiques pour les actionnaires des deux societes impliquees ce memoire presente les resultats de la premiere etude systematique de grande envergure des effets de valeur nette actualisee des fusions au canada on en vient a la conclusion que ces investissements ont engendre des gains significatifs pour les actionnaires a la fois des firmes qui ont pris le contr6le et des firmes capturees ces resultats particulierement interessants a la lumiere des resultats qui existent sur la performance des societes americaines qui ont effectue des prises de controle indiquent que le marche canadien du controle des societes joue un role important dans la promotion d une allocation optimale des ressources

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

chasing after good jobs do they exist and does it matter if they do most people believe that there are such things as good jobs jobs that a worker would consider herself lucky to get but for economists the existence of good jobs is debatable in this paper i provide a definition of a good job based on various theories of the labour market a job that involves a surplus captured partly by the worker i use that definition to guide an empirical investigation of the existence and importance of good jobs i conclude that good jobs do exist that the labour market does not just function according to a roy model with wage differentials reflecting only skill differentials compensating differentials or bond posting and that their impact on the overall wage structure is substantial finally i discuss the implications of the existence of good jobs for policy setting and for assessments of the justice of a society resume la chasse aux bons emplois est ce qu ils existent et est ce que cela importe qu ils existent la plupart des gens croient qu il y a telles choses que de bons emplois des emplois qu un travailleur se trouverait chanceux d avoir mais pour les economistes l existence de bons emplois est discutable dans ce texte l auteur propose une definition de bon emploi fondee sur diverses theories du marche du travail un emploi qui engendre un surplus capture en partie par le travailleur il utilise cette definition pour guider son enquete empirique sur l existence et l importance de bons emplois on conclut que les bons emplois existent que le marche du travail ne fonctionne pas seulement selon le modele de roy avec des differentiels de salaires qui refletent seulement les differentiels d habiletes les differentiels compensatoires ou le depot d une caution et que leur impact sur la structure globale des salaires est substantielle finalement l auteur discute les implications de l existence de bons emplois sur la definition de politiques et sur l evaluation du caractere juste d une societe

corporate combinations and common stock returns the case of joint ventures the gain to stockholders from mergers is well documented however there is little evidence as to whether the source of the gain is due to synergy or management displacement merger is just one of an almost limitless variety of ways in which firms combine resources to accomplish some objective a joint venture is another in addition to being of interest as an independent phenomenon because the original managements of the parent firms remain intact under a joint venture investigation of wealth gains from joint ventures provides an opportunity to isolate the management displacement hypothesis from the synergy hypothesis as the source of gains in corporate combinations our results are 1 there are significant wealth gains from joint ventures 2 the smaller partner earns a larger excess rate of return while the dollar gains are more equally divided and 3 the gains scaled by resources committed yield premiums similar to those in mergers we are inclined to interpret our results as supportive of the synergy hypothesis as the source of gain from corporate combinations this paper is an empirical investigation of the common stock returns of u s companies that enter into joint ventures with other u s companies we consider joint ventures in the context of what is by now a burgeoning literature examining the security returns of companies involved in intercorporate mergers and tender offers 1 in this context our objective is to provide evidence as to the source of the well documented gains to stockholders of firms involved in mergers and tender offers in addition joint ventures are an interesting economic phenomenon in their own right they are undertaken by many of the largest u s companies involve billions of dollars in capital expenditures annually and are subject to considerable scrutiny in the popular press in this regard our analysis provides data on what is as yet a relatively unexplored area of economic activity 2 a corporate merger represents the joining together of all the resources of two companies under a single management to accomplish some set of objectives empirical studies have found that mergers generally result in significant increases in the total market values of the merging firms with the stockholders of the

wealth inequality theory measurement and decomposition this paper reviews the basic principles of inequality measurement underlining the advantages and shortcomings of alternative measures from a theoretical standpoint and in the context of the study of the distribution of wealth adopting the two most popular measures the gini index and the p shares the paper documents wealth inequality in canada using the 1999 2005 and 2012 survey of financial security sfs it carries out several decompositions with covariates featuring dfl type reweighting methods and gini and p shares rif regressions the latter parallel decompositions deepen our understanding of how changes in socio demographic characteristics including the compensating role of family formation and human capital impact wealth inequality

increasing earnings inequality and the gender pay gap in canada prospects for convergence this paper retraces the evolution of canadian women s labour force participation and of the gender earnings ratio across the generations to understand better the prospects for gender convergence in pay using data from the public use labour force surveys lfs and administrative annual earnings data from the longitudinal worker files lwf the paper assesses the role of increasing top earnings inequality in the persistence of the gender pay gap having identified a growing role for the under representation of women among top earners the paper then performs an evaluation and critical analysis of existing gender equality policies centred on horizontal occupational gender segregation and discusses alternative policies for the future

takeover motives during the conglomerate merger wave this article examines the stock market response to acquisition announcements during and immediately after the conglomerate merger wave of the late 1960s the main finding is that acquirer shareholders benefited from diversification acquisitions which implies that diversification was not driven by managerial objectives it is also shown that the market responded positively to bidders who retained the management of target companies and negatively to bidders who replaced target management this is consistent with the hypothesis that the market favored acquisitions intended to exploit managerial synergies it suggests that the market disliked takeovers that were motivated to discipline target management evidence on buyer and target price earnings ratios is presented that is inconsistent with the conjecture that conglomerates were able to mislead investors by earnings per share manipulation

does industrial composition matter for wages a test of search and bargaining theory does switching the composition of jobs between low paying and high paying industries have important effects on wages in other sectors in this paper we build on search and bargaining theory to clarify a key general equilibrium channel through which changes in industrial composition could have substantial effects on wages in all sectors in this class of models wage determination takes the form of a social interaction problem and we illustrate how the implied sectoral linkages can be empirically explored using u s census data we find that sector level wages interact as implied by the model and that the predicted general equilibrium effects are present and substantial we interpret our results as highlighting the relevance of search and bargaining theory for understanding the determination of wages and we argue that the results provide support for the view that industrial composition is important for understanding wage outcomes

stochastic estimation of firm inefficiency using distance functions econometric estimation of allocative and technical efficiency has frequently been carried out using a shadow cost function and its associated share or demand equations since the problem is formulated in terms of shadow prices the effect of allocative inefficiency on input usage must be computed indirectly from input share or demand equations as an alternative approach we derive and estimate an input shadow distance system comprising the dual shadow input distance function and the price equations derived from the shadow cost minimization problem estimated shadow quantities provide direct estimates of the effect of allocative inefficiency on input usage one can also easily calculate firm and time varying technical inefficiency by decomposing the residuals we also compute returns to scale and the cost savings obtained by eliminating both types of inefficiency our approach is illustrated using a panel of u s railroads both the cost function and the distance function are valid representations of multioutput technologies the arguments of the cost function are output quantities and input prices while the arguments of the distance function are input and output quantities the input distance function measures the extent to which the firm is input efficient in producing a given set of outputs while the cost function assumes cost minimization by a firm which is input efficient the shadow cost function is a generalization of the cost function and depends on output quantities and shadow internal to the firm input prices rather than actual market input prices thus the shadow cost function assumes shadow cost minimization but not actual cost minimization this function has frequently been employed in fixed effects estimation of allocative efficiency ae and technical efficiency te an observed input vector is technically efficient if it is on the isoquant of the observed output vector an input vector is allocatively efficient if the radial contraction of the input vector to the isoquant is cost minimizing identification of parameters that measure ae can be achieved by the estimation of a shadow cost system comprising the actual cost equation and the share or input demand equations which are expressed in terms of shadow prices and output quantities shadow cost systems have been estimated by atkinson and halvorsen 1984 sickles good and johnson 1986 eakin and kniesner 1988 kumbhakar 1992 and atkinson and cornwell 1994 among others given panel data the deviation of shadow from actual input prices can be measured by price specific inefficiency parameters that may vary across firms and over time however the estimation of the effect of

mergers and long term corporate performance evidence from cross border bank acquisitions we provide evidence on operating performance changes at a sample of u s banks acquired by non u s banking organizations over the 1980 2001 period our sample allows us to compare directly the preacquisition performance of the targets with their postacquisition performance a comparison that has not been possible in prior studies we find that these cross border acquisitions produce improved target performance cash flow profitability at the target increases labor utilization improves and loan losses do not rise we also find evidence that the improvement in target operating performance primarily takes place for those acquisitions that occur following passage of the reigle neal interstate branching legislation

measuring heterogeneity in the returns to education using an education reform abstract in this paper we explore the impact of a mandatory education reform as well as pre reform availability of schools above the mandatory level on educational attainment and returns to education in norway we contribute to the existing literature by focusing on the heterogeneity of the impact of reforms our results indicate that increased compulsory education from seven to nine years increased the general level of education beyond the compulsory education we also find that the effect of family background on educational attainment was weaker after the reform the average treatment effect on returns to education is surprisingly high for education of intermediate duration this means that increasing the general level of education potentially generates high returns in the form of wages we also find that the effect of treatment on the treated on the returns to education is 1 4 percentage points higher than the average treatment effect

gradual incorporation of information pharmaceutical stocks and the evolution of president clinton s health care reform abstract we examine the effect of the evolution of president clinton s health care reform proposal over january 1992 october 1993 on pharmaceutical stock prices we identify a 52 3 percent decline in market adjusted prices which we then associate with health care reform applying a new technique isotonic regression we find most of the decline occurred gradually much of the decline occurred as the clinton plan adopted strategies to contain health care costs including managed competition and implicit regulation indirect evidence suggests that the wealth lost by pharmaceutical companies may have been largely an anticipated transfer our results are relevant to understanding the likely effects of the clinton plan and more recent proposals many other policy changes are marked by gradual public revelation of information which may not be completely observable by a researcher our approach may uncover information about the anticipated effects of policies unavailable from a traditional event study

toehold acquisitions shareholder wealth and the market for corporate control this study examines the valuation consequences of control related outcomes that fol low toehold acquisitions we find evidence that toehold acquisitions facilitate valueenhancing control transfers the types of control transfers not only include takeovers but also internal mechanisms such as proxy fights and management turnovers we find that toehold targets experiencing such control transfers exhibit an abnormal increase in share value while those not experiencing such control transfers exhibit an abnormal de crease in share value the results suggest that the positive valuation effect associated with toehold acquisitions reflects the expected benefits of subsequent control transfers

the polarization of the u s labor market this paper analyzes a marked change in the evolution of the u s wage structure over the past fifteen years divergent trends in upper tail 90 50 and lower tail 50 10 wage inequality we document that wage inequality in the top half of distribution has displayed an unchecked and rather smooth secular rise for the last 25 years since 1980 wage inequality in the bottom half of the distribution also grew rapidly from 1979 to 1987 but it has ceased growing and for some measures actually narrowed since the late 1980s furthermore we find that occupational employment growth shifted from monotonically increasing in wages education in the 1980s to a pattern of more rapid growth in jobs at the top and bottom relative to the middles of the wage education distribution in the 1990s we characterize these patterns as the u201cpolarization u201d of the u s labor market with employment polarizing into high wage and low wage jobs at the expense of middle wage work we show how a model of computerization in which computers most strongly complement the non routine abstract cognitive tasks of high wage jobs directly substitute for the routine tasks found in many traditional middle wage jobs and may have little direct impact on non routine manual tasks in relatively low wage jobs can help explain the observed polarization of the u s labor market this abstract was borrowed from another version of this item

estimating returns to education using twins in urban china abstract this paper empirically estimates the return to education using twins data that the authors collected from urban china our ordinary least squares estimate shows that one year of schooling increases an individual s earnings by 8 4 if we use a within twin fixed effects model the return is reduced to 2 7 but rises to 3 8 after the correction of measurement error these results suggest that a large portion of the estimated returns to education is due to omitted ability or the family effect we further investigate why the true return is low and the omitted ability bias high and find evidence showing that it may be a consequence of china s education system which is highly selective and exam oriented more specifically we find that high school education may mainly serve as a mechanism to select college students but as a human capital investment per se it has low returns in terms of earnings in contrast both vocational school education and college education have a large return that is comparable to that found in the united states

environmental and resource economics a canadian retrospective the paper reviews research contributions to environmental and resource economics by scholars in canada we focus mainly on work from the past 25 years but also highlight earlier pathbreaking work we begin by looking at broad trends in research both internationally and within canada we then review canadian contributions to various topics in the field canadians have played a leading role in the development of the field especially in resource economics international environmental economics and the valuation of environmental amenities

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

top income shares in canada recent trends and policy implications according to canadian taxfiler data over the last thirty years there has been a surge in the income shares of the top 1 top 0 1 and top 0 01 of income recipients even with longitudinal smoothing by individual using three or five year moving averages top shares fell in 2008 and 2009 but only by a fraction of the overall surge alberta british columbia and ontario have much more pronounced surges than other provinces part of the canadian surge is likely attributable to u s factors but a comprehensive explanation remains elusive even so i draw implications for policies that might achieve some support from across the political spectrum including the elimination of tax preferences that favour those with high incomes the promotion of shareholder democracy and to maintain canada s relatively high intergenerational mobility continued wide accessibility to healthcare and education

acquisition targets and motives the case of the banking industry findings do not indicate poorly managed firms are more likely to be acquired than well managed firms the analysis uses a sample of 1 046texas banks that existed in 1970 out of which 201 were acqui red during the period 1970 82 a multinomial logit procedure is used to estimate the relationship between the likelihood of acquisition and the characteristics of the target firm and its market additional results suggest that firms with la rge market shares low capital asset ratios and operations in urban areas are r elatively likely to be acquired but not firms with low profits or low growth copyright 1987 by mit press

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

measuring direct discrimination in labor markets using a frontier approach evidence from cps female earnings data numerous studies of earnings differentials have attempted to measure discrimination against females or minorities by decomposing the total differential between males and females or whites and non whites into an explained and unexplained portion typically these studies follow the work of oaxaca 8 however a number of criticisms can be raised with these techniques 9 5 4 of which two are particularly important that the reduced form wage equations for the two groups will not be identical in every case and that there may be large and unobservable differences between the characteristics of the two groups for which the wage equations cannot account either of these problems are sufficient to make it impossible to use residual analysis to measure discrimination attempts to address these problems and obtain reliable and consistent estimates of the extent of discrimination are important for policy purposes low and villegas 7 address the first of these problems by suggesting the use of hedonic wage equations which contain only human capital characteristics or proxies and characteristics which directly affect the hedonic parameters in this framework perfect substitution between the workers is assumed their work however leaves the second problem unresolved in this paper a stochastic earnings frontier with a discrimination discount is used to estimate discrimination against women an earnings frontier for females that depends upon marginal productivity as measured by human capital and labor market characteristics of females is estimated discrimination is assumed to be the amount female earnings are removed from the frontier less any labor market inefficiency since these estimates will depend solely on female data they do not depend upon an assumption of similarity between males and females this procedure allows

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

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

a sticky floors model of promotion pay and gender abstract according to raw data from the british household panel survey full time women are more likely than men to be promoted controlling for observed and unobserved individual heterogeneity we find that women are promoted at roughly the same rate as men but may receive smaller wage increases consequent upon promotion to help explain these phenomena we construct a new sticky floors model of pay and promotion in our model women are just as likely as men to be promoted but find themselves stuck at the bottom of the wage scale for the new grade

the pricing effects of interfirm cash tender offers the tools provided by option pricing theory are used to examine the wealth effects of interfirm cash tender offers the analysis provides evidence consistent with the synergy theory of corporate takeovers and has implications concerning the economic effects of regulations of cash tender offers the analysis further suggests that the market prices information uncertainty in a manner not captured by the standard capital asset pricing model the study introduces a technique for unbundling the prices of a primary asset and a contingent claim when only the prices of the combination are observed academics the business community and government regulators have focused considerable attention on corporate takeovers in this paper we extend the literature on takeovers in two ways first we utilize the tools provided by optionpricing theory to examine the wealth effects of interfirm cash tender offers this analysis provides some new evidence on the possible motivations for corporate takeovers second we examine the pricing of a target firm s common stock following an interfirm cash tender offer this examination suggests that the market prices information uncertainty in a manner not captured by the standard capital asset pricing model capm in addition to providing evidence on tender offers and asset pricing the study also introduces a technique for unbundling the prices of a primary asset and a contingent claim when only the prices of the combination are observed this technique has the potential to be used in other applications previous researchers have documented substantial wealth gains for target

the success of mergers in the 1920s a stock market appraisal of the second merger wave abstract this paper examines the impact on acquiring firm shareholder wealth of mergers during the oligopoly merger wave of the 1920s these acquisitions were relatively unregulated the securities and exchange commission did not exist and antitrust laws were only loosely enforced although the lack of financial market controls and the possibility of monopoly gains should have permitted acquiring companies to capture large take over profits stock price data on 134 firms indicate only modest success the average profitability of an acquisition in the 1920s does not differ from the profitability resulting from mergers in the 1960s and 1970s despite vast differences in the economic environments

does compulsory school attendance affect schooling and earnings we establish that season of birth is related to educational attainment because of school start age policy and compulsory school attendance laws individuals born in the beginning of the year start school at an older age and can therefore drop out after completing less schooling than individuals born near the end of the year roughly 25 percent of potential dropouts remain in school because of compulsory schooling laws we estimate the impact of compulsory schooling on earnings by using quarter of birth as an instrument for education the instrumental variables estimate of the return to education is close to the ordinary least squares estimate suggesting that there is little bias in conventional estimates every developed country in the world has a compulsory schooling requirement yet little is known about the effect these laws have on educational attainment and earnings 1 this paper exploits an unusual natural experiment to estimate the impact of compulsory schooling laws in the united states the experiment stems from the fact that children born in different months of the year start school at different ages while compulsory schooling laws generally require students to remain in school until their sixteenth or seventeenth birthday in effect the interaction of school entry requirements and compulsory schooling laws compel students born

the costs of antimerger lawsuits abstract this paper presents tests of the hypothesis that the relief imposed in antimerger cases is costly for defendant firms stockholders previous research on this subject suggests that defendants case related losses are due entirely to legal expenses and the disruption of productive activity in this paper it is shown that two out of five portfolios of defendant firms earn abnormal losses when final decisions in antimerger cases are announced these losses are consistent with the imposition of costly constraints on some defendants by government antitrust enforcers the tests also show that when acquisitions are canceled following antimerger complaints the losses to the target firms are substantial and completely offset the gains generated when the acquisitions are proposed

the wealth effect of merger activity and the objective functions of merging firms abstract this paper studies the net effects of the long run sequence of events leading to merger and of merger per se on shareholder wealth the appropriate measure of the wealth effect is shown to be the abnormal dollar return cumulated over time using this measure the long run wealth effect of the event sequence culminating in merger is significantly negative for acquiring firms for acquired firms the effect is negative but not significant the immediate impact of merger per se is positive and highly significant for acquired firms but larger in absolute value and negative for acquiring firms the evidence also reveals that measured abnormal rates of return to acquiring firms are sensitive to a slight variation in model specification and dependent on firm size with smaller firms earning significantly negative post merger returns

the distributional impacts of an energy boom in western canada in the energy rich region of western canada inequality rose over the past two decades while poverty declined begging the question of whether the recent energy boom was a contributing factor this study uses measures of inequality and poverty across local labor markets that vary in energy extraction intensity to identify these distributional impacts the evidence shows that overall the boom increased inequality and decreased poverty there are however a few notable cases where these relationships are reversed the significance and relative magnitude of growth across and between distributional segments were consistent with these findings

corporate takeover bids methods of payment and bidding firms stock returns this study explores the role of the method of payment in explaining common stock returns of bidding firms at the announcement of takeover bids the results reveal significant differences in the abnormal returns between common stock exchanges and cash offers the results are independent of the type of takeover bid i e merger or tender offer and of bid outcomes these findings supported by analysis of nonconvertible bonds are attributed mainly to signalling effects and imply that the inconclusive evidence of earlier studies on takeovers may be due to their failure to control for the method of payment recent studies on corporate takeovers provide inconclusive results on the valuation effects of acquisitions on the common stock of bidding firms 1 substantial differences are reported between the studies that analyze acquisitions initiated as tender offers and those that confine their samples to merger proposals the existence of mixed empirical findings for the bidding firms makes it difficult to interpret existing evidence and to draw conclusions about the managers acquisition motivations nevertheless the reason for the substantial difference between empirical findings on mergers and tender offers still remains an unresolved issue it is observed however that mergers are usually common stock exchange offers whereas tender offers are usually cash offers given that different methods of financing a project have different signalling implications myers and majluf 39 the differential stock returns of bidders in mergers and tender offers may be due to the method of acquisition financing

the social construction of market value institutionalization and learning perspectives on stock market reactions this study advances a social constructionist view of financial market behavior the paper suggests that the market s reaction to particular corporate practices such as stock repurchase plans are not as financial economists contend simply a function of the inherent efficiency of such practices rather stock market reactions are also influenced by the prevailing institutional logic and the degree of institutionalization of the practice the theory first predicts that the emergence of the agency perspective on corporate governance in the mid 1980s represented a powerful new institutional logic that would lead the market to reverse its prior aggregate reaction to stock repurchase plans in the united states the paper then considers the potential for institutional decoupling of repurchase plans and develops competing hypotheses about how the market value of these policies might have changed as more firms formally adopted but did not implement the plans over time in contrast to a financial economic pers

a reexamination of analysts earnings forecasts for takeover targets abstract we examine analysts earnings forecasts for a sample of takeover targets and document that the announcement month forecasts are systematically revised upward supporting the hypothesis that a takeover announcement conveys favorable information about the target firm in addition we find that abnormal forecast revisions of future stand alone earnings are significantly greater for targets with low tobin s q ratios relative to targets with high q ratios lending further support to the information hypothesis finally we provide evidence that managerial resistance to the takeover does not destroy value our results are in direct contrast to pound 1988

analysing wage differentials when workers maximize the return to human capital investment abstractthe analysis of the determinants of differences in wages across workers has traditionally relied on the estimation of average earnings functions in this article we propose a new theoretical model where it is the workers who decide the amount they wish to invest in human capital taking into account the costs of acquiring those skills for the purpose of maximizing earnings in this model both human capital and marginal productivity are likely to be influenced by the individual s unobserved characteristics such as ability or motivation potentially giving rise to endogeneity problems in this context the empirical implementation of our theoretical model allows us under certain assumptions to obtain consistent estimates even under the assumption of endogeneity we present an empirical application to the education sector using data from the spanish structure of earnings survey 2010 our results show that females and workers in the private education sector face more difficulties in achieving t

a note on unsuccessful tender offers and stockholder returns recent research shows that unsuccessful tender offers may affect target share returns for two years past the offer s announcement this note examines target returns in the interim between the announcement and one year after the offer s withdrawal analyzing a recent sample of targets that did not get another bid in the year following a failed tender offer this study reaches two conclusions first all of an offer s premium disappears by the time failure becomes public second excess returns are zero in the post failure year an explanation that is based on the causes of the tender offers failures is presented previous research has shown that shareholders of firms acquired by tender offers realize significantly positive excess returns see bradley 3 bradley desai and kim 4 and dodd and ruback 6 early studies such as bradley 3 and dodd and ruback 6 indicated that failed offers raise share values permanently recently bradley desai and kim 4 challenged this view with a study of returns to firms that did not receive offers for a long time following a cancelled bid they discovered that though a withdrawn offer may favorably affect a target s share value for months after the offer the initial price increase disappears within two years of the announcement similar developments such as those of asquith 1 dodd 5 langetieg 8 and mandelker 9 marked the research on mergers this note extends the work of bradley desai and kim hereafter bdk by analyzing returns to target shares in the time between the date of offer and one year after the offer s failure and public withdrawal the tests focus on two key but not fully explored phases of a failed offer the time from announcement to withdrawal and the first year after that event the sample of failed offers is quite special because it contains only those whose targets received no other bid in the year after the offer s withdrawal as bdk emphasize and as asquith 1 shows in his study of mergers only such rare cases provide the opportunity for a precise evaluation of returns to targets of failing acquisition efforts

on mergers divestments and options a note in this note a loss shared by the security holders of merging firms is pointed out separate corporate entities provide double protection against future negative cash flows that are part of any production process e g when customer or employee liabilities exceed future in come independent of whether or not debt is used in the corporate capital structure a merger involves a relinquishment of this double protection in return for a less valuable single protection limited liability in the merged corporation against combined negative cashflows

do tender offers create value new methods and evidence abstract conventional techniques of estimating takeover value improvements measure only a fraction of the total gain and include revelation about bidder stand alone value to address these biases we develop the probability scaling method which rescales announcement date returns and the intervention method which uses returns at intervening events perceived value improvements are larger than traditional methods indicate we cannot reject the hypothesis that bidders on average pay fair prices combined bidder target stock returns are higher for hostile offers lower for equity offers and lower for diversifying offers these effects reflect revelation about bidder stand alone value not differences in gains from combination

returns to education evidence from u k twins we use a new sample of uk female identical twins to estimate private economic returns to education we report findings in three areas first we use identical twins to control for family effects and genetic ability bias and the education reported by the other twin to control for schooling measurement error our estimates suggest a return to schooling for uk females of about 7 7 second we investigate within twin pair ability differences by examining within twin pair and between family correlations of education with observable correlates of ability including birthweight ability tests and reading scores our findings suggest lower ability bias in within twin pair regressions than pooled regressions third using data on twins smoking we show smoking reflects family background and using it as an instrument exacerbates ability bias this abstract was borrowed from another version of this item

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

local labor markets and natural resources a synthesis of the literature a primary way that natural resources affect a locality is through the demand for labor with greater extraction requiring more workers shifts in labor demand can be measured through changes in employment and earnings the main labor market outcomes or through changes in the population and income more generally these changes may spillover into the nonresource economy leading to greater overall effects or possibly crowd out be spread unequally across the population thereby altering the distribution of income and the poverty rate or influence educational attainment as people choose between additional schooling and work in this review the literature linking natural resources to local labor markets is synthesized by organizing existing studies according to their resource measurement and the outcomes that they consider this synthesis provides an accessible guide to a literature that has boomed in recent years it also identifies promising avenues for future research and lays a foundation to further generalize the evidence through an eventual meta analysis

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

changes in wage inequality in canada an interprovincial perspective this paper uses the canadian labour force survey to understand why the level and dispersion of wages have evolved differently across provinces from 1997 to 2013 the faster increase in the level of wages and the decline in wage dispersion in newfoundland saskatchewan and alberta are the starkest interprovincial differences we find that they are accounted for by the growth in the extractive resources sectors which benefited less educated and younger workers the most increases in minimum wages since 2005 are found to be the main reason why wages at the very bottom grew more than those in the middle of the distribution

bank m a a market power story this paper analyzes capital market reactions to international bank m a we investigate the combined stock return patterns of targets bidders and their peers upon takeover announcement and closing or withdrawal we distinguish five common m a hypotheses and relate characteristic and mutually exclusive abnormal stock return patterns to each hypothesis the findings show that there are more investors who believe in gains through the exploitation of market power by the post merger entity than investors who believe in any of the other motives tested in the paper in a multinomial logistic model we show that patterns related to market power significantly concur with large relative target size intra industry mergers and increasing market concentration suggesting a substantial lessening of competition through m a

corporate acquisitions a theory of special cases a review of event studies applied to acquisitions mergers occur when an acquiring firm and a target firm s agree to combine under legal procedures established in the states in which the merger participants are incorporated a tender offer is an offer to purchase a proportion of the outstanding shares of the target firm at specified terms on or before a specified date those shareholders not tendering their shares retain an ownership interest in the firm the term acquisition is used in a generic sense to refer to any takeover economists especially those specializing in industrial organization have theories to explain the motivations for horizontal acquisitions and to a lesser extent vertical acquisitions however conglomerate acquisitions appear to present problems to some economists and governmental organizations the literature on mergers is replete with studies which evaluate the impact of acquisitions on the participants the original studies consider the impact of mergers on the risk of the resulting firm and on its profitability in investigating these isssues the pre and post acquisition behaviour of both bidders and targets is examined and there is an attempt to isolate and measure the impact of the acquisition from other events that affect the firm performance measures are based either on accounting data or on stock price reactions to the acquisition to identify acquisition specific influences comparisons of the merger sample to a non merger control group are used these studies are seriously compromised for the following reasons accounting data do not provide information on the expected long run impacts of the acquisition on the participants there are serious problems in defining a comparable control group and the comparison group does not provide information on how the specific firms would have performed without the acquisition this review focuses on those studies which utilize stock market data and measure the performance of merger participants over the acquisition period as

frontier estimation and firm specific inefficiency measures in the presence of heteroscedasticity the purpose of this article is to illustrate a straightforward and useful method for addressing the problem of heteroscedasticity in the estimation of frontiers a heteroscedastic cost frontier model is developed and estimated using bank cost data similar to that used by ferrier and lovell our results show dramatic changes in the estimated cost frontier and in the inefficiency measures when accounting for heteroscedasticity in the estimation process we find that the rankings of firms by their inefficiency measures is affected markedly by the correction for heteroscedasticity but not by alternative distributional assumptions about the one sided error term

merger negotiations with stock market feedback do preoffer target stock price runups increase bidder takeover costs we present model based tests of this issue assuming runups are caused by signals that inform investors about potential takeover synergies rational deal anticipation implies a relation between target runups and markups offer value minus runup that is greater than minus one for one and inherently nonlinear if merger negotiations force bidders to raise the offer with the runup a costly feedback loop where bidders pay twice for anticipated target synergies markups become strictly increasing in runups large sample tests support rational deal anticipation in runups while rejecting the costly feedback loop

econometric efficiency analysis a policy oriented review abstract the econometric approach to the construction of production cost and other frontiers and the measurement of efficiency relative to these frontiers historically has had a strong policy orientation this distinguishes the approach from the mathematical programming approach which has had a managerial decision making orientation geared to solving allocation problems within the public or private organization in this paper i review the development of the econometric approach to efficiency analysis i then discuss a small number of empirical studies chosen to illustrate the application of the econometric approach to a collection of public policy issues for which the notion of efficiency measurement is of prime importance examples are drawn from the areas of 1 agricultural productivity 2 labor market efficiency and equity 3 the measurement of the standard of living 4 the establishment of quality of service standards and 5 the valuation of environmental disamenities

price movements as indicators of tender offer success this paper examines movements in the prices of target stocks as predictors of the ultimate success or failure of tender offers an empirical investigation of 100 cash tender offers during the years 1976 to 1981 leads to the conclusion that with few exceptions market prices are well calibrated i e the current target price during the offer period measures the expected discounted stock price at the conclusion date the market s probability predictions improve monotonically over time

enjoying the quiet life corporate governance and managerial preferences much of our understanding of corporations builds on the idea that managers when they are not closely monitored will pursue goals that are not in shareholders interests but what goals would managers pursue this paper uses variation in corporate governance generated by state adoption of antitakeover laws to empirically map out managerial preferences we use plant level data and exploit a unique feature of corporate law that allows us to deal with possible biases associated with the timing of the laws we find that when managers are insulated from takeovers worker wages especially those of white collar workers rise the destruction of old plants falls but the creation of new plants also falls finally overall productivity and profitability decline in response to these laws our results suggest that active empire building may not be the norm and that managers may instead prefer to enjoy the quiet life

the price of government ownership a study of the domtar takeover abstract this paper presents an analysis of how government ownership of an enterprise may affect its profitability in august 1981 two quebec crown corporations announced that they had gained control of domtar a private canadian corporation upon receipt of this information the stock s market value dropped significantly over six trading days domtar s shareholders suffered cumulative abnormal returns of minus 25 percent which is equivalent to a reduction in market value of approximately 150 million much of this loss can be attributed to government control and the anticipated pursuit of non profit objectives

markup pricing in mergers and acquisitions this paper studies the relation between the premiums in takeover bids involving exchange listed target firms from 1975 91 and the pre announcement stock price runups the evidence shows that the pre bid runup and the postannouncement increase in the target s stock price the markup are generally uncorrelated with little substitution between the runup and the markup the runup is an added cost to the bidder this finding has important implications for assessing the costs of insider trading it also raises interesting questions about the role of information from public capital markets in private takeover negotiations

the impact of takeovers on shareholder wealth during the 1920s merger wave we examine the impact of merger announcements on portfolios of acquiring firm and target firm common stock from 1919 to 1930 despite vast changes in the economic and regulatory environment overall acquisition profitability has remained remarkably constant over the last 70 to 80 years target firm shareholders in the 1920s clearly gained from takeovers averaging abnormal returns in excess of 15 while acquiring firm shareholders essentially broke even synergistic or monopolistic gains from consolidation were minimal unlike the more recent experience target firm and acquiring firm abnormal returns were largely unaffected by the mode of acquisition the means of financing or the degree of industrial relatedness

the allocative efficiency measure by means of a distance function the case of spanish public railways abstract this paper is an empirical application of the distance function to study the allocative efficiency of a regulated railway spanish firm renfe where the cost minimising hypothesis may be questioned besides and in contrast with other studies we include the possibility of the presence of persistent allocative inefficiency to achieve these aims we have estimated a system of equations for the inputs distance function and cost shares using annual data over the period 1955 95 using this procedure we have checked the presence of persistent allocative inefficiency in particular a systematic overutilisation of labour and underutilisation of capital moreover we have found some empirical evidence that since 1984 management contracts have improved the input allocation in spanish railways

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